The Odd Couple: The AI and Energy Gap the Market is Ignoring

May delivered across the board. The S&P 500 rose 5.3%. A balanced 70/30 portfolio gained 3.7%. Q1 earnings grew at nearly three times the rate Wall Street had forecast. By almost any measure, it was a strong month — and the results were earned, not accidental.

Then June opened with a reality check. A blowout jobs report sent yields surging, the Nasdaq fell 4.18% in a single session, and the 30-year Treasury briefly touched 5.2%. The Federal Reserve has almost no room to maneuver: inflation isn't retreating, the labor market isn't cooling, and the long end of the yield curve is sending signals that most investors are still choosing to ignore.

One strong month doesn't change the macro setup. The underlying tensions — rates, energy supply, geopolitics — haven't resolved. They've just been temporarily outpaced by earnings momentum.

Information technology was the best-performing sector in May by a wide margin. Energy was the worst. Oil prices declined, investors rotated out of commodity-linked names, and defensive positions that had held up well earlier in the year were left behind.

That divergence deserves more attention than it's getting.

AI infrastructure spending is projected to reach $700 billion in 2026. Every model trained, every query processed, every data center running at capacity draws from the same electrical grid that energy companies have maintained for a century. US electricity demand is projected to grow 75% to 100% by 2050 — driven in no small part by the AI buildout itself.

The market is pricing the application layer and largely ignoring the physical infrastructure underneath it. That kind of divergence tends to correct — the only question is how, and when.

The Strait of Hormuz remains the world's most consequential economic chokepoint. Roughly 20% of global oil supply transits that narrow passage, along with significant volumes of natural gas and fertilizer feedstocks. Every escalation out of the Middle East sends a ripple through oil prices, bond yields, and investor sentiment — and every de-escalation reverses it.

That back-and-forth has become a defining feature of this market cycle. The US economy has shown real resilience through multiple shocks. But sustained constraint in the Strait is a different kind of risk — one that feeds into commodity prices, inflation expectations, and supply chain costs in ways that even optimistic models haven't fully priced. It's not a footnote. It's a slow-moving variable with the capacity to reshape the macro picture quickly.

The 2026 IPO class couldn't be more divided, and the divide is worth understanding.

SpaceX and Anthropic are priced on trajectory, not current fundamentals. Their valuations are built on the credible — but demanding — belief that AI and space infrastructure will reshape the global economy. Price-to-sales multiples dwarf anything in the S&P 500. The margin for error is thin. If this IPO window delivers, it could be the most consequential since the dot-com era. If it doesn't, it will be an expensive lesson in what happens when narrative outpaces execution.

Inspire Brands — parent company of Dunkin', Arby's, Buffalo Wild Wings, and Sonic — is the opposite story. Thirty-three thousand restaurants, real cash flows, and a straightforward private equity exit after a 2020 leveraged buyout. IPO proceeds go directly to debt reduction. No moonshots. No paradigm-shifting language. Just durable consumer revenue handed to public market investors.

Both tell you something real about where sentiment sits. The high-growth names aren't irrational — but they require growth rates that no company in history has ever sustained. The fundamentals-first names aren't unexciting — they're stabilizers. In a market navigating genuine macroeconomic uncertainty, that distinction matters.

Markets are pricing a lot of optimism. The macro picture hasn't given it a clear runway yet — however, our playbook has not changed. We will continue to pursue a diversified approach and are pleased to report that our investment strategies are performing well.