Market Commentary | May 2026

Wildermuth Commentary May 2026.pdf

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Markets Climb as Earnings Rise Sharply

Corporate earnings are giving investors a surprisingly strong reason for optimism. Many companies are growing profits, protecting margins, and finding ways to perform well despite complications from the war in Iran, higher oil prices, and continued tariff uncertainty.

The S&P 500 and Nasdaq closed out April at fresh records. Hopes for progress in the Iran conflict, lower oil prices, and another strong round of corporate earnings boosted the two indexes to their sixth straight weekly gain after an earnings-heavy week. First-quarter profit estimates also climbed sharply as many companies reported better results than expected.

Perhaps the most encouraging part is that while stocks have climbed to record highs, many valuations have actually declined. Expected profits have risen faster than stock prices, which creates a healthier foundation than existed several months ago.

This does not mean stocks are cheap as they are still expensive compared with long-term averages, but high valuations are easier to justify when companies are delivering strong profit growth. For now, investors are seeing evidence that businesses can manage through higher costs, policy uncertainty, and geopolitical stress.

Artificial intelligence (AI) remains an important part of the story. The largest technology companies continue to benefit from AI spending, and investors are seeing real revenue growth rather than just future promises. That helps explain why technology stocks have remained strong. The market’s recent strength also reflects broader earnings growth, resilient consumers, and an economy that continues to avoid recession.

The next stage for AI will be broader adoption beyond the largest technology names. That process is starting, but the results are still very uneven. Some companies are being rewarded simply for talking about AI, while others have been punished for their perceived lack of ability to adjust to a future with AI in it. It will take some time for this story to play out and for investors to discern the real winners.

Beyond technology, the U.S. consumer still looks surprisingly strong. Despite higher gasoline prices, consumer confidence unexpectedly rose in April to 92.8. Better views of the labor market undoubtedly helped. The March jobs report showed 178,000 jobs added, with unemployment dropping to 4.3 percent. Those are not boom numbers, but they also do not suggest the collapse that some analysts had predicted.

There are still real concerns. The War in Iran and fuel prices which can feed inflation possibly leading to delayed rate cuts or higher interest rates. Tariffs also appear to be weighing on trade, manufacturing, and foreign investment. Their impact has been less severe than many feared, but they are still a drag on growth rather than a boost.

For now, the market has a stronger foundation than it did earlier this year. Earnings are growing, consumers remain strong while AI continues to positively impact corporate earnings. Recession risks also look very low. Investors have reasons for optimism, and if the war ends soon, markets could get another boost. As always, anything can happen, but as long as companies keep delivering strong results, markets can handle a lot of uncertainty.

Daniel Wildermuth

Portfolio Manager, Quartz Astra Strategies

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DATA SOURCES

Market Data: https://www.wsj.com/market-data


INDEX DESCRIPTIONS

The Standard & Poor’s 500 Index is a capitalization-weighted index that is generally considered representative of the U.S. large capitalization market.

The NASDAQ Composite Index is a capitalization-weighted index that is comprised of all stocks listed on the National Association of Securities Dealers Automated Quotation System stock market, which includes both domestic and foreign companies.

The Dow Jones Industrial Average is a price-weighted measure of 30 U.S. blue-chip companies. The index covers all industries except transportation and utilities.

IMPORTANT DISCLOSURES

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Past performance is not indicative of future results. No part of this material may be reproduced or referred to in any form, without express written permission of Quartz Partners, LLC.

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