• Tech rally leads markets higher despite geopolitical uncertainty — U.S. equity markets closed higher on Monday, despite uncertainty surrounding the path forward for U.S.–Iran negotiations, as well as reports that the U.S. struck Iranian radar and drone sites over the weekend. Despite the geopolitical flare-up, a surge in the technology sector drove gains across all three major U.S. indices. The rally in tech shares was fueled by NVIDIA’s unveiling of a new semiconductor chip designed for personal laptops. Outside of technology, energy was the only other S&P 500 sector to finish higher on Monday. Overseas, European markets were mostly lower, while Asian equities moved higher overnight, led by South Korea’s KOSPI Index, which gained more than 3% amid continued strength in global technology shares. Oil prices also closed higher, with WTI crude rising to $92 per barrel. Treasury yields increased alongside heightened geopolitical uncertainty, with the 10-year yield climbing to 4.46%.
   
• Markets are back at all-time highs. Can the rally continue? — Equity markets have staged an impressive rebound following the March pullback, with the S&P 500 gaining roughly 20%, including dividends, since March 30, while the technology-heavy Nasdaq has advanced nearly 30%. Strong technology earnings and a de-escalation in the war with Iran have been the primary catalysts behind the rally, supporting investor risk appetite over the past two months. Historical seasonality trends suggest the momentum could continue into June. Since 1970, the S&P 500 has generated an average June return of 0.5%, with positive returns occurring 61% of the time.* While those results are not meaningfully stronger than the average month, seasonal trends have been particularly favorable in recent years. Since 2015, the index has gained an average of 1.5% in June, with positive returns in 82% of those years.* That momentum has also tended to carry into July, as the S&P 500 has averaged a 3.2% gain and posted positive returns in every July since 2015.* While there's no promise history will repeat itself this year, we continue to believe the fundamental backdrop for equities remains supportive. Steady economic activity and resilient earnings growth should continue to provide a constructive environment for equity markets, in our view.
   
• May performance recap — Equity markets built on April’s strong momentum in May, with the S&P 500 posting its ninth consecutive weekly gain last Friday and returning 5.3% for the month, including dividends. Investor sentiment was supported by strong corporate earnings growth and expectations for a diplomatic resolution to the war in Iran, which helped drive oil prices lower during the month. From a leadership perspective, the technology sector led the way, gaining 16% in May following strong first-quarter earnings results and continued robust demand for AI-related investment. However, strength in equities was not limited to the U.S. Emerging-market equities gained nearly 10%, led by technology-heavy regions such as Taiwan and Korea, which also continue to benefit from ongoing AI-driven semiconductor spending. International developed large-cap stocks — primarily companies in Europe and Japan — also moved higher, gaining more than 3% for the month and benefiting from lower oil prices. Despite the volatility experienced in March and continued geopolitical uncertainty, each of our recommended equity asset classes has returned more than 9% year to date. Given the sharp rebound from the March lows, we believe a period of consolidation would be normal. Even so, the fundamental backdrop for equities remains constructive in our view, supported by strong corporate profit growth, healthy economic activity, and stable labor-market conditions.

Brock Weimer, CFA;
Investment Strategy

^{Source: FactSet. 
*FactSet, Edward Jones. S&P 500 Price Index.} 

• Stocks add to gains on Middle East ceasefire optimism - Ongoing reports that the U.S. and Iran have reached an agreement to extend their ceasefire by 60 days continue to support investor sentiment. Major equity indexes were slightly higher on Friday and posted their ninth consecutive weekly gain. Oil prices were down about 1.5% today and almost 10% lower for the week, trading near $88 per barrel amid hopes that the Strait of Hormuz will reopen. AI-driven demand continues to support earnings, as illustrated by a 30% jump in shares of Dell Technologies. The company delivered a sales outlook well above consensus estimates, driven by strong demand for AI-related server infrastructure. Tech was a major driver behind the S&P 500's May strength rising 16%. Nonetheless, both the equal-weight S&P 500 and small-cap indexes reached new highs this month, suggesting early signs of broadening market leadership as bond yields retreat.
   
• S&P 500 posts a ninth consecutive week of gains - Despite persistent geopolitical headline noise, U.S. equities have continued to move higher, with the S&P 500 logging 22 record highs so far this year. The rally has been largely tech-led and supported by resilient earnings, but the key question is whether it can be sustained. A nine-week winning streak is a rare occurrence historically. Over the past 70 years, this has only happened 12 other times. Notably, these streaks have tended to occur earlier in the bull market cycle, rather than at its end. Forward returns following similar periods have generally been positive. Three- and six-month and one-year returns were positive in most instances *. The key takeaway, in our view, is that while the market may pause in the near term to consolidate gains, this type of strength has not historically signaled that a peak is imminent.
   
