For the period covering May 1 through May 31, 2026.

Global Perspective

Overview

The economy is still growing. Companies are making more money than expected. Consumers are still spending. And bonds are paying meaningful income to investors again.

Those are encouraging headlines. But an important shift is taking place beneath them: 

• Leadership is narrow, with artificial intelligence (AI) as the dominant theme. This means a smaller group of tech companies—particularly those that benefit regardless of the macroeconomic backdrop—is driving a larger share of market gains.
• As a result, economic outcomes are less uniform—with growth, inflation, and expected returns varying more widely across geographies and households.

We’re not saying the market has run out of steam. But the strength isn’t showing up everywhere equally. For investors, that means simply being invested may not be enough. Where you’re invested is becoming just as important.

An Economy Defying Expectations—as a Whole

For much of the last two years, investors, economists, and everyday Americans have been bracing for a recession. Yet despite higher interest rates (the cost of borrowing money), stubborn inflation (the rate at which prices rise), and ongoing global uncertainty—including major geopolitical events—the U.S. economy continues to move forward.

The U.S. economy remains surprisingly resilient, growing at an estimated 2%-2.5% pace, and helping support broader global growth.  Inflation remains sticky and—although the pace of price increases has diminished and is not as swift as it was a few years ago—inflation is elevated, eroding the purchasing power of consumers. 

Perhaps the simplest way to think about today’s economy is this: it may not be sprinting, but it’s still moving.

For investors, that’s important. Markets don’t require perfect economic conditions to perform well. They simply need an economy that continues to grow, consumers who continue to spend, and businesses that continue to generate profits.

Why it matters for investors: A stable economy helps support corporate earnings (the profits companies generate) and lowers the likelihood of a significant economic downturn—both of which can create a more supportive backdrop for long-term investors.

A Tale of Two Economies: Not Everyone Is Shopping the Same One 

Consumer spending remains one of the biggest drivers of economic growth. And for now, consumers are still spending.  But while the economy remains healthy overall, the experience of living in it can feel very different depending on who you are — which also means consumption is largely polarized.

For higher-income households, things are going relatively well. Rising home values, strong investment markets, and higher yields from savings and investments have helped boost wealth and financial flexibility. For many of these families, spending remains relatively comfortable.

For others, the picture is more challenging. For many lower-and middle-income families, many everyday expenses — groceries, utilities, insurance, internet service, and gasoline — remain significantly higher than they were just a few years ago. At the same time, wage growth (the pace at which workers’ pay increases) has begun to slow, making it harder for many to absorb those higher costs and keep up. In other words, the economy isn’t moving at the same speed for everyone. As a result, many consumers are becoming more selective about how and where they spend their money.

In short: the economy is still moving forward — but some households have a much smoother ride than others.

Why it matters for investors: Consumer spending fuels a large portion of economic growth. Understanding where spending remains strong — as well as where financial pressure may be building — becomes increasingly important as investors evaluate opportunities and risks across different industries and sectors.

Equities Overview

The Stock Market Rally Had Receipts

For much of the past year, investors have been asking the same question: “Can company profits keep up with stock prices?” So far, the answer has been a clear yes.

Corporate earnings (the profits companies generate) have consistently come in stronger than expected, giving investors confidence that the market’s gains are being supported by real business results — not just optimism. In fact, expectations for earnings growth in 2026 have climbed from roughly 13% to more than 20%, as companies continue to outperform forecasts.

In simple terms, businesses are making more money than many investors thought they would.

That’s important because stock prices ultimately follow earnings. Companies that grow profits tend to become more valuable over time, which helps support higher stock prices.

Which means this hasn’t been a rally built on hope. It’s been a rally built on proven results (let’s call it receipts). 

Why it matters for investors: Strong corporate earnings remain the foundation supporting higher stock prices in today’s market. The challenge now is whether companies can continue clearing an increasingly high bar.

AI is Driving the Bus

At this point, artificial intelligence (AI) isn’t just influencing the market. It’s influencing nearly everything inside the market.

From semiconductor manufacturers (companies that produce computer chips) to cloud-computing providers (companies that deliver computing services over the internet) — a growing share of corporate earnings growth (profits), business investment (capital spending in tech), and investor attention is flowing into AI-related companies. And so far, that investment has paid off.

Companies tied to AI continue to grow faster than much of the broader market — helping drive stock market gains and fueling enthusiasm among investors.

