April’s Rally Was More Than a Sugar Rush

by merhutchens | May 11, 2026 | Market Update

In 1952, the fashion world was in a quiet crisis. Paris couldn't agree on where a woman's waist should sit. High waist, low waist, natural waist, no waist at all — every designer had a different answer, and the phrase "the wandering waistline" became the shorthand for a moment when no one could agree on what normal was supposed to look like.

We're living through something similar right now — except the disagreement isn't about fashion. It's about the economy.

In April, consumer sentiment fell to its lowest level since that same year, 1952. People feel rattled — by headlines, by oil prices, by geopolitical tension. And yet the stock market just posted some of its best monthly numbers in decades. The S&P 500 hit new all-time highs. The Nasdaq had its best month since 2002. The gap between how Americans feel and what markets are doing is about as wide as it has ever been.

Here's the thing: that gap is not a warning sign. It's actually a tailwind.

When pessimism runs this deep, it tends to lift markets over time rather than drag them down. Worried investors sitting in cash eventually come back in. Skeptics become believers. History shows that these moments of disconnect — where sentiment is depressed but fundamentals are solid — have more often extended rallies than ended them.

Every time sentiment has crashed this far — markets have responded:

1975 trough (57.6)

+38%

S&P 500 · next 12 mo.

1980 trough (51.7)

+25%

S&P 500 · next 12 mo.

2009 trough (55.3)

+53%

S&P 500 · next 12 mo.

2022 trough (50.0)

+24%

S&P 500 · next 12 mo.

2026 reading (47.6)

Today

Near all-time low

Source: University of Michigan Surveys of Consumers; Fortis Analytics. S&P 500 forward returns are approximate 12-month price returns from each noted trough. Past performance does not guarantee future results.

And the fundamentals right now are genuinely solid.

What the Numbers Are Actually Telling Us

April's market performance wasn't a fluke driven by a few big tech names. Nine out of eleven S&P 500 sectors finished the month in positive territory. The gains ran from the largest companies all the way down to the smallest. That kind of broad participation matters — it signals durability, not a sugar rush.

+15.7%

Nasdaq-100 — best month since Oct. 2002

+10.5%

S&P 500 monthly return

+38%

Philadelphia Semiconductor Index (SOX)

+18.5%

Communication Services in April

+17.5%

Technology sector in April

9 of 11

S&P sectors finished in the green

The most important number isn't a monthly return. It's what analysts now expect earnings to look like over the next twelve months — and those expectations have been revised upward at a pace you typically only see coming out of a major market crash. We are not coming out of a crash. That makes what's happening unusual, and potentially very powerful.

The engine behind all of this is AI infrastructure. Microsoft, Google, Amazon, and Meta are spending hundreds of billions of dollars building out data centers and the chip capacity to power them. That capital flows directly into semiconductor revenues, which flows into earnings across the broader market. This isn't hype anymore — it's a multi-year spending cycle with real numbers behind it. Growth is outpacing value, and we believe that continues.

Oil, the Middle East, and a Market That's Made Up Its Mind

Yes, crude oil spent most of April above $90 a barrel. Yes, the situation in the Middle East is genuinely unresolved. These are real risks and we don't dismiss them.

But watch what the market does, not just what the headlines say. Equities staged a 13-day rally straight to new all-time highs in the middle of all of it. The market has effectively decided that oil is no longer the main character in this story.

Capital is flowing toward growth, toward technology, toward the future — and away from the idea that energy prices control everything.

Europe is more exposed here than the US. Germany and Italy rely heavily on fossil fuels for industrial energy, which puts them at a competitive disadvantage as prices stay elevated. The US, as a net energy exporter, is insulated from the worst of it — and that supports domestic earnings.

Earlier this year, we leaned into commodities deliberately, and it paid off. But the environment has shifted, and we're shifting with it.

What We're Doing With Your Portfolio

For the first half of the year, we kept portfolios tilted toward value, mid-cap stocks, commodities, and higher-than-normal cash. That was the right call — it protected capital during a volatile stretch and delivered meaningful outperformance.

