Markets Reach New Highs as Economic Signals Remain Mixed

Matthew Rubin Chief Investment Officer

 

1. Equity markets surged back to all-time highs, lifted by strong technology earnings and easing global tensions.
2. The Conference Board’s Consumer Confidence Index slipped in May for the first time in four months, though the decline was smaller than forecasted. Consumer spending has remained resilient.
3. The Federal Reserve’s (Fed’s) latest survey of business conditions showed higher energy costs, cautious hiring, and growing financial strain among lower-income households, while wealthier consumers continued to spend freely.

 

1. April Inflation Data Comes in as Expected

Equity markets climbed back to record levels last week. Since reaching its correction low on March 23, U.S. equities have rebounded sharply. Through the close on June 5, the S&P 500 advanced just over 20%¹, including dividends, while the Nasdaq Composite climbed roughly 36%¹. Strong earnings from technology companies and reduced tensions with Iran were the main drivers, pushing investors toward riskier assets over the past two months.

History offers some seasonal context heading into summer. Since 1970, the S&P 500 has averaged a 0.5% gain in June, with positive returns in about 6 out of 10 years.² More recently, that trend has strengthened. Since 2015, the index has averaged a 1.5% gain in June, finishing higher in 82% of those years.² July has been even more consistent, with the index gaining an average of 3.2% and posting positive returns every July since 2015.²

While past performance does not guarantee future results, the broader backdrop for stocks remains constructive. Steady economic activity and resilient earnings growth continue to support the case for equities, though these conditions can change without notice.

2. Jobless Claims Tick Up but Labor Market Stays on Solid Ground

The number of Americans filing new unemployment claims rose last week to 225,000, coming in above economists’ expectations.³ While the increase is worth monitoring, the reading remains low by historical standards. For context, the 20-year average for new claims sits near 365,000, substantially higher than current levels.³

On the continuing claims side, the picture was encouraging. The total number of people actively receiving unemployment benefits fell to 1.78 million, a signal that workers who lost jobs are moving into new ones without prolonged employment gaps.³

Last week’s data aligns with other recent readings that point to a broadly stable labor market. Friday’s jobs report for May added more clarity. The U.S. economy added 172,000 jobs in May, well above expectations of 90,000, while the unemployment rate held steady at 4.3%.⁵  Taken together, we believe last week’s reports help reinforce the belief that the labor market has strengthened this year after a weak 2025.

3. Fed Survey Reveals Business Uncertainty and a Consumer Spending Divergence

The Fed released its latest survey of business conditions last week, covering the month of May. The report painted a picture of an economy under pressure from higher energy prices tied to the ongoing conflict in the Middle East, now in its third month.⁴

Most regions reported rising inflation compared to the April survey.⁴ Businesses saw input costs climb faster than the prices they could charge customers, squeezing profit margins.⁴ To manage the pressure, many firms adjusted their supply chains, trimmed product offerings, or absorbed higher costs rather than pass them onto consumers.

On the hiring front, conditions were largely flat. Employers remained cautious, with most districts reporting little to no change in employment.⁴ Manufacturing was a notable exception, with hiring activity showing relative strength, partly tied to data center construction.⁴

Consumer spending told two different stories. Higher-income households continued spending, particularly on premium goods and services.⁴ Lower-income consumers faced growing financial strain, with rising delinquencies reported across several loan categories.⁴

Looking ahead, businesses expressed a limited appetite for expansion. Uncertainty remains the dominant theme, with most firms holding off on material growth plans for the next six months.⁴

For the period ending 6/5/26.
* Small-cap stocks are represented by the Russell 2000^® Index. International stocks are represented by the MSCI EAFE. Bonds are represented by the Bloomberg US Aggregate Bond Index. Oil is represented by WTI Oil (West Texas Intermediate Oil), a benchmark for light, sweet crude oil and a primary measure for pricing oil contracts and futures in the U.S.

Sources
¹ FactSet S&P 500 & Nasdaq total returns as of June 5, 2026
² Standard and Poor’s, S&P 500 Index Historical Returns, June 2026
³ U.S. Department of Labor, Employment and Training Administration, Unemployment Insurance Weekly Claims News Release, May 29, 2026
⁴ Federal Reserve Board of Governors, Beige Book: Summary of Commentary on Current Economic Conditions, May 2026
⁵ U.S. Bureau of Labor Statistics, The Employment Situation [most recent monthly release], 2026

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A Composite PMI is a single index that tracks economic activity by combining the performance of both the manufacturing and services sectors, providing a comprehensive overview of overall business conditions.
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The Consumer Price Index (CPI) measures the monthly change in prices paid by U.S. consumers. The Bureau of Labor Statistics (BLS) calculates the CPI as a weighted average of prices for a basket of goods and services representative of aggregate U.S. consumer spending. The CPI is a measure of inflation and deflation. The CPI report uses a different survey methodology, price samples, and index weights than the producer price index (PPI).
Additional Disclosures: International and Foreign Securities, Fixed Income Investments, the Consumer Price Index, the Producer Price Index.
Comparative Index Descriptions: The Standard & Poor’s (S&P) 500 Index, The Russell 2000^® Index, The NASDAQ Composite Index, The MSCI EAFE Index, Dow Jones Industrial Average^® (Dow Jones or DJIA), The Bloomberg Barclays US Aggregate Bond Index (US Agg Bond), The CBOE Volatility Index (VIX). CSP2026001_22