Weekly Newsletter: May 25, 2026
The earnings season finally wound down with the release of Nvidia’s numbers, as well as many of the retailers. While not all sunshine and rainbows, the numbers did highlight an ongoing issue with the consumer. Energy prices are having an impact, but not across the board. Those at the upper end of the income/asset scale are and have been doing just fine, while those at the lower end of the income/asset scale have shifted their spending and are “trading down”. Nvidia earnings showed the AI buildout is in full steam ahead mode. The “hyperscalers” are roughly half of Nvidia’s revenues and continue to grow quickly. The reaction was more ho-hum as the stock has gained nicely since the semiconductor group bottomed in March. The final week of the month is typically light on economic data, and with earnings season “officially” over, there will be little from corporate news. The holiday-shortened week and the beginning of summer vacations may mean a quieter market next week.
The bond market continues to worry about higher gas prices, inflation, and growing Federal debt. Pushing rates higher was not part of the Fed’s playbook as we came into this year, as many had penciled in at least one, if not three, rate cuts. The “betting” has flipped to maybe one rate increase before the year is out. The beginning of the Kevin Warsh era at the Fed officially begins this week and will be tested at his first meeting in a couple of weeks. It is not unusual for economic events to begin early in the tenure of a new Fed Chief. Greenspan was tested by the crash in 1987, Bernanke oversaw the financial crisis in 2008, and Yellen maintained what many saw as unnecessary monetary easing. Powell came into office just after the economic reopening following Covid. What will Warsh’s defining moment be? Dealing with persistent inflation from higher energy prices and a still bloated Fed balance sheet may have unintended consequences in the coming couple of years.
During much of this year, the markets have been split between the technology and AI trade and everything else. This week, there was some catch-up as the equal-weighted SP500 index rose nearly 2.5% vs. the SP500’s 0.80% rise and the tech sector’s “meager” gain of just under 0.5%. The news that is likely to capture investors’ attention will be the initial public offering of SpaceX. It is set to go public on June 12th and is likely to be the largest IPO in history. The money to buy shares will be coming from somewhere, so investors may be selling stocks in general to own a share of the company. It is expected that the company will quickly be a part of various market indices that, in turn, could create additional buying as ETF providers “rebalance” portfolios to include the stock. Combined with plenty of economic data and a Fed meeting, the IPO could be part of a wild June.
The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable but are opinions and do not constitute a guarantee of present or future financial market conditions.