But there’s a tradeoff: As more of the market’s performance becomes tied to a single theme (AI), the market becomes more dependent on that theme continuing to succeed. In other words, when a smaller group of companies is responsible for a larger share of returns, any change in their outlook can have a much bigger impact on the market as a whole.

Think of it this way: AI may not be the entire market, but it’s increasingly the engine pulling it forward — at least for now.

Why it matters for investors: AI remains one of the market’s most powerful growth drivers. However, as more returns become concentrated in a relatively small group of AI-related companies, investors should pay close attention to how that story continues to evolve.

AI Infrastructure: Show Me the Money

AI may be the biggest investment story in the world right now — not only because of what it’s earning today, but because of what companies believe it could earn tomorrow. And a lot of it has to do with infrastructure. The assumption was simple: if AI is going to transform the economy, companies need to invest heavily today to build the technology, infrastructure, and computing power needed to support it. And they have been. 

Large technology companies — often called hyperscalers (major cloud-computing providers like Amazon, Microsoft, and Google) — are pouring hundreds of billions of dollars into building data centers, buying computer chips, and expanding the infrastructure needed to support AI.

In many cases, they’re investing a significant portion of their available cash flow (the money left over after paying operating expenses and investing in the business) into this effort, and the sheer scale of this investment is difficult to overstate.

The opportunity is enormous. But so is the price tag. And with expectations comes accountability. Which leads to the question investors are increasingly asking: “Will all of this spending eventually produce enough profits to justify the investment?” For now, markets are betting the answer is yes. But over time, investors will want more than promises. They’ll want results.

Why it matters for investors: AI remains one of the most important long-term growth opportunities in global markets. The next phase of the story, however, may depend less on how much companies spend and more on how much value those investments ultimately create. In other words, investors should pay attention to actual execution, not just ambition. 

Energy Corps: Signifying Shareholders Come First Now

Higher energy prices are helping energy companies make more money. What’s different this time is what they’re doing with it.

In past energy cycles, rising oil and gas prices often led companies to spend heavily on new drilling projects and production growth. The goal was simple: produce more while prices were high. Today’s energy companies are taking a different approach. Rather than aggressively expanding, many are focusing on profitability (how much money a company keeps after expenses), strengthening their balance sheets (a company’s overall financial health), and returning cash to shareholders through dividends (cash payments made to investors) and share repurchases (when a company buys back its own stock).

In simple terms: they’re spending less and keeping more.

That’s a meaningful shift because it allows a larger share of higher energy prices to flow directly into company profits — and ultimately into investors’ pockets. In short: instead of prioritizing production growth at any cost, energy companies are increasingly focused on maximizing the value of the assets they already have.

Why it matters for investors: Financial discipline is reshaping the energy sector, allowing more revenue growth to flow directly into profits and investor returns.

Where Nobody’s Looking — Opportunities Beyond the Headlines

Markets don’t just misprice risk. They misprice attention.

While AI has captured most of the spotlight, other areas of the market have quietly fallen out of favor. But in many cases, these sectors like healthcare, financials, and industrials continue to generate solid profits, maintain healthy balance sheets (reflecting the financial health of a company), and operate fundamentally strong businesses. They’re just not getting the same attention.

That doesn’t necessarily mean these businesses are weaker. It may simply mean investors are looking elsewhere. And importantly: History has shown that when attention becomes concentrated, opportunities often emerge outside the most popular themes.

Markets don’t always reward the best businesses equally. Sometimes they just reward the businesses attracting the most attention. But in many cases, it’s the outliers they should turn to. 

Why it matters for investors: Some of the market’s most attractive opportunities may not be found in the stocks everyone is crowding around. They may be found in high-quality businesses that have simply been overshadowed by today’s most popular themes.

Fixed Income Overview

Bonds Are Earning Their Keep Again

For years, many investors owned bonds for one primary reason: stability. The problem was that they simply weren’t getting much income in return.

Today, however, many high-quality bonds (loans made to financially strong governments and companies, accessed by investors) offer yields above 4%, meaning investors can once again earn meaningful income without taking excessive risk. 

In simple terms, bonds are paying investors once again.

And after more than a decade of historically low interest rates, that’s a significant shift. Bonds are no longer just helping smooth out the ups and downs of a portfolio. They’re also contributing to returns through the income they generate.