That chapter is closing. The earnings story, the AI buildout, and the breadth of April's rally have given us the conviction to move more aggressively. We are actively deploying our cash position back into growth-oriented equities. This isn't a leap of faith — it's a response to data that keeps pointing in the same direction.

The world is still complicated. Geopolitical risk doesn't disappear because markets rally. We're watching carefully.

But just like 1952's wandering waistline eventually found its shape — and the decade that followed became one of the most prosperous in American history — we think the current confusion will resolve itself. The earnings are real. The investment cycle is real. The breadth is real.

This is not the moment for excessive caution. It's the moment to make sure your capital is moving.

April 2026 Market Update: Triple Threat

by merhutchens | Apr 6, 2026 | Market Update

A year ago, we were writing about resilience. The S&P 500 had just closed out 2025 up nearly 18%, the AI trade was printing winners across mega-cap technology, and the Federal Reserve had pivoted back toward accommodation. Valuations were stretched, yes — but earnings growth gave investors every reason to stay the course. Momentum was the strategy, and momentum was working.

That was then. The first quarter of 2026 didn’t just change the conversation. It rewrote it entirely.

The Great Rotation: S&P 500 Sector Returns

Full year 2025 vs. Q1 2026 · Reversal sectors changed direction entirely

Sector	Full Year 2025	Q1 2026	Change
Energy	+8.7%	+38.3%	▲ +29.6pp
Materials REVERSAL	−10.5%	+9.7%	▲ +20.2pp
Utilities	+16.0%	+8.3%	▼ −7.7pp
Consumer Staples	+3.9%	+7.7%	▲ +3.8pp
Industrials	+19.4%	+4.6%	▼ −14.8pp
Real Estate	+3.2%	+2.8%	▼ −0.4pp
Health Care REVERSAL	+14.6%	−4.9%	▼ −19.5pp
Comm. Services REVERSAL	+33.6%	−6.9%	▼ −40.5pp
Info. Technology REVERSAL	+24.0%	−9.1%	▼ −33.1pp
Consumer Discret. REVERSAL	+6.0%	−9.2%	▼ −15.2pp
Financials REVERSAL	+15.0%	−9.4%	▼ −24.4pp

From Tailwinds to Headwinds — Fast

What began as a year of cautious optimism unraveled with remarkable speed. January started quietly enough, with the S&P 500 posting a modest gain and manufacturing data showing real signs of life. But by March, three forces had collided simultaneously — and markets felt every bit of the impact.

The S&P 500 ended Q1 down 4.3%, snapping a three-quarter winning streak. The Nasdaq 100 fell nearly 6%. The companies and sectors that led markets in 2024 and 2025 — software, AI platform giants, consumer discretionary — were among the worst performers of the quarter. This is not a minor rotation — as we projected at the beginning of February, and took deliberate steps to reposition at that time. It is a structural repricing. Compare that to one year ago: broad tech leadership, AI euphoria, and rate-cut optimism carrying everything higher. The contrast could not be starker.

The Triple Threat

Three forces converged this quarter in ways that individually would have been manageable. Together, they created something far more challenging.

The Oil Shock. On February 28th, coordinated U.S.-Israeli strikes on Iran triggered the closure of the Strait of Hormuz — the chokepoint for roughly 20% of global petroleum flows. Crude oil, which began the year near $57 a barrel, surged above $100 and briefly touched $115. The average American is already paying nearly $1.00 more per gallon of gasoline than they were in late February. Capital Economics has projected that even in a contained three-month scenario, Brent crude could average as high as $150 a barrel — with prices not fully normalizing until 2028. History offers a sobering reference point: Brent crude above $104 per barrel has preceded every recession since 1970 — and we are sitting at $100 right now. This is not a routine geopolitical flare-up. It is a supply shock of historic proportions, and its full impact on inflation and growth has not yet been felt.

Tariffs. Just as the tariff narrative from 2025 appeared to be fading, Q1 brought a fresh chapter. The Supreme Court struck down the broad “reciprocal” tariff framework, and the administration responded with a flat 10% levy on all imports. Layered on top of energy price pressures, the inflationary implications are real and compounding. You cannot simultaneously fight inflation and support growth with the same tool — and that is precisely the impossible position the Federal Reserve now finds itself in.

