AI and Geopolitics Continue to Drive Markets

Monthly Market Summary - June 1, 2026

• The S&P 500 Index gained +5.3% in May and set multiple new all-time highs. Technology led all S&P 500 sectors with a +16.0% return, followed by Consumer Discretionary (+2.6%) and Health Care (+2.5%). However, eight of eleven sectors traded lower, led by Energy (-5.6%), Utilities (-5.1%), and Consumer Staples (-3.2%).
• Bonds traded higher despite a mid-month surge in Treasury yields. The U.S. Bond Aggregate returned +0.3% but underperformed corporate bonds as credit spreads tightened. Investment-grade and high-yield corporates returned +0.7% and +0.5%, respectively, with both outperforming the broader Bond Aggregate.
• International stock traded higher in May but were mixed. Emerging markets gained +9.7% and outperformed the S&P 500, while developed markets' +3.2% return lagged both U.S stocks and emerging markets.

The S&P 500 and Nasdaq Hit New Highs, but the Rally Is Narrowing
The S&P 500 and Nasdaq 100 reached new all-time highs in May, fueled by continued enthusiasm for artificial intelligence and large cap technology stocks.  While the headlines suggest a strong and healthy market, the underlying picture may be less encouraging.
 
Technology gained 16% during the month and was the only S&P 500 sector to outperform the index.
Meanwhile, eight of the eleven sectors declined, and ten of the eleven sectors lagged the broader market.
Large cap growth stocks gained 7.2%, more than double the 2.9% return of large cap value stocks.
 
The result is a market that is becoming increasingly dependent on a small group of mega-cap technology companies. While the S&P 500 and Nasdaq continued to set records, most sectors are failing to participate in the rally. This growing concentration raises concerns about the strength of the advance. As fewer stocks drive a larger share of returns, the market may become more vulnerable to any slowdown in the technology sector.

This Year’s Two Defining Themes: Geopolitics & Artificial Intelligence
Two themes have defined markets this year. The first is geopolitics. Trade and tariff uncertainty earlier in the year has given way to military conflict in the Middle East, which has created an oil supply disruption. The Strait of Hormuz, which carries roughly 20% of global oil supply, has been effectively closed since the conflict began in late February, causing global oil inventories to shrink. Oil prices remain elevated after briefly hitting four-year highs earlier this year but have been relatively contained given the extent of the oil supply disruption. There was partial relief in May as U.S.-Iran negotiations progressed and the market began pricing in a potential reopening of the Strait. West Texas Intermediate crude ended the month below $90 per barrel, down -16.5%. However, the path forward remains uncertain, as a successful deal would take months to restore shipping traffic to pre-conflict levels. What happens next in the Middle East will impact energy prices, the inflation outlook, and the broader financial market.
 
The second theme is the artificial intelligence buildout. Companies have committed hundreds of billions to build the AI industry's physical backbone, including data centers, computer chips, and power generation. Forecasted 2026 capital spending across the leading tech companies now exceeds $600 billion, with most of the capex directed at AI infrastructure. The spending is driving economic growth and starting to show up in corporate earnings, with AI-linked revenue growth becoming a significant driver of overall S&P 500 profit growth. The investment is also creating drastic changes. Shortages across parts of the technology supply chains are creating bottlenecks, and companies are experiencing rapid growth as they repurpose products and services for the age of AI. The pace of spending and technological change explains much of the performance gap between the tech sector and more traditional areas of the stock market.

This material prepared by Coastal Bridge Advisors is for informational purposes only. Additional data provided by MarketDesk Research. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Opinions expressed by CBA are based on economic or market conditions at the time this material was written. Economies and markets fluctuate. Actual economic or market events may turn out differently than anticipated. Facts presented have been obtained from sources believed to be reliable. CBA, however, cannot guarantee the accuracy or completeness of such information, and certain information may have been condensed or summarized from its original source.