Chad Holland, CFA, CFP® | Managing Director | June 4, 2026
May delivered strong gains for stock investors even as the bond market wrestled with renewed worries about inflation. All three major U.S. indexes closed the month at record highs, with the S&P 500 pushing above 7,500 for the first time on the back of continued strength in technology shares. Beneath those headlines, long-term interest rates told a more complicated story, climbing to levels not seen in close to twenty years before easing back as oil prices retreated.
The month also brought a rare change at the top of the Federal Reserve, the first since 2018, as Kevin Warsh was sworn in to succeed Jerome Powell. A leadership transition like this understandably raises questions about where policy heads next. History offers some reassurance here: the economy and markets have grown and adapted under a long line of Fed chairs with very different styles. Our job is to keep portfolios balanced enough to take part in months like May while staying prepared for the parts of the cycle that look nothing like it.
Key Data Points for May
- The S&P 500 rose 5.1%, the Nasdaq gained 8.4%, and the Dow Jones Industrial Average added 2.8%. All three closed May at new record highs.
- The S&P 500 traded above 7,500 for the first time, one of 22 record closes in 2026 through month end.
- Market volatility eased, with the CBOE VIX Index finishing May at 15.32.
- International developed markets returned 2.6% (MSCI EAFE Index, in U.S. dollar terms), while emerging markets returned 9.5% (MSCI EM Index).
- The 30-year Treasury yield reached 5.18%, its highest in nearly two decades, before settling below 5%. The 10-year yield rose to 4.4%, and the Bloomberg U.S. Aggregate Bond Index returned 0.3%.
- Oil prices fell, with Brent crude near $92 per barrel and WTI around $88.
- Gold eased to $4,539 per ounce, and the U.S. Dollar Index closed at 98.94, also modestly lower.
- First-quarter real GDP was revised lower to 1.6% from an earlier 2.0%. April headline CPI registered 3.8% year over year, with core CPI at 2.8%.
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Bond Yields Climbed to Multi-Year Highs, Then Eased
The clearest source of tension in May ran through the bond market. The 30-year Treasury yield pushed to its highest level in close to two decades before slipping back below 5% by month end, and the 10-year and 2-year yields rose alongside it as investors priced in the idea that rates could stay elevated for a while longer. Futures markets now lean toward the Fed raising rates once by the middle of 2027, a notable shift from the rate cuts many had penciled in earlier this year.
The move traces back to inflation. Both the Consumer Price Index and the Producer Price Index came in hotter than expected, driven largely by energy costs. When inflation runs higher, investors tend to demand more yield to make up for the eroding value of each future dollar, which pushes rates up. The worry among some economists is that if fuel prices stay elevated, the pressure could spread beyond energy into the broader basket of goods. Gas has eased to roughly $4.30 a gallon nationally, though that is still about $1.50 above where it sat before the conflict in Iran.
Higher rates ripple through everything. For households, they raise the cost of mortgages, auto loans, and other borrowing. For businesses, they make financing operations and expansion more expensive. In markets, higher rates reduce the present value of future cash flows, which can weigh on asset prices. There is a flip side worth remembering, though: higher yields mean bonds are finally generating real income again after many lean years, and that income can do meaningful work inside a diversified portfolio.
It also helps to keep these moves in context. Rates have whipsawed in both directions this year as expectations around a peace deal have shifted, and they have been notoriously hard to forecast for some time. Yields are high relative to the past decade, but they remain well below the levels many feared during the worst of the inflation scare.
Stocks Set Fresh Records as Earnings Held Up
Even with the bond market under pressure, stocks kept climbing. The S&P 500 cleared 7,500 for the first time in May, one of 22 record closes already this year. Large technology names continued to do much of the heavy lifting, but the advance has been broader than in some recent stretches, with participation spreading across more of the market.
A strong backdrop like this has also revived interest in initial public offerings, with names such as SpaceX, Anthropic, and OpenAI drawing attention as potential candidates. Many of these companies have grown for years on private capital, part of a longer trend toward staying private well past the point where earlier generations of businesses would have gone public. The headlines tend to focus on the first day of trading, but the more durable benefit of an IPO is that it widens the set of opportunities available to everyday investors. With today’s largest technology companies, what mattered was never the debut itself but how the businesses compounded in the decades that followed.
New highs themselves are not a warning sign. Over long stretches, markets have tended to move upward, which means they spend a good deal of time at or near records. What deserves more attention than any index level is the health of the fundamentals underneath it, and corporate earnings have continued to grow at a solid clip, with analysts looking for further gains in the year ahead.
That earnings growth has helped keep valuations relatively steady even as prices have risen. The S&P 500 trades around 20.9 times forward earnings, roughly in line with the past few years but still above its longer-term average. Elevated valuations do not tell us what the next year or two holds, yet they matter a great deal for how we build portfolios for the long run. Staying balanced across sectors, company sizes, and investment styles is one way to manage that risk while still taking part in the market’s progress.
A New Fed Chair Takes Over at a Tricky Moment
May also brought new leadership to the Federal Reserve, as Kevin Warsh was sworn in as Chair, succeeding Jerome Powell. Warsh is a familiar figure to markets, having served on the Fed’s Board of Governors during the 2008 financial crisis, and he is widely viewed as a known quantity with deep experience in policy and financial markets.
Because Fed transitions happen so rarely, they naturally stir questions about the direction of policy. Warsh is seen as something of a reformer, which adds a layer of uncertainty about how the central bank might operate under him. In recent Senate testimony he stressed the importance of monetary policy independence and of acting in the country’s interest, and he has signaled a preference for a more focused Fed, with a track record that leans toward guarding against inflation.