AI and Power Demand. The AI buildout is no longer a software story — it is a capital-intensive infrastructure story, and it is colliding directly with an energy market under severe strain. Data centers require enormous amounts of power. As AI deployment scales across industries, the demand for energy generation isn’t shrinking — it’s accelerating. The intersection of an oil shock, tariff-driven cost inflation, and AI-driven power demand is not a passing disruption. This potential for structural challenges in the short and intermediate term makes us cautious — and it is precisely why we have maintained positions in high-quality technology companies even as we reduced our broader sector exposure. We believe in the long-term thesis; we are simply more selective about how we express it.

Fortis Portfolio Positioning · Q1 2026

Cash Raised

15%

Moved to cash in late March — the day before the Iran conflict escalated markets

Current Cash Position

10%

After selective redeployment into value-oriented sectors at quarter-end

All Strategies

↑

Significantly outperforming respective benchmarks across every strategy

Process, not prediction — disciplined risk management and diversification at work.

We’ll be honest with you: sometimes we look like geniuses, and sometimes it really is just the discipline working. This is one of those times when we’re genuinely pleased to report it’s a little of both — but mostly the discipline. All of our strategies are significantly outperforming their respective benchmarks heading into Q2. At the start of the year, we made a deliberate decision to reduce our technology exposure and broaden our allocations across sectors that had been overlooked during three years of AI-driven concentration. That broadening — into energy, materials, utilities, and value-oriented names — was not a dramatic call. It was a risk management decision rooted in valuation discipline. The overweight to energy, in particular, has played out exceptionally well.

Then, in the final days of March — the day before the Iran conflict erupted into full market consciousness — we moved approximately 15% of our portfolios to cash. We want to be clear: we did not predict the strike on Iran. What we did see was a confluence of risks that made raising cash the prudent move. The timing looked prescient. The reality is that it was process, not prediction. We subsequently redeployed a portion of that cash toward more value-oriented sectors at the end of March and currently sit at approximately 10% cash — meaningfully higher than where we began the year.

We are fully aware that markets have been rising sharply on any indication that the Iran conflict may be approaching resolution. We are not losing sleep over the possibility of missing a rally. The triple threat has not resolved. It has simply paused. Protecting what our clients have built is always the first priority. Capturing every point of upside is not. Diversification is not a concept we talk about — it is how we construct portfolios every single day. Quarters like this one are the proof of why it matters.

Where Diversification Delivered

Beneath the headline carnage, something important happened. The equal-weighted S&P 500 and the Russell 2000 each gained nearly 1% — even as the index-level S&P fell 4.3%. Value outperformed growth every single month of the quarter. Energy surged 38%. Materials, utilities, and consumer staples each posted solid gains. The companies and sectors that spent the prior three years as afterthoughts in a growth-obsessed market stepped forward as the genuine leaders of Q1 2026.

Index Performance: Q1 2026

Returns varied significantly by size and weighting calculations for popular indexes · The S&P 500 cap-weighted index is dominated by the largest companies, where the top 10 stocks represent nearly 40% of the index. The equal-weighted version gives each of the 500 companies the same influence regardless of size. The Russell 2000 tracks approximately 2,000 smaller U.S. companies, while the Nasdaq 100 is heavily concentrated in mega-cap technology. As of March 31, 2026.

S&P 500 Equal-Weighted Index

Each of 500 stocks carries equal weight regardless of company size

The average stock gained. Concentration was the problem, not the broader market.

+0.9%

Russell 2000 Small Cap Index

Tracks ~2,000 smaller U.S. companies with market caps typically under $2 billion

Small caps led the market. Less AI exposure meant less vulnerability to the tech selloff.

+1.0%

▼ Negative returns below ▼

S&P 500 Cap-Weighted Index

Weighted by market size — top 10 stocks represent nearly 40% of the entire index

Mega-cap names dragged the index down despite most stocks gaining.

−4.3%

Nasdaq 100 Index

Tracks the 100 largest non-financial companies, heavily concentrated in mega-cap technology

Worst performer of the quarter. AI disruption fears and energy shock hit tech hard.

−5.8%

The average stock GAINED in Q1 — the index fell only because mega-cap weight distorted the result.

