June 2026

Markets Climb the Wall of Worry
as Record Highs Continue

Market momentum accelerated in May as major indexes continued climbing to record highs. The Nasdaq Composite led domestic markets, surging 8.4% as strong corporate earnings and renewed AI-driven optimism pushed the index above 26,000 for the first time. The Dow Jones Industrial Average rose 2.8%, becoming the first major index to close above 51,000.

The benchmark S&P 500 gained 5.2% and closed above 7,500 for the first time, while the Russell 2000 advanced 4.3%. The S&P 400 Mid-Cap Index added 2.3%. Both the Russell 2000 and S&P 400 reached record highs during the latter part of the month. Year-to-date, U.S. equities remain firmly positive, led by small-cap stocks and the Nasdaq, which have gained 17.6% and 16.1%, respectively.

May highlighted the contrast between exceptionally strong financial markets and a challenging macroeconomic backdrop. Robust corporate earnings, a resilient labor market, and continued investment in artificial intelligence helped propel equities higher despite elevated oil prices, ongoing geopolitical tensions surrounding Iran, and persistent inflation pressures. Meanwhile, first-quarter U.S. GDP growth came in at a modest 1.6% annualized rate. Encouraging developments in Iran peace negotiations late in the month helped support investor sentiment.

International equities also posted solid gains. The MSCI Emerging Markets Index surged 9.5% in May and finished the month up 24.8% year-to-date, while the MSCI EAFE Index advanced 2.6%.

Fixed income markets remained under pressure from inflation concerns. The Federal Reserve left interest rates unchanged at its May meeting but continued to emphasize the risk of persistent inflation. The Fed's preferred inflation gauge, the Personal Consumption Expenditures (PCE) Index, rose 3.3% year-over-year.

As a result, market expectations shifted away from rate cuts, with some investors now pricing in the possibility of a 0.25% rate increase before year-end. The benchmark 10-year Treasury yield finished May at 4.45%, while the 30-year Treasury bond yield briefly surpassed 5% for the first time since 2007, reaching 5.12% before ending the month at 4.99%. The Bloomberg U.S. Aggregate Bond Index gained a modest 0.3%. Investors remain closely focused on inflation trends, Federal Reserve policy, and the broader economic outlook.

Despite ongoing uncertainty, the strong rebound experienced in April and May serves as another reminder of the importance of maintaining a disciplined, long-term investment approach. Diversification, patience, and adherence to a well-constructed investment plan remain critical during both periods of volatility and market strength.

June Update & Investment Outlook

After the Dow, S&P 500, and Nasdaq reached new record highs early in June, markets experienced increased volatility as investors digested two months of exceptional gains.

Headline CPI rose for the third consecutive month, reaching 4.2% year-over-year in May, while Core CPI increased to 2.9%. The hotter inflation data contributed to market turbulence as investors reassessed Federal Reserve expectations. However, optimism surrounding progress in Iran peace negotiations helped support a broad market rally on June 12 and tempered some of the volatility.

Periods of consolidation following strong market advances are common and often healthy, allowing investors to balance optimism and expectations against evolving economic data, geopolitical developments, and corporate fundamentals.

Attention now turns to new Federal Reserve Chair Kevin Warsh and his first FOMC meeting on June 16-17. While no change in interest rates is widely expected, investors will closely monitor the Fed's commentary for clues regarding future policy direction, inflation concerns, and the central bank's outlook for economic growth.

While uncertainty remains, we continue to encourage investors to stay focused on their long-term objectives. Diversification, patience, and discipline remain essential components of successful investing across changing market environments.

Key Takeaways for Investors

• Remain well diversified
• Maintain discipline and patience
• Stay focused on long-term goals
• Review your risk tolerance regularly

Call your Nelson Advisor today at 800-345-7593 to discuss your portfolio and any questions or concerns.

~ Your Nelson Securities Team

Past Performance Is No Guarantee of Future Results

Past Performance is No Guarantee for Future Results

This article is for informational purposes only and does not constitute investment advice.