Not What You'd Expect

Back from a brief getaway, although I stayed somewhat abreast of market and economic happenings while I was away.

Just a quick observation on the US equity market... While it seems intuitive to credit the ascent to all-time highs for the S&P 500 to optimism that an Iran resolution is close at hand, the underneath action of late pours a little cold water on that assumption.

For starters, a solid, durable resolution would initially be bullish for virtually all things equities, save, initially, for the energy related.

Thing is, while the S&P had an impressive May (+5%), 7 of 11 key US equity sectors actually lost money during the month... And, of the 4 that were positive, tech (top green line below) -- on earnings and hype -- did 80% of the lifting... I.e., without its heavy concentration in the tech sector, the S&P would've lost money in May!  That's not the broad-based rip-your-face-off-rally you'd expect in an all's clear scenario:

Also, when we consider US vs foreign equity markets, and how foreign equities had been notably outperforming the US on previous pro-resolution headlines, their non-participation during the latter half of last week likely reflects global skepticism.

Stay tuned...  

(white = US, yellow = Japan, blue = Eurozone, orange = emerging mkts): 

There's of course lots more I can ramble on about, but rather than asking you to devote far too much of your valuable weekend herein, I'll deliver it in digestible doses over the coming days 😎.

In the meantime, here's your weekend wrap*, beginning with the latest scoring of our PWA Index:

Client Note — A Record Market, and a More Encouraging Read Underneath

Markets notched a ninth straight weekly gain, with the major indexes closing at fresh record highs. Encouragingly, our internal conditions gauge improved this week as well, to −8.96 from −13.43 — still in negative territory, but its strongest weekly gain of the year and a second consecutive move in the right direction.

The improvement came from an unexpected place: the factory floor. Regional manufacturing surveys across the country were broadly stronger in May, with four of five Federal Reserve districts reporting expansion and one reaching its best level in nearly five years. Industrial production and factory usage also held up. In short, the part of the economy that makes and ships things is doing better than the gloomier headlines would suggest.

The softer side of the ledger was the household. Family income was essentially flat in April once inflation is accounted for, and consumers leaned on their savings to keep spending. Home sales and mortgage activity cooled as borrowing costs ticked back up. None of this is alarming on its own, but it is the piece we are watching most closely — a strong production economy can eventually be pulled lower if the consumer keeps fading.

The market's strength remains concentrated in a handful of very large technology companies tied to artificial intelligence. That is a genuine source of return, and we participate in it. But it also means the index can keep climbing while the typical company — and the typical household — experiences something different. Our job is to hold both pictures at once: to stay invested in what is working while keeping the portfolio's defensive and real-asset anchors in place.

Inflation remains the stickiest part of the picture. Even with oil prices easing on hopes for a Middle East ceasefire, underlying inflation and long-term expectations stayed elevated. That keeps us patient on interest-rate-sensitive positions and constructive on our gold and real-asset exposure, which continues to behave as a steady anchor. We remain fundamentally constructive, selectively positioned, and attentive to the gap between the headline and the trend beneath it.


This note is for informational purposes and is not a solicitation to buy or sell any security. Past performance is not indicative of future results. 

*Prepared by Marty Mazorra, Chief Investment Officer, Private Wealth Advisors. Research synthesis and drafting assisted by AI tools under advisor review. All market views, analysis, and recommendations are those of the advisor.