Globally, international equities outperformed the S&P 500 for a second consecutive quarter. Europe and Japan both showed resilience. Emerging markets — particularly Latin America — benefited from rising commodity prices. Valuations outside the U.S. remain far closer to historical norms, and the earnings outlook for developed and emerging markets remains constructive. For investors who stayed diversified, Q1 felt very different than the headlines suggested.

Bonds delivered exactly what they are supposed to deliver in uncertain environments: ballast. The Bloomberg U.S. Aggregate Bond Index finished roughly flat as rising Treasury yields offset income generation. Credit spreads widened but remain well below recessionary levels — the bond market is pricing in caution, not crisis — and high-quality bonds continue to offer meaningful income at yield levels that didn’t exist for most of the prior decade. For portfolios with genuine fixed income exposure, this remains one of the most attractive entry points in years.

What Comes Next

I won’t pretend the road ahead is without risk. The Strait of Hormuz remains closed. Oil is hovering near levels that have historically preceded recessions. Inflation is re-accelerating just as the Fed had hoped to declare victory. The Federal Reserve is, frankly, frozen — caught between slowing growth and rising prices, with few good options.

But here is what I keep coming back to: the fundamentals that drive equity returns over time have not broken down. S&P 500 earnings are still projected to grow over 16% in 2026. Consumer spending, while softening at the edges, continues to expand. AI is not a bubble to be popped — it is a structural force broadening across the economy into healthcare, industrials, energy infrastructure, and beyond. And a resolution to the Strait of Hormuz disruption, when it comes, could release significant pent-up economic momentum very quickly.

Every significant dislocation since 2008 — the rate shock of 2022, the COVID crash, the taper tantrum — eventually presented a compelling entry point for investors with the patience and positioning to take advantage of it. We are building that dry powder deliberately. We are watching. And we are ready.

The quarter that just ended was a reminder that markets do not move in straight lines. The quarter ahead may well be a reminder of why staying invested — selectively, diversified, and with eyes wide open — remains one of the most powerful strategies available.

Stay analytical. Stay diversified. Stay ahead.

— Meridith L. Hutchens, Fortis

Investing involves risk of loss. Past performance is not a guarantee of future results. The information contained in this article is for informational purposes only and does not constitute investment advice or a solicitation to buy or sell any security. Please refer to Fortis Portfolio Solutions’ Form ADV2 located in the Client Resource section of our website for full disclosures. Source: Bloomberg. Total returns including dividends.

March 2026 Market Update: Rotation, Resilience, and What Comes Next

by merhutchens | Mar 11, 2026 | Market Update

February handed portfolio managers something worth studying carefully. Beneath the headline volatility, a structural shift quietly unfolded across equity markets—one that challenges the concentration thesis many portfolios have leaned on for the past three years. The dominance of mega-cap technology stocks isn't over. But the market is sending a clear, deliberate signal: the next chapter looks different from the last. This month's update breaks down the key forces at play—AI-driven rotation, the surprising resurgence of overlooked sectors, resilient macro data, geopolitical risks that demand measured attention, and a potential shift in Federal Reserve leadership that could meaningfully reset rate expectations heading into the second half of 2026. If your portfolio strategies carry significant tech exposure, now is the time to stress-test your positioning against a market that is actively broadening. Here's what the data is telling us.

AI Advances Triggered Rotation, Not Retreat

AI remains the defining investment theme of this cycle. February confirmed that—just not in the way many expected. New AI developments sparked sharp, short-term selling pressure across certain software names as investors reassessed stretched valuations and near-term growth assumptions. What followed wasn't capitulation. It was rotation. Capital moved out of overconcentrated software positions and into energy and value stocks. This distinction is critical for portfolio managers to internalize: rotation signals that investors remain constructive on AI's long-term trajectory. They're simply spreading that conviction across a wider opportunity set. The companies best positioned to benefit from AI's next phase aren't necessarily the ones that led the last rally. Semiconductor manufacturers, networking equipment providers, data-center builders, and power generation companies are increasingly commanding institutional attention. These are the infrastructure layers that make AI scalable—and ultimately profitable at an enterprise level. For the better part of three years, the spotlight belonged to software and platform giants. The picks-and-shovels layer is now stepping forward.