• Inflation is a key risk for the Fed as labor market concerns ease - This week, several Fed officials expressed concern about the recent uptick in inflation, which has pressured bond returns. The recent pullback in oil prices is helping to ease some of those worries, with the 10-year Treasury yield falling below 4.5%. However, with inflation moving further away from the Fed’s 2% target and labor market trends stabilizing or even improving, policymakers may begin to shift away from their easing bias at the June meeting. Looking ahead, next week’s focus will be on the monthly jobs report, which is expected to show a solid pace of job gains of around 100,000, alongside a steady unemployment rate of 4.3%. We expect the Fed to remain vigilant but are unlikely to overreact to what may prove to be a temporary, energy-driven inflation spike. In our base case scenario, we expect the Fed to remain on hold this year and resume rate cuts next year.

Angelo Kourkafas, CFA;
Investment Strategy

^{*Bloomberg, Edward Jones; Source for all data not cited: Bloomberg, FactSet.} 

• Stocks gain with inflation in focus – Equity markets closed higher on Thursday after the April personal consumption expenditures, or PCE, inflation report came in largely in line with expectations. Additionally, initial jobless claims remained contained at 215,000 last week, while first-quarter real GDP was revised lower to 1.6% amid downward revisions to investment and consumer spending. From a leadership perspective, the health care and technology sectors were the top performers, with each gaining more than 1%. Technology was supported by strength among software names following better-than-expected earnings from Snowflake, while strong results from Agilent helped lift sentiment across the health care sector. Bond yields finished slightly lower, with the 10-year Treasury yield closing at 4.45% and the 2-year yield at 4.02%. Oil prices ended only modestly higher, at around $89 per barrel, reversing larger gains from earlier in the day following reports that U.S. and Iranian negotiators reached a memorandum of understanding to extend the ceasefire and begin further negotiations on Iran’s nuclear program.
   
• April inflation data in line with expectations - Inflation was in focus on Thursday, with April personal consumption expenditures (PCE) inflation released this morning. Headline PCE rose 0.4% for the month, driven in part by a 5.5% increase in gasoline prices, and was up 3.8% from a year ago. Core PCE, which excludes food and energy, rose 0.24% for the month and 3.3% on an annual basis. The April reading brought the three-month annualized rate of core PCE to 3.8%, underscoring that near-term inflation pressures remain above the Federal Reserve’s 2% target. In our view, today’s data reinforces the likelihood that the Fed will remain on hold in the near term. That said, we believe the bar for rate hikes remains high, especially as labor-market conditions have come into better balance and annual wage growth has slowed from nearly 6% in 2022 to around 3.5% in April. Taken together, these conditions support a patient approach from the Fed, and in our view, policymakers are likely to hold interest rates steady this year.
   
• Tech-led rally has markets back to all-time highs. Where to from here? – After a volatile close to the first quarter, when the S&P 500 fell 9% from its prior all-time high, equities have staged an impressive rebound since April. The S&P 500 has gained more than 18% since March 30, while the technology-heavy Nasdaq has risen 28%. The rally has been even more pronounced in semiconductors, with the PHLX Semiconductor Index up 80% over the same period, supported by continued AI-related capital spending. While we would not characterize markets as cheap, valuations have not expanded meaningfully during this rally. In fact, both the S&P 500 and Nasdaq are trading at forward price-to-earnings multiples below where they began the year, while the PHLX Semiconductor Index’s forward multiple is little changed. This suggests that the recent move higher has been driven by strong corporate profit growth as opposed to expanding valuations. First-quarter S&P 500 earnings per share rose nearly 27% from a year ago, helped by strength in technology and AI-exposed areas of the market. Importantly, earnings growth has not been limited to tech. Cyclical sectors such as financials, industrials and materials also posted earnings growth of more than 20%, pointing to broader strength in corporate fundamentals. After such a sharp move higher, a period of consolidation would not be surprising. However, we believe the broader backdrop for equities remains supportive, underpinned by solid profit growth, steady economic activity and resilient labor-market conditions.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data not cited: FactSet.} 

• Markets close slightly higher, Dow leads the way - U.S. stocks were modestly higher today, with the Dow Jones outperforming both the S&P 500 and the technology-heavy Nasdaq. Overall, the S&P 500 is up about 10% this year and closed at another all-time high on Wednesday. Investor sentiment appears to be supported by lower oil prices, with WTI crude oil down about 4.5%, and optimism that tensions in the Middle East could ease, although weakness in some cybersecurity names kept the broader market from moving decisively higher. In the bond market, Treasury yields were modestly lower, as the 10-year Treasury yield dipped back below 4.5%. The VIX volatility index, also known as the Wall Street fear gauge, is back below 17, near the lows of the year. Overall, the data looks reasonably constructive as solid economic and earnings fundamentals continue to support equities, but after a strong rally in markets, some near-term consolidation would not be surprising to us – however, we continue to view pullbacks as opportunities for long-term investors.
   
