Market View: May-June 2026

By Argent Wealth Management, LLC on April 30, 2026

Executive Summary

Economic Backdrop: Recession risk remains low, supported by forward indicators, tight high‑yield spreads, steady retail sales, and equity market resilience despite geopolitical tensions and higher oil prices favoring stocks over bonds.

Valuations & Returns: Equity valuations are reasonable relative to growth (PEG ratios have improved), but after strong returns over the past three years, investors should expect more moderate future returns and exercise greater caution.

Inflation & Portfolio Construction: Sticky inflation, partly driven by rising commodity prices, reduces the attractiveness of traditional bonds; alternatives such as buffer ETFs and allocations to gold and real assets may improve risk‑adjusted outcomes.

Commodities Theme: Technology leadership is increasingly tied to national security and supply‑chain resilience, supporting a long‑term bullish case for commodities—especially gold—within what appears to be a commodity supercycle.

AI Investing: AI adoption is inevitable despite possible short‑term overinvestment; semiconductors remain the most durable beneficiaries, while select AI‑enabled, cybersecurity, data‑centric software firms and AI consulting providers appear oversold and well positioned for long‑term growth.

Economy

Odds of recession remain low. NDR’s recession probability model looks at forward indicators. When recession odds remain low, stocks tend to outperform bonds.

High-yield spreads remain at historical lows. Bond investors concur with low recession odds.

Retail sales have stayed steady, implying the increase in oil prices hasn’t been enough to stop healthy discretionary spending.

Negotiations are ongoing between the U.S. and Iran to open the Strait of Hormuz. The stock market has remained resilient even as the war has increased oil prices. This implies investors believe the price of oil is unlikely to drag down the economy.

Valuations and Returns

Price to earnings ratios for major indices remain reasonable. Price to earnings relative to growth (PEG ratio, bottom clip) have come down. Growth relative to valuation looks attractive.

Major index returns over the last three years have been significant. Investors shouldn’t expect similar returns over the next three years. Recently, shares of typical “safe-haven” investments such as consumer staples, pharmaceuticals, and utilities have risen, making the upside for even cautious investments somewhat limited.

Inflation and Portfolio Construction

Inflation remains sticky, and is likely to remain so, partly due to the rise in commodity prices. Bonds are typically used by investors when their economic views grow more cautious, but the threat of persistent inflation renders them less attractive. As a result, the Federal Reserve is widely expected to keep interest rates on hold for the duration of 2026.

Investors can utilize creative solutions, such as buffer ETFs, to reduce risk. These are defined-outcome funds. They track an underlying index, like the S&P 500, while providing a predetermined or “buffered” level of downside protection such as the first 10 or 15% of losses in exchange for capping the maximum potential upside over a specific period, usually one year. They use option contracts to achieve this goal.

Commodities Theme

Gold and other real assets also deserve a place in portfolios, especially for long-term investors. The March-April Market View details the long-term thesis. Here is a summary:

Technology leadership is increasingly tied to national security, and the shift toward protectionism has made secure access to critical natural resources a strategic priority. Governments now view minerals, energy, and supply chain resilience as essential for sustaining AI, semiconductors, and advanced computing capabilities. This competition centers less on territory and more on controlling and diversifying the supply chains that power next generation technologies. From an investment perspective, commodities—especially gold—offer diversification benefits and remain supported by bullish long-term signals despite appearing overbought near term. Long term, government deficits emphasize the need to own scarce, neutral and tradeable assets with predetermined inflation rates. Fiat currencies will lose value over time. Overall, the environment suggests we are in a commodity supercycle, and a modest allocation with flexibility to add on pullbacks may be prudent.

AI Investing

AI continues to be the hottest investment topic.

There may be short-term overinvestment in AI as companies race to build models and datacenters, but long-term adoption appears inevitable, similar to past technology waves that boosted productivity and growth. While some low value software may be disrupted, data driven, cybersecurity, and AI enabled software firms as well as AI consulting providers remain essential and may be undervalued. LLMs depend on high quality data, human governance, and security, meaning they complement rather than replace most enterprise software. Most companies still lack the expertise to implement AI effectively, keeping adoption in early stages. Regardless of which AI platforms ultimately win, semiconductors are the clear, durable beneficiaries at the core of the entire AI ecosystem.

Semiconductor stocks, as represented by SOXX, the iShares Semiconductor ETF, and AI stocks, as represented by ARTY, the iShares Artificial Intelligence ETF, look highly attractive on a PEG basis. Even if there is overinvestment in these stocks near term, low valuations should support any major selloffs.

Software stocks, as represented by the iShares Expanded Tech-Software ETF, are not as inexpensive on a PEG basis. However, they declined about 30% from highs. As they adjust to an AI world, earnings growth may lag temporarily. The odds that earnings recover and these companies continue to grow long term are higher than the odds they are displaced by AI.

While some software providers focused on basic, easily automated tasks may face pressure, high‑value cybersecurity and data‑centric software companies with clear AI strategies appear oversold. Consulting firms specializing in AI implementation also look undervalued.

Critically:

LLMs cannot replace data; they depend on it.
They are tools for accessing and analyzing information—not sources of truth.
Human-built models still require guardrails, governance, and ongoing quality control.
Cybersecurity firms are already integrating AI to monitor threats and protect AI agents and their connections within corporate systems.
Most corporations lack internal AI expertise and will rely on consultants to design, build, and refine their AI strategies. Adoption is underway, but effective implementation remains in early innings.

Sources:

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