The S&P 500 Crosses 7,000—and the Story Beneath the Surface

Despite early-month turbulence driven by AI-related selling and geopolitical uncertainty, major indexes rebounded. The S&P 500 crossed the 7,000 level a month ago—a milestone that reflects genuine underlying resilience, even amid a meaningful leadership rotation. More telling than the index level was the relative performance of small and mid-cap stocks, which outperformed large-caps in the early part of the month. For years, the average stock has lagged the mega-cap names that carried the index. That dynamic is beginning to unwind, and for diversified portfolios, this is a significant development. The S&P 500's gains over the past three years were disproportionately driven by a small number of companies. That concentration created two interrelated risks: elevated portfolio exposure to a handful of names, and valuation sustainability concerns if growth expectations were even marginally disappointed. Energy and consumer staples sectors surged to all-time highs in February while recent leaders lagged. That's institutional reallocation—deliberate, measured, and worth taking seriously.

Economic Indicators: The Resilience Trade Holds

The macro backdrop remained broadly supportive through February. U.S. economic growth continued to demonstrate resilience—positive job growth and retail sales that came in better than forecasted. These aren't dramatic beats. But in an environment where recession concerns periodically resurface, steady data carries real analytical weight. Strong employment figures suggest consumer spending has durability, which directly supports the sectors gaining momentum: consumer staples, healthcare, and domestically oriented industrials. Better-than-expected retail sales reinforce that the demand side of the economy hasn't deteriorated, even as interest rate uncertainty persists. The question heading into Q2 is whether this resilience holds if geopolitical risks escalate or if monetary policy expectations shift materially. For now, the data supports a cautiously constructive view—though "cautiously" deserves equal emphasis.

Geopolitical Risks: Price the Pattern, Not the Panic

No rigorous market analysis can sidestep the geopolitical overhang. February brought continued uncertainty around international tensions, including concerns over Greenland and ongoing instability in the Middle East. These pressures added to volatility early in the month and merit ongoing attention. But here's what history actually tells us about geopolitical shocks and equity markets: the pattern matters more than the headline. Recent precedent is instructive. On June 23—the day after the U.S. and Israel attacked Iran's nuclear and military sites—the S&P 500 reversed higher and closed with a 1% gain. Investors accurately assessed there was no long-term structural risk, even after Iran retaliated. The index found support at its 21-day exponential moving average and continued ascending. A similar dynamic played out in January when the U.S. capture of Venezuelan leader Nicolas Maduro barely registered—the S&P 500 rose 0.6% and the Nasdaq added 0.7% the following Monday. The market's message, repeated across multiple geopolitical events: assess the longevity and severity, not the spectacle. That said, the current environment involving Iran does introduce specific sector considerations. Defense, gold, silver, and energy equities are likely to receive a short-term bid. A rotation out of higher-risk and small-cap names and into more stable, defensive positions is also a plausible near-term outcome. Portfolio managers should watch index price and volume action—particularly the S&P 500's relationship to its 50-day moving average—more closely than geopolitical headlines themselves.

Fed Leadership: The Market Is Already Pricing the Transition

One of February's most underappreciated developments was how the market reacted to shifting Federal Reserve leadership expectations. Kevin Warsh has emerged as a leading candidate to succeed Jerome Powell—a prospect that appeared to ease investor anxiety around future policy direction. Warsh is widely regarded as a more market-oriented voice in monetary policy circles. His potential elevation could signal a shift toward greater policy flexibility, or at minimum, a more predictable communication framework. Whether that materializes is still uncertain. But the market's sensitivity to even the speculation is telling. Fed leadership transitions—real or anticipated—have historically influenced rate expectations, bond yields, and equity valuations in ways that extend well beyond the initial headlines. For portfolios with meaningful fixed income exposure, this narrative warrants close attention. A more accommodative Fed posture would reprice duration assets, compress credit spreads, and add fuel to the equity rotation already underway. Watch this space carefully.

