Our technical gauges continue to express quiet confidence in remaining fully invested, as recent market gains have largely affirmed the wisdom of following the trend rather than the noise.
Hey, sexy market. Wall Street returned from its Memorial Day weekend riding high, arms pumping, and very much feeling itself... Oppa Gangnam Style? More like Oppa AI Style — because this rally has the moves, the money, and apparently no intention of leaving the dance floor, with all the major indexes setting fresh all-time intraday highs during the week.
Equities: Houston, We Have Ten Trillion-Dollar Companies
The S&P 500 added +1.6% on the week, closing at 7,580, while the tech-heavy Nasdaq Composite led the charge with a +2.4% weekly gain, settling at 26,973. For the month of May — a month that had the audacity to rebrand itself — the Nasdaq surged 8.4%, the S&P 500 climbed 5.
Let's pause for a moment to appreciate the altitude at which we're now operating. All ten of the S&P 500's largest holdings — every single one — now carry fresh market capitalization in the trillions. The newest member of the club: Micron Technology, which rocketed 29% last week alone, pushing its market cap to $1.1 trillion and vaulting past both Berkshire Hathaway and Eli Lilly to crack the top ten. For the year, Micron is up a staggering 240%, fueled by insatiable AI demand for high-bandwidth memory chips. The top ten is now an all-tech affair — Nvidia, Microsoft, Apple, Google, Amazon, Broadcom, Meta, Tesla, Berkshire, and now Micron — leaving Berkshire Hathaway as the last non-tech standard-bearer with a trillion-dollar market cap, sitting just outside the top ten at roughly $1.02 trillion. Warren Buffett's conglomerate deserves considerable respect: it remains the only non-technology company on the planet to have crossed that threshold. In a market where the AI trade has swallowed everything in its path, that distinction matters.
Technology stocks as a sector gained 4.5% on the week, but the real fireworks were in semiconductors. The PHLX Semiconductor Index surged 7.2%, as the memory and AI-chip complex collectively erupted. The Technology Select Sector ETF (XLK) hit a new 52-week high Friday and finished May up nearly 20%. If the AI boom is a second act, investors are not waiting for intermission — they're already selling out the third.
The week's undisputed headline act was Dell Technologies, which reported Q1 FY2027 results after the bell on Thursday that were jaw-dropping. Revenue hit $43.84 billion — an 88% year-over-year increase — obliterating consensus by 23%. AI-optimized server revenue alone exploded 757% year-over-year to $16.13 billion. Dell shares surged 66% on the week, their best performance on record, lifting the entire AI infrastructure complex: Hewlett Packard Enterprise jumped over 23%, and Super Micro Computer rose 7%. As one market strategist put it, Dell is "the poster child for the AI broadening earnings story" — proof the trade has migrated well beyond chips into the full infrastructure stack.
Now, the dampener — because no week is complete without one. April's PCE price index, the Federal Reserve's preferred inflation gauge, showed headline prices rising 3.8% year-over-year and core PCE climbing 3.3% — both nearly double the Fed's 2% target. While the monthly readings came in slightly softer than feared, the annual figures serve as a persistent reminder that inflation has not been tamed so much as temporarily inconvenienced. Markets continue to price in no Fed rate cuts in 2026, with some probability still assigned to a December rate hike. The Fed, caught between a stubborn inflation ceiling and a war-induced oil shock, appears content to let the data do the talking while the equity market sprints ahead without it.
Source: MorningStar
Bonds: Yields Retreat as Tehran Diplomacy Offers Relief
Treasury markets spent the week grappling with the familiar tug-of-war between inflation anxiety and geopolitical diplomacy — and ultimately landed on the side of cautious relief. The 10-year Treasury yield eased to approximately 4.5% by Friday, retreating from the 16-month high of 4.70% touched as recently as May 20th. The 30-year bond yield dipped to around 4.99%, while the 2-year note — the Fed's shadow — fell to roughly 3.98%.
The catalyst for the bond rally was a report late in the week from Axios suggesting that U.S. and Iranian negotiators had agreed in principle to a 60-day ceasefire extension and the beginning of nuclear program negotiations, potentially restoring unrestricted passage through the Strait of Hormuz. Bond markets, which had been pricing in persistent energy-driven inflation, exhaled. The sting in the tail: President Trump had not yet formally approved the proposed terms, keeping traders appropriately hedged.