Why it matters for investors: Fixed income is once again serving both of its traditional roles, and doing exactly what investors expect it to do — provide stability during periods of market volatility (large swings in prices) and generate attractive income along the way.

The Easy Money Era is Over — Rate Pressure Is Starting to Show

For years, low interest rates made borrowing cheap. Companies could take on debt, refinance loans, and fund growth with relatively little cost. Consumers benefited too, with lower mortgage rates, lower car loans and student loans and other borrowing costs, and much easier access to credit. That environment has changed. 

Many of us remember the days of sub-2% borrowing costs. Those days are long gone — and we may never see them again. Today, interest rates above 4% have become the new reality, making it more expensive for businesses and consumers to borrow money. 

But higher rates don’t usually create immediate problems. Instead, they tend to work like gravity rather than a sudden shock. You don’t always notice the effect immediately. But over time, the pressure builds. Think of it like carrying a heavier backpack. You may not notice the extra weight right away, but the longer you carry it, the more difficult it becomes.

We’re beginning to see that pressure emerge in some of the most rate-sensitive areas of the economy, including commercial real estate (income-producing properties like office buildings, shopping centers, and apartment complexes), where many borrowers are facing significantly higher refinancing costs as existing loans come due.

The same dynamic is affecting businesses that rely heavily on debt. Companies with strong balance sheets — a company’s financial health, including its assets, liabilities, and debt levels — are generally adapting well. Those carrying larger debt burdens are finding the environment much more challenging — even oppressive.

Why it matters for investors: Higher interest rates are increasingly separating financially strong borrowers from weaker ones. As a result, credit quality (a borrower’s ability to repay debt) and careful investment security selection are becoming more important than they’ve been in many years. 

A Look Ahead

Being Invested Isn’t Enough

For much of the past few years, investing felt relatively straightforward. When markets moved higher, most stocks tended to move higher with them.

That environment is changing. Today, a growing share of market gains is being driven by a smaller group of companies, sectors, and investment themes. At the same time, the gap between the market’s winners and losers continues to widen.

In other words, not everything is rising together anymore. Some companies are thriving. Others are struggling to keep pace. And those differences increasingly come down to fundamentals (the underlying strength of a company’s business, profits, and financial health).

This isn’t necessarily a warning sign. In many ways, it’s a sign of a more normal market — one where strong businesses are rewarded and weaker businesses face greater challenges. But it does require a different mindset – in that simply being invested may no longer be enough. Where you’re invested, and why you’re invested, matters more than it has in several years.

The bottom line for investors: Market leadership is becoming narrower and more concentrated – meaning a smaller number of companies, sectors, or themes are responsible for a larger share of the market’s gains — which also means that dispersion (the difference between winners and losers) is widening. With this in mind, it’s important to understand that diversification (spreading investments across different areas of the market), portfolio construction (how investments are combined), and thoughtful security selection become increasingly important drivers of long-term success.

The Story Beneath the Headlines

If there’s one theme running through today’s economy and markets, it’s this: Things are still working. The economy is growing. Companies are making money. Consumers are spending. And bonds are generating income again.

But beneath those tone-setting headlines, an important shift is taking place — and it’s not so obvious. The benefits of growth are becoming less evenly shared. Some companies are thriving while others struggle to keep pace. Some consumers remain financially comfortable while others are feeling the pressure of higher costs. Some parts of the market continue to lead, while others are being left behind.

In other words, the economy is still moving forward — it’s just not moving forward equally. That’s not necessarily a warning sign. In many ways, it’s what happens when markets and economies mature. But it does create a different environment for investors — one where broad market exposure alone may not be enough.

Success is becoming less about owning everything and more about understanding what’s driving growth, where risks are building, and how different opportunities fit together.

The bottom line for investors: Markets remain resilient, but the winners and losers are becoming easier to spot if you pay attention. In a world where outcomes are becoming more uneven, thoughtful investing — which could mean going against the headline-driven crowd — matters more than ever. This is no longer a market where a rising tide lifts every boat equally. It’s a market increasingly defined by selectivity, discipline, and intentional positioning. Welcome to the Age of Selectivity.

This information is not intended as a recommendation. The opinions are subject to change at any time and no forecasts can be guaranteed. Investment decisions should always be made based on an investor’s specific circumstances. Investing involves risk, including possible loss of principal.

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