Sector Outlook: Manufacturing, Energy, and Healthcare Step Forward

Three sectors are demonstrating the kind of structural momentum that warrants genuine portfolio consideration. Energy has been the month's standout, combining geopolitical tailwinds with AI infrastructure demand. Data centers consume enormous power. As AI deployment scales across industries, energy generation companies become structural beneficiaries—not cyclical plays. The sector's surge to all-time highs reflects both narratives simultaneously. Manufacturing—semiconductor manufacturing in particular—sits at the intersection of AI demand and industrial policy. Domestic production incentives and ongoing supply chain reconfiguration are stacking tailwinds in ways that weren't present 24 months ago. Healthcare continues to benefit from demographic trends and medical technology innovation. As a traditionally defensive sector, it also provides portfolio ballast during elevated volatility—a characteristic that looks considerably more attractive now than when markets were trending smoothly upward. The common thread: each sector serves as an enabler or stabilizer for the broader economic and technological transformation underway. They're not competing with the AI trade. They're extending it.

What February's Signal Means for Portfolio Positioning

February underscores a key point: diversification is back, and concentration is risky. Mega-cap tech remains strong but no longer guarantees outsized returns. The market now demands active choices in sectors, sizing, and geography. AI infrastructure—semiconductors, networking, and power—offers strong potential, while energy’s role as a geopolitical hedge and AI enabler is vital. Shifting Fed expectations could also reshape fixed income opportunities. The Lesson of February 2026 AI-driven growth depends on infrastructure, energy, and networks—areas many portfolios overlook. This is a call to reassess, rebalance, and prepare for the future, not replay the past. Stay analytical. Stay diversified. Stay ahead

Why August’s Rally Reveals More Than Most Market Observers Realize

by merhutchens | Sep 2, 2025 | Market Update

August delivered something many seasoned investors thought was impossible four months ago: the S&P 500's 20th record high of the year. But here's what caught my attention—this wasn't just another tech-driven surge. We witnessed something far more telling about the underlying health of our markets and economy.

The Broadening That Changes Everything

For the better part of 2024, we've watched a narrow group of mega-cap technology stocks carry the entire market on their shoulders. August flipped that script entirely. The equal-weight S&P 500 hit new all-time highs, signaling that the "average" large-cap stock finally joined the party. This isn't just a statistical curiosity—it's a fundamental shift that speaks volumes about investor confidence spreading beyond the usual suspects. I've been watching markets long enough to know that sustainable bull runs require broad participation. When Health Care emerges as the month's top performer while Utilities trail (a complete reversal from July), you're seeing real rotation based on changing economic expectations. This isn't momentum chasing; it's smart money repositioning for what comes next. The small-cap revival particularly caught my eye. The S&P 600 Small Cap Index surged roughly 7%, marking its best month of outperformance over the S&P 500 in over a year. Many hedge funds were caught short small caps—literally. According to CFTC data, non-commercial short positions in the Russell 2000 recently hit their highest levels since 2022. The resulting short-covering rally provided additional fuel, but the underlying fundamentals tell a more compelling story.

Reading Between the Fed's Lines

Jerome Powell's Jackson Hole speech marked a pivotal moment that many investors underappreciated. His shift from singular focus on inflation to balancing the dual mandate of employment and price stability represents the most significant change in Fed messaging since the post-COVID era began. Here's my take: Powell's acknowledgment that "policy in restrictive territory" might need adjustment reveals a Fed increasingly concerned about labor market softening. The unemployment rate edged to 4.2% in July—still historically low, but the trajectory matters more than the level. With net immigration near zero, our labor supply constraints create a unique dynamic where unemployment won't spike dramatically even as job demand slows. This creates an interesting paradox. Lower labor supply should theoretically support wages and potentially inflation, but it also constrains economic growth. The productivity question becomes critical—can AI and technological advancement offset this demographic headwind? MIT's recent finding that 95% of AI pilot programs deliver no measurable return suggests we might be waiting longer for that productivity boost than many expect.