Whatever reforms he pursues, the backdrop he inherits is a difficult one. The economy remains broadly healthy, but inflation has picked up in recent months while the labor market has sent mixed signals. Supporting hiring would typically argue for lower rates, while cooling inflation would argue for tighter conditions. That tension is exactly why markets have swung from expecting more cuts to bracing for at least one hike.
For long-term investors, the more useful lesson is a historical one: the economy has expanded under a long succession of Fed chairs, across both parties and a wide range of approaches. Earnings, productivity, demographics, and innovation tend to be the real engines of long-run returns. A change at the top of the Fed can stir short-term uncertainty, but it rarely rewrites those underlying drivers.
What This Means for Your Portfolio
A month like May is a good reminder of why we build portfolios the way we do. Rather than buying packaged products or replicating an index, our approach to investment management centers on owning individual securities, chosen and managed at the level of each client. That gives us room to target tax outcomes deliberately, to manage concentrated positions with care, and to lean toward balance across sectors, sizes, and styles rather than chasing whatever led last month.
The current setup rewards that discipline. Stocks are at records and valuations sit above their long-run averages, which argues for staying invested while keeping expectations grounded. At the same time, higher bond yields mean the fixed-income side of a portfolio can finally contribute real income, something that was hard to come by for much of the past decade. Holding both, in deliberate proportion, is what lets a portfolio benefit from strong months without being overexposed when conditions change.
None of this calls for dramatic moves. It calls for the same thing it usually does: a plan built around your goals, reviewed regularly, and adjusted thoughtfully as the facts change rather than as the headlines do. For households focused on the years ahead, that work runs straight through thoughtful retirement planning, where time horizon and income needs shape how the portfolio is positioned. When circumstances or objectives shift, the portfolio should reflect that, and that kind of steady, deliberate adjustment sits at the heart of how we manage money.
Frequently Asked Questions
Why did stocks rise in May even as bond yields jumped?
It can seem strange for stocks to set records while yields climb, but the two markets were responding to different things. Stocks took their cue from solid corporate earnings and continued strength in technology, which supported prices even as borrowing costs rose. Bonds, meanwhile, reacted to hotter inflation data and the prospect of the Fed holding rates higher for longer. Higher yields can eventually create competition for stocks, but in May the earnings picture was strong enough to keep equity investors focused on growth. Stretches where the two markets move in different directions are not unusual, and they are one reason holding both can smooth the ride.
What does the new Fed Chair mean for my investments?
Kevin Warsh taking over from Jerome Powell is a meaningful event, since Fed transitions happen rarely and the chair influences the path of interest rates. Warsh is viewed as a known quantity with crisis-era experience, though he is also seen as a reformer, which adds some uncertainty about how policy may evolve. History suggests this matters less for long-term results than the headlines imply, as the economy has grown under many different chairs from both parties. For now, markets have shifted toward expecting at least one rate hike rather than further cuts. We are watching how policy develops, but on its own it is not a reason to overhaul a well-built plan.
Should I be worried that the market is at an all-time high?
New highs tend to make people nervous, but they are a normal feature of rising markets rather than a signal of trouble. Because markets have historically trended upward over long periods, they spend a lot of time at or near record levels. What matters more than the index number is whether the fundamentals behind it are healthy, and right now earnings are still growing. Valuations are elevated relative to history, which is worth respecting, though elevated valuations have little to say about where the market goes over the next year or two. The more productive response tends to be staying balanced rather than trying to time the top.
With yields this high, should I move more money into bonds?
Higher yields have made bonds more attractive than they have been in years, since they now offer more meaningful income, and that is a genuine positive for diversified portfolios. Whether you should shift your own allocation, though, depends on your goals, your time horizon, and how the rest of your portfolio is positioned, not on the headline yield alone. Bonds also carry their own risks, including price declines if rates keep rising. The right mix is a personal question that depends on your full financial picture rather than on any single number. It is the kind of question best answered in the context of your overall plan.
Could rising oil prices push inflation higher from here?
It is possible. The recent uptick in inflation was driven largely by energy, and gas prices remain well above where they were before the conflict in Iran. The concern some economists raise is that if fuel costs stay elevated, the pressure could spread beyond energy into the broader basket of goods. So far oil has actually eased somewhat from its peak, which is encouraging, but the situation in the region remains fluid and hard to predict. We watch inflation closely because it shapes how the Fed sets rates, and rates in turn affect nearly every part of a portfolio, so staying diversified rather than betting on a single outcome tends to serve investors well.
May added new milestones to an already strong year for stocks, even as rising yields and a new face at the Fed gave investors plenty to think about. Headlines around inflation, monetary policy, and geopolitics are likely to keep generating noise in the months ahead. The steadiest path through it remains the one it has always been: staying focused on your long-term financial goals rather than the story of the day.
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The views expressed are those of Holland Capital Management, LLC (HCM) as of June 2026 and are subject to change without notice. This commentary is provided for general educational purposes only and should not be construed as individualized or personalized investment advice. Any economic or market information cited is historical and is not indicative of future results.
Different types of investments carry different degrees of risk, and there can be no assurance that any specific investment, strategy, or product referenced will be profitable, match any historical performance level, or be suitable for your portfolio. Investing in stocks involves risks including fluctuating dividends, loss of principal, and potential illiquidity in a falling market. Bonds are subject to market and interest rate risk if sold before maturity; bond values and yields decline as interest rates rise, and bonds are subject to availability and changes in price.
Nothing in this commentary should be treated as a substitute for personalized advice from HCM or another qualified professional, and no investment decision should be based on its contents. All information is obtained from sources believed to be reliable, but its accuracy and completeness cannot be guaranteed. If you have questions about how any topic discussed here applies to your situation, please contact Holland Capital Management, LLC.