• Fed is likely on hold this year: The recent acceleration in the consumer price index (CPI), along with the Fed minutes showing that some officials would consider rate hikes if inflation remains elevated, may bring back uncomfortable memories of 2022. That was the last time the Fed had to respond to high inflation with aggressive rate hikes, a tightening cycle that ultimately contributed to a bear market in stocks. However, we think there are a couple of important differences between today’s inflation backdrop and the one investors faced in 2022. First, monetary policy is not easy. In 2022, the fed funds rate was near zero while headline CPI was moving toward 9%. Today, policy rates are matching inflation, giving the Fed less urgency to respond aggressively to every upside surprise. Second, the labor market is no longer overheated. In 2022, job openings were roughly twice the number of unemployed workers and wage growth was accelerating. Today, unemployment remains low, but hiring has slowed and wage growth is not reaccelerating in a way that would meaningfully push services inflation higher. For these reasons, we think the Fed will remain vigilant but is unlikely to overreact to what may prove to be a temporary, energy-driven inflation spike that is largely outside of the Fed's control. Our base case is that the Fed stays on hold this year. We no longer expect near-term cuts, but we still think the bar for rate hikes is high.
   
• Consumer confidence dips less than expected – The Conference Board's Consumer Confidence Index declined to 93.1 in May, marking its first drop in four months. The drop was smaller than forecasts pointing to a pullback to 91.9. Consumers' assessment of current business and labor-market conditions dropped 3.2 points, partially offset by a modest improvement in the short-term outlook*. Concerns over the economy were driven by inflation, oil and gas prices, and geopolitical risks. Despite the decline, the index remains modestly below its historical average, suggesting that consumer attitudes, while cautious, have not weakened as sharply as some other sentiment measures imply. This contrasts with the University of Michigan Consumer Sentiment Index, which reached a record low in April. Key drivers to the difference include the Conference Board's heavier focus on employment and the labor market, while in the University of Michigan's survey, personal finances carry a more significant weight. Overall, consumer spending has remained resilient despite weak sentiment, supported by a stable labor market and generally healthy household balance sheets.

Mona Mahajan;
Investment Strategy

^{Source for all data not cited: FactSet. Source for data cited: *The Conference Board}

• Markets close higher, supported by lower bond yields and oil prices - Equity markets finished higher on Tuesday, with the S&P 500 and Nasdaq reaching record highs. The 10-year U.S. Treasury yield moved lower at 4.49%, extending its recent decline and returning to the upper end of our expected 4.0%-4.5% range for this year. International markets were softer, with Asian markets finishing mostly lower overnight and European markets also trading down. In energy markets, WTI oil prices declined, likely reflecting cautious optimism around U.S.-Iran diplomatic talks and the potential for reduced geopolitical risk. Meanwhile, the U.S. dollar was modestly lower against major currencies but has remained largely rangebound recently.
   
• Bond yields pull back as inflation concerns ease – The benchmark 10-year U.S. Treasury yield has fallen about 20 basis points (0.20%) from its recent peak a week ago, moving back to our 4%-4.5% expected range for this year. A key driver of the move has been a moderation in inflation expectations. Market-implied 10-year inflation expectations, as reflected in Treasury Inflation Protected Securities markets, have eased to about 2.35%, helping reduce pressure on long-term yields. This suggests investors may be gaining some confidence that inflation risks are becoming more contained, even if the path back to the Fed’s 2% target remains uneven. At the front end of the yield curve, markets continue to price in the likelihood that the Fed's next move could be a rate hike rather than a cut, potentially sometime early next year. We expect policymakers to remain on hold in the near term, with the Fed's preferred core Personal Consumption Expenditures (PCE) inflation gauge running at 3.2%, still well above the 2% target. At the same time, we think a steady labor market gives policymakers room to remain patient and assess whether inflation pressures are temporary and when they may begin to ease.
   
• Consumer confidence dips less than expected – The Conference Board's Consumer Confidence Index declined to 93.1 in May, marking its first drop in four months. The drop was smaller than forecasts pointing to a pullback to 91.9. Consumers' assessment of current business and labor-market conditions dropped 3.2 points, partially offset by a modest improvement in the short-term outlook*. Concerns over the economy were driven by inflation, oil and gas prices, and geopolitical risks. Despite the decline, the index remains modestly below its historical average, suggesting that consumer attitudes, while cautious, have not weakened as sharply as some other sentiment measures imply. This contrasts with the University of Michigan Consumer Sentiment Index, which reached a record low in April. Key drivers to the difference include the Conference Board's heavier focus on employment and the labor market, while in the University of Michigan's survey, personal finances carry a more significant weight. Overall, consumer spending has remained resilient despite weak sentiment, supported by a stable labor market and generally healthy household balance sheets.

Brian Therien, CFA
Investment Strategy

^{Source for all data not cited: FactSet. 
Source for data cited: *The Conference Board}