United States

We take stock of earnings, AI capex and the labor market and explain why we think the repeated new highs in the S&P 500 are justified.

The US High Quality (USHQ) portfolio underperformed its benchmark through April, returning 7.02%, while its SPY benchmark returned 11.55%. On a trailing three-month basis, the USHQ portfolio’s performance was weaker than the benchmark as well, with USHQ underperforming by approx. 338bps. 

Improving job growth keeps Fed rate cuts off the table, but evidence of labor market tightening will be required before rate hikes become part of the discussion.

Aggregate Senate betting market pricing appears too pessimistic on Democrats relative to state-level odds and early polling, suggesting a potential mispricing and a relatively sanguine attitude towards the still-unresolved conflict in Iran and its aftermath.

Our Portfolio Allocation Summary for May 2026.

Leadership has rotated toward investment-driven sectors, reflected in both EPS growth and price performance. Expanding margins suggest the cycle may have longer to run, as productivity gains start to work their way through fundamentals. We continue to see upside for the S&P 500, with no change to our sector outlook.

So far, there is no evidence of second-round effects from the oil price shock showing up in the US economy. Fed rate hikes are off the table unless those effects emerge.