May Market Recap
Markets carried their strong momentum into May, with all three major indices hitting fresh all-time highs. The monstrous run in the tech sector has been powered by AI-related spending, as evidenced by earnings surprises reported by memory-chip makers, hardware manufacturers, and construction equipment producers. Investors have largely looked past factors that may cause the rally to pause or take a breather. After a weak start to the year, the technology sector surged more than 40% in the past two months, far outpacing all other S&P 500 sectors and leading the broader market higher.
Why Are Bond Yields Climbing?
In May, the most notable movement in the market, aside from the powerful tech rally, was the 30-year Treasury yield reaching its highest level since 2007. While persistently high oil prices took the brunt of the blame, they aren’t the only reason behind the rising bond yields. Market observers believe there are three main contributors:
- Inflation fears are spreading beyond just energy prices, as evidenced by April’s core services CPI and PPI as well as the price indices in the Empire manufacturing survey.
- Global political turmoil is making investors nervous. For example, the UK may soon welcome a more liberal prime minister who could exacerbate its budget situation.
- New Fed Chair Kevin Warsh’s dovish stance on interest rate cuts may not align with economic reality. Rate cut odds have all but disappeared since March while chances of a rate hike are increasing.
What's Next In Techology?
Artificial Intelligence (AI) has dominated headlines for the past several years, emerging as a transformative force across nearly every industry. Fueled by rapid advancements in generative AI and increasing corporate adoption, investor enthusiasm has surged – driving substantial gains in AI-linked stocks. Companies involved in semiconductors, cloud computing, and data infrastructure have been among the biggest winners.
Looking back over the past half century, technology has no doubt been the breeding ground for innovations and breakthroughs, and leadership has constantly evolved. Now the question is: what’s next?
Only time will tell who will emerge as the winners; however, one thing is certain: whatever the next “big thing” is, it will surely change how we live, conduct businesses, and interact with one another while also sparking new ideas, industries, and more.
From an investing perspective, the market tends to reward those who maintain a long-term focus rather than chasing the latest trends.
