IndiView: Market Update and Outlook (May 2026)

Below is a summarized transcript of our IndiView: Market Update and Outlook for May 2026. The full video is included at the bottom of this post.

Market Update and Outlook: April Rebound Resets the Conversation

After a difficult start to the year, April delivered a sharp rebound across risk assets. U.S. large-cap stocks, small caps, and the Nasdaq all rallied strongly during the month, with technology leading the way. That rebound improved investor statements after a rough first quarter, but it also pushed valuations back toward the more expensive side of the range. The market can still work from here, especially if earnings continue to hold up, but we are back to valuation levels that aren’t as attractive.

Earnings Remain the Market’s Main Support

The strongest argument for stocks right now is not the economy, but corporate earnings. Even with softer economic data and ongoing geopolitical risks, earnings estimates have not meaningfully rolled over. In fact, they have generally moved higher. That earnings strength helped support the April rally and remains one of the key reasons higher-than-average valuations may still be justified, at least for now.

Bonds Remain Muted

The bond market has not provided much excitement so far this year. Aggregate bonds, high yield, and long-term Treasuries have all stayed within a relatively narrow performance range. Rates have moved slightly higher, particularly on the longer end, which has offset some of the income bonds are generating. The result has been a fairly flat bond market, with limited differentiation across most fixed income categories.

Gold Pulls Back, Bitcoin Rebounds, and REITs Hold Up

Alternatives were mixed. Gold pulled back from recent highs, though it remains positive year to date after a strong run over the past year and a half. Bitcoin had a sharp one-month rally, but remained down year to date for investors who held it from the beginning of the year. REITs have been a relative bright spot, helped in part by strength in data center-related real estate stocks.

Risk Assets Regain the Lead

The April rally shifted performance back toward growth-oriented portfolios. Earlier in the year, conservative portfolios were holding up better because stocks were under pressure. After April’s rebound, more equity-heavy allocations moved back ahead. Conservative investors were still positive, but muted bond returns have limited upside for portfolios with heavier fixed income exposure.

Technology Reasserts Leadership

Technology was the clear sector standout in April. Semiconductors rallied strongly, and software bounced from a difficult first-quarter stretch. That does not mean every technology company is equally attractive, but the sector remains where investors appear most willing to allocate capital. Healthcare and financials, on the other hand, have struggled, with healthcare broadly weak and financials facing pressure earlier in the reporting season.

Fixed Income Spreads Still Do Not Offer Much Reward

Credit and maturity spreads remain below average. Investors are not being paid much to take on additional default risk or extend far out on the maturity curve. Maturity risk looks somewhat better than it did, but the overall compensation for adding risk in bonds remains limited. For now, short maturity, liquidity-oriented positioning continues to make sense.

Geopolitical Risk Remains High, but Hard to Trade

Geopolitical risk remains elevated, especially with continued focus on energy markets and oil prices. The longer oil stays at elevated levels, the more it can pressure consumers, businesses, airlines, and transportation costs. That said, it remains difficult to build a clear investment case around geopolitical headlines alone, so this is more of a risk to monitor than a direct portfolio-positioning driver right now.

The Fed Becomes More Important From Here

With a new Fed chair appointed, monetary policy becomes an even bigger area to watch. There will likely be pressure to reduce rates, but the traditional data does not yet clearly support aggressive cuts. Inflation has reaccelerated, and while the labor market has softened, unemployment remains below long-term averages. The key will be how Fed commentary evolves and whether internal disagreement begins to shape policy expectations.

Jobs and Housing Stay in Slow-Growth Mode

Housing remains constrained by mortgage rates and affordability. Even if rates were to move below 6%, the gap between home prices and incomes still creates a headwind. The labor market also remains in a slow-growth environment. There are some signs of hiring improvement in real-time data, but higher-end layoffs and softer trends suggest it is too early to call for a meaningful acceleration.

Stocks Are No Longer Cheap, but Earnings Help

At the end of March, the market had become more reasonably valued because stock prices fell while earnings estimates held up. After April’s rebound, that valuation opportunity is less compelling. Stocks are not necessarily wildly expensive, but they are back in a range where future returns depend heavily on continued earnings growth. The risk would be a shift where earnings estimates begin to fall while valuations remain elevated.

Portfolio Positioning: Average to Slightly Below Average Risk

After the April rally, the preferred positioning moves back toward average to slightly below-average risk. This is not an environment that calls for being ultra-conservative, but it also does not appear to be a time to aggressively chase risk. A balanced investor might be close to their normal allocation, with perhaps a slight tilt below full risk depending on objectives and time horizon.

Fixed Income Positioning: Stay Short and Flexible

There has been no major change in fixed income positioning. With spreads tight and rates slightly higher, the preference remains short maturity and dry-powder oriented. Bonds can still serve a role in portfolios, but there is not enough compensation right now to justify aggressively extending maturity or taking on additional credit risk.

Software Still Has Opportunity, but Selectivity Matters

Software rebounded alongside the broader market in April after struggling earlier in the year. Valuations in parts of the software market remain unusually low compared to history, even as many companies continue to grow at attractive rates. That said, after the recent rally, selectivity matters more. The opportunity is still there, but it may not be as broad or as compelling as it looked during the March weakness.

Data Center REITs Have Worked Better Than Expected

Data center REITs have been one of the areas where our caution was misplaced. Companies tied to data center demand have performed very well and helped drive REIT strength year to date. The longer-term concern remains whether capacity eventually becomes overbuilt as the artificial intelligence buildout shifts from “build everything” to efficiency and return-on-investment discipline. For now, though, those stocks have continued to work.