Geopolitics: The Strait of Hormuz Stays Center Stage
There is no ignoring the elephant — or rather, the oil tanker — in the room. The U.S.-Iran conflict has been the dominant macro variable of 2026, and this week was no exception. U.S. military forces conducted additional "self-defense" strikes over the Memorial Day weekend, even as diplomatic back-channels buzzed with ceasefire proposals. Reports of a potential deal sent equities and bonds rallying on multiple days, only to be tempered by the absence of a presidential signature and continued intermittent strikes.
West Texas Intermediate crude eased about 1% on Friday to $87.93 per barrel — a notable pullback from the $100+ levels seen earlier in the conflict, and a meaningful contributor to the bond market's relative calm. Gold, an ever-reliable barometer of unease, continued its advance, with futures rising 1% to $4,578 an ounce.
U.S. consumer confidence, meanwhile, fell in May as inflation tied to the Middle East conflict continued to weigh on households. That sentiment gap — between bullish markets and cautious consumers — remains one of the more uncomfortable paradoxes of the current cycle.
Gold: The Other Safe Haven Earns Its Stripes
Gold had a week that illustrated perfectly why the metal earns a seat at the portfolio table — though it wasn't a straight line to get there. Spot gold staged a sharp recovery on Friday, climbing back above $4,500 to settle around $4,543–$4,593 per ounce, after a bruising Thursday session that had briefly dragged prices down to $4,380 — their weakest level since late March. The culprit on Thursday: a stronger dollar and renewed U.S.-Iran military tensions sparking stagflation fears. The catalyst for Friday's rebound: in-line PCE data that cooled fears of an imminent Fed tightening escalation, drawing physical buyers back into the market.
The Bottom Line
Nine weeks up. Record highs across the board. A Dell earnings print that rewrote the AI infrastructure narrative. Gold recovering from a midweek stumble and still holding above $4,500. And a fear gauge so subdued it's practically snoring — even as individual stocks swing by 30% in a session. Markets ended May not merely in positive territory but in celebratory fashion, with the Nasdaq posting its best month in recent memory and the S&P 500 firmly in the black for the year.
The road ahead is not without potholes: PCE inflation stubbornly above target, a Fed frozen in its tracks, oil prices hostage to Middle East headlines, a ceasefire deal that awaits a presidential pen. For now, the bulls have the momentum — and, it appears, the earnings to back it up.
“Somewhere along the way, we lost sight of a foundational principle that previous generations understood instinctively: economic security is national security, for a nation that cannot manufacture, mine, ship, or refine its needs gradually cedes its strength—and sovereignty—to others. That is a dangerous dependency for any country. It is an unacceptable one for the United States.”
—Remarks by Treasury Secretary Scott Bessent, 2026 Reagan National Economic Forum: While America Slept, May 29, 2026
Inflation Isn’t Dead. It Just Changed Form
By Gregory Lai CFA, following a recent discussion with Senior PM and Affinity market historian Mike Petrino (University of Chicago, MBA)
Mike Petrino still thinks about inflation the way economists did before central banking became a televised sport.
Trained at the University of Chicago in the late 1970s, Mike came out of an era when inflation was viewed less as a political talking point and more as a monetary consequence. His framework is rooted in an older school of economics, one that focuses less on headlines and more on the long arc of money, liquidity, and incentives.
His latest observations arrive at an uncomfortable moment: inflation remains above the Fed’s target, oil prices are rising again, and markets continue to behave as though interest-rate cuts alone can solve nearly everything. Kevin Warsh do you really want the job?
Mike’s warning is simple:
inflation may not be nearly as defeated as investors believe.
Inflation Never Really Returned to “Normal”
The most recent Consumer Price Index (CPI) reading came in around 3.8% annually—above the Federal Reserve’s stated 2% target.
That number may sound elevated by modern standards, but Mike immediately frames it differently.
Since 1971, when the United States officially left the gold standard, inflation has averaged roughly 3.9% annually. At that pace, prices double approximately every 18 years.
In Mike’s framework, inflation is not an occasional policy failure. “It is the natural resting state of a modern fiat monetary system operating alongside persistent fiscal expansion and periodic liquidity injections.” Injection might be a generous understatement.
In my words: we treat inflation like a storm when it may actually be the climate.
