What happened
U.S. equities spent May making records, and the artificial-intelligence trade made most of them. The Nasdaq 100 gained 10.4 percent on the month, roughly double the S&P 500's 5.4 percent, the Dow's 5.3 percent, and the Russell 2000's 5.0 percent. The headline numbers were strong across every major index. The composition underneath them was not balanced. A tape that rises on four indices but leads decisively with one is telling you where conviction actually sits — and where it does not.
The advance was not uninterrupted: a mid-month bond selloff driven by renewed inflation angst briefly halted it, with Nasdaq 100 futures down roughly 1.6 percent on May 15 before megacap technology reasserted leadership into month-end.
Treasuries were the month's most volatile asset class. The ten-year yield climbed from roughly 4.44 percent in early May to a peak of 4.67 percent on May 19 — its highest level in months — before retreating to about 4.48 percent by month-end as Iran-deal optimism cooled energy prices and eased inflation fears. The thirty-year briefly touched 5.18 percent intraday, with a $25 billion auction clearing at a 5 percent yield. The two-year, the cleanest market proxy for near-term Fed expectations, rose to 4.12 percent before settling near 4.05 percent. The curve held a modest bear-steepening posture for most of the month.
Crude oil was the month's defining macro variable. WTI opened May above $106 per barrel, with the U.S.–Iran conflict keeping the Strait of Hormuz closed, then whipsawed sharply lower — falling into the high $80s late in the month on reports that U.S.–Iran talks had reached their "final stages" — before recovering to settle near $92. Brent posted its largest monthly decline since the onset of the pandemic. Gold retreated from a peak near $4,736 per ounce in mid-May to the low $4,400s as risk appetite improved and the dollar firmed.
The dollar strengthened through the month, with the DXY index rising from roughly 98.4 to 99.4 as elevated inflation data reinforced a higher-for-longer rate narrative and kept the dollar bid against its peers. European bonds and currencies found some relief late in May as oil prices retreated.
What we believe is worth reading
Two features of the month, in our view, matter more than the record itself.
The first is the narrowness of the rally. A five-percent month at the index level is healthy, but a 10.4 percent month in the Nasdaq 100 against 5 percent almost everywhere else means the gains are concentrated in a comparatively small set of megacap technology names. Concentration of that kind makes the index level less informative than it appears: the benchmark can sit at a record while the median holding does not. The early days of June made the point — the Dow rose roughly 800 points in a single session even as several large AI names fell.
The second is energy, which this month sat upstream of nearly everything else. The Iran conflict and the status of the Strait of Hormuz drive the oil price; the oil price drives the inflation backdrop; and the inflation backdrop drives a Federal Reserve that has made clear it is watching prices closely. A resolution that reopened the Strait would likely pull oil lower, ease inflation, and potentially unlock rate cuts — a meaningful tailwind for risk assets. Escalation would do the reverse. That is an unusually wide fork, and much of the month's price action across rates, commodities, and currencies reads as the market handicapping which branch it takes.
Against that backdrop, the Fed has settled into a holding pattern with a hawkish tilt. San Francisco's Mary Daly called policy "in a good place" while cautioning that forward guidance "could be misleading" and that the Fed is "prepared to respond either way." Kansas City's Jeffrey Schmid went further, naming inflation the single biggest risk to the economy and questioning how patient the committee should remain. With the ISM prices-paid index above 80 for a second consecutive month — a first since the post-pandemic surge — the bond market has reason to stay on edge.
What we are not doing
We are not chasing the concentration. A rally whose leadership has narrowed to a handful of names is not, on its own, a reason to add to those names; it is a reason to check that client portfolios have not quietly become more exposed to a single theme than their objectives intend. Where May's advance has pushed allocation weights away from target, the disciplined response is to trim back toward it, not to lean further in.
We are not predicting the outcome in Iran. The cost of being wrong about a binary geopolitical event is asymmetric, and these situations routinely defy the consensus timeline. We would rather own portfolios that tolerate either branch of the fork than portfolios that require us to have called it.
We are not repositioning for a single inflation print or a single Fed meeting. When a central bank's own officials describe their forward guidance as potentially misleading, treating any one data release as a portfolio input introduces more risk than it removes.
What we are doing, as in every month, is the deliberate work of long-term wealth management: keeping client allocations calibrated to their objectives, time horizons, and risk tolerances; rebalancing where a strong month has pulled weights off target; reviewing positions whose theses have evolved; and reading widely so that the moment which genuinely demands action — should the fork in the Strait resolve in either direction — does not find us unprepared.
That work is, by design, mostly invisible from the outside. It is also the work that compounds.