Market Commentary

May 8, 2026

A surge in Big Tech stocks, driven by renewed AI enthusiasm following the U.S.-Iran ceasefire, pushed the S&P 500 Index to a new high in April. After posting an aggregate year-to-date loss of 11.07 percent in the March quarter, the seven largest stocks in the S&P 500—Alphabet, Amazon, Apple, Broadcom, Meta, Microsoft, and Nvidia—returned 16.85 percent in April. Those stocks accounted for 57 percent of the S&P 500’s April return, and 68 percent when AMD, Intel, and Micron are included. While 9 of the 11 S&P 500 GICS sectors posted gains in April, only 24 percent of constituents outperformed the overall index, underscoring the rally’s narrow breadth.

The U.S. economy entered 2026 with the wind at its back, but the U.S.-Iran conflict continues to cloud the outlook. First-quarter real GDP growth of 2.0 percent benefited from a rebound in government spending after last fall’s shutdown and from robust AI infrastructure investment, although the impact was muted by a surge in tech equipment imports. Consumer spending proved relatively resilient in the first quarter, but rising energy prices are worsening the affordability crisis, and higher inflation could push real disposable income growth toward zero. As long as equity markets hold up, higher-income households should have the wherewithal to buoy spending. Moreover, AI capital investment continues to expand aggressively: the top four hyperscalers are now projected to spend over $695 billion in 2026, up from $376 billion in 2025 and well above the December projection of $491 billion.

Given the binary nature of the U.S.-Iran conflict and its global economic effects, portfolios remain well diversified. We retain our current positioning in technology but expect shares to take a breather after the substantial April rally, now that March-quarter earnings reports are largely in the rearview mirror. We also continue to favor industrials, especially companies exposed to secular growth opportunities in power and automation. Energy is an increasingly attractive sector as well, given the prospect of higher oil and natural gas prices even if the U.S. and Iran settle their dispute in the coming days or weeks.

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