Inflation's Stubborn Reality Check

While markets celebrated relatively stable CPI data at 2.7%, I'm watching the details more closely. Core inflation's uptick to 3.1% tells a different story than the headline numbers suggest. The price increases in furniture and other imported goods could signal tariffs beginning to filter through the economy, though it's still early to draw definitive conclusions. This presents a fascinating policy dilemma. One camp argues tariffs create only one-time price adjustments and shouldn't influence monetary policy. The other warns we haven't seen the full impact yet. I lean toward caution here. With goods like furniture—where the U.S. leads global imports while China dominates exports—we're seeing exactly what economic theory predicts when trade barriers rise. The Fed's challenge intensifies when you consider labor market dynamics. Certain industries—construction, hospitality, agriculture—rely heavily on immigration to fill workforce gaps. Restricted labor supply in these sectors could drive wage inflation even as overall job growth slows. It's a recipe for persistent services inflation that could complicate the Fed's rate-cutting plans.

The Earnings Reality Check

Let me address the elephant in the room: earnings quality. Q2 earnings per share growth for the S&P 500 reached nearly 12%—more than double initial expectations. Over 80% of companies beat bottom-line estimates, with 50 issuing positive guidance. These aren't just numbers; they reflect real business fundamentals that justify market valuations. The earnings revision breadth for the S&P 500 climbed to its highest level since August 2021. This metric—net upward revisions minus downward revisions—strongly correlates with future market performance. When I see this kind of broad-based earnings momentum, it pushes back against bubble narratives that focus solely on valuations. Even NVIDIA's "disappointing" results need context. Yes, the AI darling saw its slowest revenue growth in years, but we're talking about high double-digit growth from a company carrying 8% of the S&P 500's weight. The market's measured response—brief selling followed by recovery—demonstrates maturity in how investors process information.

Geopolitical Noise Versus Market Signal

One of the most telling aspects of August was how markets shrugged off potential volatility triggers. From trade tensions to the attempted firing of Fed Governor Lisa Cook, any of these events could have sparked significant turbulence. Instead, we saw the VIX trade at 52-week lows. This resilience reveals something important about current investor psychology. Either markets have already priced in political uncertainty, or investors increasingly separate policy noise from economic fundamentals. The dollar's weakness to 52-week lows while Treasury yields remain relatively stable suggests the latter. Here's what I find particularly interesting: for all the talk about declining U.S. exceptionalism, our equity markets continue outperforming globally. Yes, the dollar has weakened, but that follows years of strength and could actually benefit U.S. exporters and multinational corporations.

September's Challenge and October's Promise

As I write this, we're entering September with the market at short-term overbought levels and little margin for error. September's historical reputation for turbulence is well-earned, but context matters. When markets trend higher into September, seasonal weakness often fails to materialize. The key variables I'm watching: continued earnings growth, Federal Reserve policy clarity, and whether the recent broadening of market leadership sustains. If we do see a September pullback, October historically provides strong tailwinds—potentially amplified by an actual rate cut rather than just expectations.

The Bottom Line

August's rally wasn't just about prices going up; it revealed fundamental strength in the U.S. economy and corporate sector that many observers missed. The broadening of market leadership, combined with robust earnings revisions and Fed policy flexibility, creates a foundation for continued gains. Yes, inflation risks remain, and seasonal headwinds loom. But when I look at the totality of evidence—from small-cap revival to earnings quality to market resilience in the face of uncertainty—I see an economy and market structure capable of navigating these challenges. The real question isn't whether we'll see volatility ahead—we will. It's whether investors can maintain perspective on the underlying fundamentals that made August's broad-based rally possible in the first place. Based on what I'm seeing, that foundation remains remarkably solid.

May 2025: Markets Defy Expectations

by merhutchens | Jun 3, 2025 | Market Update

Trade Tensions:

a TEMPORARY RESPITE

BACK TO FORTIS PRIVATE WEALTH

May was a turbulent month for the U.S. stock market. Trade tensions with China threatened to derail the bull market, but stocks staged an impressive comeback. The Dow Jones rose 4.16%, the S&P 500 shot up 6.29%, while the Nasdaq rocketed up 9.65%. For a moment, it seemed like nothing could shake Wall Street’s confidence, as if the bull market was unstoppable. But the story is far from over.

Mid-May brought a glimmer of hope as U.S.-China trade talks appeared to make progress, calming investors and pushing stocks to fresh highs. The easing of levies and reduced tensions sparked a rally, fueling optimism that the good times might continue.

