Month in Review
- Markets around the world continued to rally from the late March lows, as oil prices fell sharply amidst optimism of a long-term ceasefire in Iran and earnings expectations continued to increase.
- The S&P 500 Index rose +5.26% in May (S&P 500 TR Index), driven by large AI-related companies. The market capitalization index rose nearly double the equal weighted index, highlighting the trend of increasing concentration in the market (+2.68%, S&P 500 Equal Weighted TR Index).
- Large cap growth stocks outpaced all other markets in May (+7.20%, Russell 1000 Growth TR Index), benefiting from significant exposure to Technology stocks: Technology sector alone represents 53% of the Russell 1000 Growth Index.
- Bond market dealt with competing forces in May: investors continued to reduce the likelihood of rate cuts in 2026, but oil prices had their largest monthly decline since early 2020. The result was a mild monthly gain for the bond market, with the Bloomberg US Agg Bond TR Index rising +0.31% in May.
Market Concentration Back to Highs
Technology and AI-related companies powered the S&P 500 higher in May, extending the rally that began in late March. Technology stocks have led the way, with the Nasdaq Composite Index rising +8.43% in May, which is also shifting the composition of the overall equity market.
After declining from record levels of concentration, the S&P 500 has once again become extremely concentrated: the top 10 companies in the index represent 40.6% of the market capitalization. While this is below the near 50-year record set in 2025, this is a sharp reversal from recent broadening of leadership (the top 10 companies represented 37.9% of the market as recently as March 31, 2026). What is driving this shift? Earnings.
First quarter earnings showed the strength of AI-related spend, with earnings estimates surprising to the upside at a level rarely seen outside of post-recessionary recoveries. Analysts expected AI Hyperscalers to invest over $800bn in AI-related capex in the next 12-months; an important factor driving overall earnings growth higher. These companies are also amongst the larger companies in the market, and responsible for the sharp increase in concentration since late March.
Source: Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management. As of May 29, 2026
What’s on Deck for June?
Kevin Warsh was sworn in as the next Chairman of the Federal Reserve and will begin to oversee the FOMC in June. His tenure starts at a time of increasing dispersion of views amongst Federal Reserve members and a shifting investor outlook toward interest rate policy.