May 2026 Market Insights Report

Market Performance Overview

U.S. markets delivered solid gains in May, with equities broadly higher, small caps outperforming, and risk sentiment improving. The month was characterized by hopes for easing geopolitical tensions, lower Treasury yields, and continued strength in corporate earnings.

Equity Market Performance (May 2026)

U.S. equities posted strong positive returns across major indices, with the S&P 500 extending its winning streak and approaching record highs.

• S&P 500: +4.96% over the past month

• Dow Jones Industrial Average: +2.44% over the past month

• Nasdaq Composite: +7.13% over the past month, reflecting continued technology leadership

• Russell 2000 (small caps): +3.14% over the past month, outperforming large caps on a relative basis

Markets were driven by an improving geopolitical outlook, particularly progress on U.S.–Iran negotiations. Stocks also benefited from a pullback in Treasury yields and broad-based earnings strength across sectors.

Sector returns for the month showed strong leadership from technology and energy, while defensive sectors lagged.

• Information Technology: +10.80% (largest monthly gainer)

• Energy: +4.34% (supported by earlier oil price strength)

• Communication Services: +4.39%

• Consumer Staples: +2.52%

• Materials: –3.00% (weakest sector)

Fixed Income & Commodities

Bond markets were mixed as yields fluctuated with shifting inflation expectations and geopolitical developments.

Fixed Income (Monthly Performance)

• Bloomberg U.S. Aggregate Bond Index: –0.99%

• Bloomberg Credit Index: –0.89%

• High Yield: –0.28%

Commodities

• Oil: +3.54% for the month, despite a sharp weekly decline late in May

• Gold: –4.76%

• Natural Gas: +6.98%

Oil markets remained tight, with Persian Gulf flows at approximately 40% of normal levels, contributing to increased volatility.

Economic and Policy Developments

Several macroeconomic factors shaped May’s market tone. Easing geopolitical tensions supported risk assets, particularly equities. We also saw a change in Federal Reserve leadership as Kevin Warsh was sworn in as Fed Chair, while FOMC meeting minutes reflected a more hawkish tone.

Overall, the economy continued to demonstrate resilience, as evidenced by the strength of U.S. GDP growth.

Key Takeaways:

• U.S. equities rose across the board, with tech and small caps leading.

• Market sentiment improved due to easing geopolitical tensions and lower yields.

• Corporate earnings remained a key support, with strong Q1 results feeding into May optimism.

• Fixed income lagged as bond yields stayed elevated.

• Retail investor engagement increased, influencing deal structure and allocation strategies.

Capital Markets Continue to Expand

The broader capital markets in May reflected a market in expansion mode, characterized by:

• Strong equity performance driven by earnings upgrades

• Surging IPO activity with larger, later-stage issuers

• Broad sector participation, especially in AI-linked industries

• Robust trading volumes and improving market breadth

• A macroeconomic backdrop increasingly supportive of risk assets

Together, these factors positioned the U.S. capital markets for one of the most active issuance windows in several years as 2026 progressed.

Is There a Structural Floor Under Stocks?

The U.S. position in Iran remains firm in that enriched uranium and a path toward nuclear weapons are non-starters. The rest of the world is more supportive of free-flowing traffic through the Strait of Hormuz as fuel supplies are being tested across Europe and Asia. The longer the markets remain elevated in the U.S., the more pundits call for some type of correction.

I am in the early innings of some research attempting to determine whether the supply-and-demand dynamics of publicly traded stocks are helping maintain a floor beneath the equity market due to the steady flow of dollars into employer-sponsored retirement plans.

The Shrinking Public Equity Universe

The number of publicly traded U.S. stocks has followed a clear long-term arc: rapid growth through the 1970s, 1980s, and 1990s, a peak in the mid-1990s, and a multi-decade decline since then.

The most authoritative long horizon data comes from CRSP (Center for Research in Security Prices), which tracks all U.S.-listed companies across NYSE, AMEX, and NASDAQ.

1970s

• 1972: A major jump in listings occurred with the creation of NASDAQ, which doubled the number of public companies.

• 1979: 2,401 companies, the lowest value in the World Bank’s 1975–2024 dataset.

1990s (Peak)

• 1996: 8,090 listed companies, the highest ever recorded in the World Bank dataset.

• 1997: Around 8,000 public companies, marking the all time peak before a long decline.

2000s–2020s (Long Decline)

• The number of public companies has fallen 40–50% since the 1990s peak, driven by mergers, acquisitions, regulatory burdens, and the rise of private capital.

• 2023: 4,317 listed companies.

• 2024: 4,010 listed companies, continuing the downward trend.

2025–2026

• CRSP based analyses show the U.S. remains at approximately 5,000 or fewer public companies, depending on classification methodology (common shares only, REITs included, etc.).

  • Example: A CRSP based dataset notes a decline from roughly 8,000 public companies in 1997 to around 5,000 today.

Is There a New Market Floor?

The basis hypothesis is that there are fewer stocks available, while most deposits into 401(k), 403(b), and other retirement savings plans continue to be directed toward equities.

On this basis, does the sheer force of capital inflows provide an equity market floor…maybe even stronger than the “Greenspan Put”?

Regardless of the outcome of this research, we do believe that there will always be market corrections. That is why broad diversification, a robust asset allocation structure, and attention to an investor’s time horizon will all remain critical factors for each investor to consider.

Looking Ahead

Currently, we are focused on two key variables: a resolution to the conflict with Iran and the direction of inflation trends.

The primary concern is that elevated inflation could negatively affect broad consumer spending and, in turn, weigh on the economy as a whole. We believe the next few months will be critical in determining the path forward for both inflation and economic growth.

Disclaimer: Investment advisory services offered through Innovative Asset Advisors Group, LLC, (“IAAG”), a Registered Investment Advisor with the U.S. Securities and Exchange Commission. Registration does not imply any level of skill or training. The content provided is for informational purposes only and does not constitute investment, legal, or tax advice. Investments, including equities, bonds, commodities, real estate, and alternative assets, carry risks, including the potential loss of principal. Past performance is not indicative of future results. Before making any financial decisions, you should consult with your personal financial, legal, or tax advisor to evaluate your individual circumstances. IAAG does not guarantee the accuracy, completeness, or timeliness of the information presented, and it may be subject to change without notice. This material, or any portion thereof, may not be reprinted, sold, or redistributed without the written consent of Innovative Asset Advisors Group, LLC.