But the optimism was fleeting. By month’s end, President Donald Trump reignited tensions through a series of TruthSocial posts accusing China of violating the agreement.

Understanding Why

Market Performance: Highs, Lows, and Everything in Between

In May, the markets reflected the ebb and flow of trade tensions, with some sectors thriving while others faced challenges. Technology took the lead, followed by impressive gains in communication services, consumer discretionary, and industrials. In contrast, healthcare, energy, real estate, and financials struggled to keep pace.

Sector Returns for May 2025

The table below is for the time period of 4/30/2025 - 5/30/2025 as measured by ETF in corresponding sector

Technology (XLK)9.97%9.97%
Industrials (XLI)8.84%8.84%
Consumer Discretionary (XLY)8.38%8.38%
Communication Services (XLC)6.24%6.24%
Financial (XLF)4.51%4.51%
Materials (XLB)2.92%2.92%
Energy (XLE)1.28%1.28%
Real Estate (XLRE)1.04%1.04%
Health Care (XLV)-5.57%-5.57%

Fortis

Stock Strategy

Overview

May 2025

{

Amid market turbulence in May, corporate America provided an unexpected lift: S&P 500 companies reported an impressive 12.5% growth in Q1 earnings. However, this optimism was tempered by cautious projections, with many companies warning that tariffs could weigh on future profits.

By maintaining a strategic focus and cutting through the noise, our emphasis on value stocks has successfully reduced portfolio volatility. At the same time, a balanced allocation to higher-risk stocks allowed us to seize the dramatic market rebound in May.

A Cautious Outlook: Reducing Equity Exposure

Although the bull market held its ground in May, the latest developments in trade and monetary policy suggest choppy waters ahead. Investors are bracing for increased volatility, with the mood on Wall Street more subdued than broader market gains might suggest.

In response, we’ve reduced equity exposure to capture what appears to be a short-term rally. This decision stems largely from concerns about the comments during the FOMC Minutes and lack of demand in the U.S. Treasury auction:

The Fed maintained interest rates at 4.25%–4.50%, citing inflationary pressures and a weakening labor market.

The May 22 FOMC Minutes highlighted concerns that progress on inflation had stalled, while job market softening raised additional risks.

A $16 billion 20-year Treasury bond auction saw very little demand, forcing higher yields to draw buyers—a troubling sign for safe-haven assets.

The Ripple Effects of Weak Treasury Demand:

The disappointing bond auction signals more than just a market hiccup—it reflects a fundamental shift in how investors view Treasuries as a safe asset. Confidence is eroding, with institutional investors and everyday traders alike shifting capital away from long-duration assets. The implications of this shift could reshape the financial landscape, as higher yields and dwindling demand alter the dynamics of “safe money.”

This year, prioritizing high-quality corporate debt has proven to be a more effective safe haven than U.S. Treasuries. At the same time, short-term U.S. Treasuries and Treasury Inflation-Protected Securities (TIPS) have played a key role in stabilizing our bond portfolio. We remain focused on closely monitoring this trend moving forward.

Looking Ahead

Key Events to Watch

All eyes are on the data this week. The upcoming nonfarm payrolls report is projected to show 128,000 new jobs, with unemployment holding steady at 4.2%. However, a rise in jobless claims could weigh on economic sentiment.

Meanwhile, trade developments out of Washington will be key to watch, especially as earnings season wraps up. On June 20, we’ll see “triple witching” options expiration and S&P Index rebalancing—two events that could shake up market liquidity. Looking ahead, June 27 marks Russell Reconstitution, historically one of the busiest trading days of the year.

Looking at the bigger picture, Bespoke Investments noted that as of May 27, the S&P 500 closed the first 100 trading days of 2025 with a modest year-to-date gain of 0.11%. What’s even more impressive? This happened despite it being the 7th most volatile start to a year in over 70 years. It’s a reminder that big market swings don’t always translate to big gains or losses.

So, how do we stay consistent in such a wild market? It boils down to discipline, research, and adaptability. Early 2025's volatility highlighted why sticking to a structured strategy beats reacting to short-term noise. By focusing on evolving trends, strong fundamentals, and a long-term outlook, we’ve been able to navigate the uncertainty.

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