Monthly Market Insights

May 2026

Continued Market Resilience

Despite the ongoing conflict in the Middle East and the continued closure of the Strait of Hormuz, broad equity markets have reached all-time highs. We attribute this strength to three primary factors: robust capital expenditures in artificial intelligence, the drawdown of strategic oil reserves and elevated government fiscal spending. While these forces have sustained economic activity and investor confidence in the near term, each carries meaningful risks that we are monitoring closely.

Valuations in the technology sector remain heavily dependent on the expectation that AI investment will translate into significant profitability—an assumption that, if revised, could compress multiples broadly. Strategic oil reserves are a finite buffer; a further depletion without resolution in the Strait of Hormuz would likely accelerate inflationary pressures.

On the fiscal side, the capacity for continued government spending is increasingly constrained. Taken together, these dynamics have contributed to a notable shift in the monetary policy outlook: where markets once anticipated continued Federal Reserve rate cuts, discussions have turned to the possibility of a rate increase as early as 2027.

We remain cautious in our overall outlook. A resolution to the Middle East conflict and demonstrated profitability from AI investment would represent important, positive catalysts. In the interim, our portfolios continue to be diversified with reduced exposure to the technology sector. As always, our focus is on managing risk while preserving and growing your capital over the long term. We appreciate your continued trust and welcome any questions regarding your portfolio or financial wellbeing.

-The Axiom Team

U.S. and Canadian Markets

Stocks surged in April, notching their best month in five years as investors cheered upbeat economic news, efforts to lower tensions in the Middle East, and first-quarter results.

The Nasdaq Composite rose an eye-catching 15.29 percent, while the Standard & Poor’s 500 Index gained 10.42 percent. The Dow Jones Industrial Average picked up 7.14 percent. The S&P/TSX Composite Index gained 3.65 percent.^1,2

Strong Finish as Investors Look Ahead

Stocks were up and down during the second half of the month as investors gauged potential outcomes of the Middle East conflict amid an ongoing ceasefire.

As the month came to a close, investors were emboldened when first-quarter corporate reports started to roll out.⁷

For Q1 2026 (with 315 of S&P 500 companies reporting actual results through Friday, May 1), 84 percent of S&P 500 companies have reported a positive EPS surprise, and 81 percent of S&P 500 companies have reported a positive revenue surprise. If the trend holds, it will mark the highest earnings growth rate since Q4 2021.⁷

U.S. Sectors

Information Technology (+20.02 percent) was the dominant double-digit leader, besting the S&P 500 by nearly 10 percentage points and driving a disproportionate share of the Index’s April gain.⁸

Consumer Discretionary (+8.60 percent), Industrials (+7.95 percent), and Real Estate (+8.74 percent) also posted strong months. Communication Services (+5.10 percent), Financials (+5.59 percent), Materials (+3.00 percent), Consumer Staples (+2.84 percent), and Utilities (+2.09 percent) all posted solid gains but underperformed the overall Index.⁸

As oil prices fell over the month, Energy (-2.63 percent) was under pressure. Health Care (-0.42 percent) also edged lower.⁸

Canada Recap

Canada’s S&P/TSX Composite Index rose steadily over the first half of April. The TSX trended higher in the first half of the month despite increased market volatility due to the ongoing Middle East conflict. Oil prices remained high, boosting energy stocks—one of the largest weightings in the Index.^9,10

But markets hit several roadblocks as the month progressed. The TSX fell amid fresh uncertainty over ceasefire talks. The materials sector led the Index lower, with weakness also in the energy, telecom, and technology sectors.

News of a 2.4 percent uptick in March inflation and the central bank’s decision to hold interest rates steady on April 29 added to selling pressure. But a solid 1.9 percent rally on April 30 helped the Index finish the month strong.^11,12,13

What Investors May Be Talking About in May

No Fed meeting this month, but plenty of Fed officials will be hitting the speaking circuit and there’s a lot for them to talk about.

Expect Fed speakers to give updates on monetary policy and how the Middle East conflict could ripple through economic growth and inflation. Supply chain disruptions and rising energy prices remain key concerns, potentially complicating the path toward the Fed’s 2 percent inflation target.

And with the majority of S&P 500 companies having reported first-quarter results by now, Fed officials may also help connect the dots between the GDP outlook and corporate forecasts. Their commentary could offer key insights about the timing of any future rate adjustments.