For much of the last two decades, globalization, technological efficiency, and cheap labor masked those underlying forces. But structural disinflation is no longer as powerful as it once was, and markets may still be anchored to an economic regime that is slowly fading.
Oil Reminded the Market That Inflation Is Physical
Before the recent escalation of military conflict in the Middle East, inflation was running closer to a 2.5% annual rate. Since then, West Texas Intermediate crude oil has climbed sharply—from roughly $57 per barrel toward $100.
That matters far beyond gasoline prices.
Oil feeds transportation, manufacturing, agriculture, logistics, chemicals, and countless production chains embedded throughout the economy. Higher energy costs ripple outward quickly.
Mike’s point is that inflation is not merely a spreadsheet exercise driven by central-bank policy statements. It is also physical.
In my words: AI may dominate headlines, but economies still run on molecules, not just microchips.
Markets became accustomed to viewing inflation as something digital, temporary, and manageable. Energy shocks have a way of reminding investors that the real economy still operates in the physical world.
The Fed Debate May Be Missing the Real Issue
The public debate surrounding Federal Reserve policy has intensified as Jerome Powell’s term approaches its conclusion and President Trump advocates for lower interest rates and additional liquidity support.
Powell argues that easier monetary policy risks reigniting inflation. Trump argues the economy needs relief.
Mike believes both sides may overestimate the power of interest rates themselves.
Most recently, M2 money supply growth has been running near 5% annually—well above levels historically associated with stable 2% inflation. Over time, sustained monetary growth at that pace tends to work its way into prices.
Mike’s argument is not that interest rates do not matter. It is that policymakers and markets increasingly mistake the price of money for the supply of money itself.
In my words: modern markets have become so Fed-focused that they sometimes confuse monetary theater with monetary reality.
Liquidity alone cannot create productivity, nor can rate cuts instantly reverse structural inflationary pressures tied to deficits, energy markets, and geopolitics.
Why Markets Still Assume Inflation Will Fade
For nearly two decades, investors were conditioned to believe inflation was temporary, globalization was permanent, and central banks were nearly omnipotent.
That environment rewarded long-duration assets, aggressive valuations, and financial engineering.
The world now looks very different.
Global supply chains are less stable. Geopolitical tensions are higher. Fiscal deficits remain enormous. Energy security matters again. Labor markets are tighter than they once were.
Yet markets still behave as though the post-2008 playbook remains fully intact.
Mike’s broader point is that inflation expectations are often psychological before they become statistical. Once businesses and consumers begin assuming structurally higher prices, inflation becomes harder to suppress cleanly.
That does not mean inflation spirals out of control.
It means 2% may no longer be the natural destination investors assume it to be.
The Bigger Risk
Markets can tolerate high valuations.
Markets can tolerate slowing growth.
Markets can even tolerate geopolitical instability.
What markets struggle with is the realization that the assumptions underpinning the last twenty years may no longer hold.
This is ultimately what Mike is forcing readers to confront.
Not whether inflation rises next month or falls next quarter.
But whether the modern economy has structurally shifted toward a world of persistently higher inflation, higher volatility, and less policy precision than investors became accustomed to during the post-financial-crisis era.
As Mike would put it: sustained money growth and persistent inflation are rarely strangers for long.
As I’d put it: inflation is never just an economic statistic. Eventually, it becomes a social mood, a political problem, and a market repricing mechanism all at once.
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.
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WEEK AHEAD
June 1-5, 2026
Gangnam Style: Wall Street's Got Trillion-Dollar Swagger"
Equities: Houston, We Have Ten Trillion-Dollar Companies
Bonds: Yields Retreat as Tehran Diplomacy Offers Relief
Geopolitics: The Strait of Hormuz Stays Center Stage
Gold: The Other Safe Haven Earns Its Stripes
The Bottom Line
Inflation Isn’t Dead. It Just Changed Form
By Gregory Lai CFA, following a recent discussion with Senior PM and Affinity market historian Mike Petrino (University of Chicago, MBA)
Mike Petrino still thinks about inflation the way economists did before central banking became a televised sport.
Trained at the University of Chicago in the late 1970s, Mike came out of an era when inflation was viewed less as a political talking point and more as a monetary consequence. His framework is rooted in an older school of economics, one that focuses less on headlines and more on the long arc of money, liquidity, and incentives.