World Markets

The MSCI EAFE Index bounced back last month, advancing 7.05 percent.¹⁴

The major European markets all posted gains for the month, with Italy (+8.88 percent) and Germany (+7.11 percent) leading the way. Spain (+4.29 percent) and France (+3.81 percent) also posted solid gains, while the United Kingdom lagged a bit, gaining 1.99 percent.¹⁵

Most markets outside Europe also advanced, with some countries posting strong monthly gains. Egypt caught the market’s eye, gaining 14.21 percent.¹⁵

Pacific Rim markets were led by Korea’s KOSPI Index, which jumped 30.61 percent. Japan (+16.1 percent) had a strong month, while Australia (+2.17 percent) checked in with more mixed results.¹⁵

Yahoo Finance April 30, 2026

Indicators

Gross Domestic Product (GDP)

The economy grew 2.0 percent on an annualized basis in the first quarter, based on the Commerce Department’s initial estimate of GDP. It fell short of the 2.2 percent economists were expecting. The 2 percent growth in Q1 compared with 0.5 percent GDP growth in Q4 of 2025 and 4.4 percent growth in Q3.^16,17

Employment

Employers added 178,000 jobs in March, exceeding the 59,000 jobs economists expected. The healthcare and social-assistance sector (+90,000 jobs) was the biggest contributor to March job growth. Unemployment fell slightly to 4.3 percent from February’s 4.4 percent rate. Wage growth rose 0.2 percent month over month, below expectations and slower than February’s 0.4 percent monthly pace.^18,19

Retail Sales

Consumer spending rose 1.7 percent in March, following an upwardly revised 0.7 percent increase in February. Economists expected a 1.5 percent increase. Year over year, sales increased 4.0 percent in March, up from 3.7 percent in February.^20,21

Industrial Production

Industrial output fell 0.5 percent in March over the prior month, the largest drop in 18 months; markets expected a 0.1 percent rise.²²

Housing

Housing starts rose 10.8 percent in March from the prior month, compared with February’s shutdown-delayed report showing a 3.0 percent month-over-month drop. Regionally, single-family starts rose the most in the West (+18 percent), followed by the Northeast (+11 percent), the South (+8.5 percent), and the Midwest (+1.3 percent).^23,24

Sales of existing homes fell 3.6 percent in March over the prior month, a nine-month low and a downturn from February’s 1.7 percent rise. Sagging consumer confidence, still-limited inventory, and sluggish job growth deterred would-be buyers. Year over year, existing home sales fell 1.0 percent. The median existing home sales price was $408,800, 1.4 percent higher than a year prior. The supply of unsold homes rose 3.0 percent month over month to 4.1 months of supply at the current sales rate.²⁵

Data on new home sales was unavailable for February and March due to the latest government shutdown. However, March building permits—another indicator of new residential construction—declined 10.8 percent over the prior month and fell 7.4 percent year over year. Higher material costs, high interest rates, and cautious builder sentiment drove the decline.²⁶

Consumer Price Index (CPI)

Consumer prices rose 0.9 percent in March from the prior month, as expected, up from February’s 0.3 percent month-over-month increase. Core inflation, which excludes energy and food prices, increased 0.3 percent month over month and 2.7 percent year over year in March.²⁷

Durable Goods Orders

Orders of manufactured goods designed to last three years or longer increased 0.8 percent in March—higher than the 0.5 percent expected. March’s rise came as many businesses tried to get ahead of Middle East-related supply chain disruptions.^28,29

The Federal Reserve

Minutes from the Federal Open Market Committee (FOMC) meeting in March were released on April 8. The Minutes suggested some Fed members were growing more comfortable with the idea of adjusting rates to counter the threat of inflation. However, the announced ceasefire on the same day mitigated any immediate market impact from the minutes’ content.^30,31

The FOMC voted 8–4 to keep interest rates steady at the April 29 meeting, leaving the Federal Funds Rate at a 3.5 to 3.75 percent target range. Notably, three of the four dissenting members agreed with the rate decision. Still, they objected to language in the accompanying statement suggesting that a rate cut was more likely than a rate increase.³²

The Federal Reserve next meets June 16-17, at which time they will publish a Summary of Economic Projections, including the ‘dot plot’ of long-term interest rate forecasts.

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