His latest observations arrive at an uncomfortable moment: inflation remains above the Fed’s target, oil prices are rising again, and markets continue to behave as though interest-rate cuts alone can solve nearly everything. Kevin Warsh do you really want the job?
Mike’s warning is simple:
inflation may not be nearly as defeated as investors believe.
Inflation Never Really Returned to “Normal”
The most recent Consumer Price Index (CPI) reading came in around 3.8% annually—above the Federal Reserve’s stated 2% target.
That number may sound elevated by modern standards, but Mike immediately frames it differently.
Since 1971, when the United States officially left the gold standard, inflation has averaged roughly 3.9% annually. At that pace, prices double approximately every 18 years.
In Mike’s framework, inflation is not an occasional policy failure. “It is the natural resting state of a modern fiat monetary system operating alongside persistent fiscal expansion and periodic liquidity injections.” Injection might be a generous understatement.
In my words: we treat inflation like a storm when it may actually be the climate.
For much of the last two decades, globalization, technological efficiency, and cheap labor masked those underlying forces. But structural disinflation is no longer as powerful as it once was, and markets may still be anchored to an economic regime that is slowly fading.
Oil Reminded the Market That Inflation Is Physical
Before the recent escalation of military conflict in the Middle East, inflation was running closer to a 2.5% annual rate. Since then, West Texas Intermediate crude oil has climbed sharply—from roughly $57 per barrel toward $100.
That matters far beyond gasoline prices.
Oil feeds transportation, manufacturing, agriculture, logistics, chemicals, and countless production chains embedded throughout the economy. Higher energy costs ripple outward quickly.
Mike’s point is that inflation is not merely a spreadsheet exercise driven by central-bank policy statements. It is also physical.
In my words: AI may dominate headlines, but economies still run on molecules, not just microchips.
Markets became accustomed to viewing inflation as something digital, temporary, and manageable. Energy shocks have a way of reminding investors that the real economy still operates in the physical world.
The Fed Debate May Be Missing the Real Issue
The public debate surrounding Federal Reserve policy has intensified as Jerome Powell’s term approaches its conclusion and President Trump advocates for lower interest rates and additional liquidity support.
Powell argues that easier monetary policy risks reigniting inflation. Trump argues the economy needs relief.
Mike believes both sides may overestimate the power of interest rates themselves.
Most recently, M2 money supply growth has been running near 5% annually—well above levels historically associated with stable 2% inflation. Over time, sustained monetary growth at that pace tends to work its way into prices.
Mike’s argument is not that interest rates do not matter. It is that policymakers and markets increasingly mistake the price of money for the supply of money itself.
In my words: modern markets have become so Fed-focused that they sometimes confuse monetary theater with monetary reality.
Liquidity alone cannot create productivity, nor can rate cuts instantly reverse structural inflationary pressures tied to deficits, energy markets, and geopolitics.
Why Markets Still Assume Inflation Will Fade
For nearly two decades, investors were conditioned to believe inflation was temporary, globalization was permanent, and central banks were nearly omnipotent.
That environment rewarded long-duration assets, aggressive valuations, and financial engineering.
The world now looks very different.
Global supply chains are less stable. Geopolitical tensions are higher. Fiscal deficits remain enormous. Energy security matters again. Labor markets are tighter than they once were.
Yet markets still behave as though the post-2008 playbook remains fully intact.
Mike’s broader point is that inflation expectations are often psychological before they become statistical. Once businesses and consumers begin assuming structurally higher prices, inflation becomes harder to suppress cleanly.
That does not mean inflation spirals out of control.
It means 2% may no longer be the natural destination investors assume it to be.
The Bigger Risk
Markets can tolerate high valuations.
Markets can tolerate slowing growth.
Markets can even tolerate geopolitical instability.
What markets struggle with is the realization that the assumptions underpinning the last twenty years may no longer hold.
This is ultimately what Mike is forcing readers to confront.
Not whether inflation rises next month or falls next quarter.
But whether the modern economy has structurally shifted toward a world of persistently higher inflation, higher volatility, and less policy precision than investors became accustomed to during the post-financial-crisis era.
As Mike would put it: sustained money growth and persistent inflation are rarely strangers for long.
As I’d put it: inflation is never just an economic statistic. Eventually, it becomes a social mood, a political problem, and a market repricing mechanism all at once.
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.