“Not a worry in the world, cold beer in my hand, life is good today” – Toes by Zac Brown Band
May 10th marked the beginning of 84 days of sun in Utqiaġvik (formerly Barrow), Alaska – the Northernmost city in the United States. That was the final sunset for the summer, with continuous daylight until August 2nd, 2026. True, absolute night and darkness does not emerge in the region until late September. This “midnight sun” phenomenon is due to its northern location, but with endless summer, also comes weeks of absolute darkness in the winter. We feel that the markets are also entering a period of abundant sunshine and prosperity with a summer of endless rallies in the cards on the heels of a blowout quarter of earnings. Oil prices be damned, full speed ahead!
I know the world feels terrible. Iran has yet to be resolved, CPI and inflation are creeping up, and gas prices are a concern to every citizen. But the fundamentals are strong in the market. Are there issues? Certainly. We have logged 6 straight weeks of gains in a very uneven rally. The market is becoming concentrated in AI once again as the S&P 500 is vastly outperforming the S&P Equal Weight. As of 5/11/26, only 53% of stocks are in an uptrend, versus 70%+ back in 2024, and even that number has deteriorated rapidly in March and April. But earnings have been so strong, the P/E multiple has compressed slightly down by -5% as earnings are up 13%, and margins are now exceeding 20%. Companies are making more money and keeping more money due to efficiency and cost savings. And earnings expectations continue to rise rapidly for 2026 and 2027. It would be highly unusual to have a bear market in a period where earnings growth is expanding. Since the October 2022 lows, the S&P 500 is up 107% in terms of price return, with 14% in just the last 6 weeks. Again, this puts us in an average bull market – not concerned yet with an irrational exuberance top.
If you overlap the melt-up between 2022-2026 and the buildup during the tech bubble of 1996-1999, we would have to go parabolic at this point to be anywhere near the Nasdaq’s bubble peak. The similarities in return from 1996-1998 and 2023-2025 are high – during that period in the 90’s, the Nasdaq was up 107%, and the current era is up 118%. 1999 is when the irrational & crazy started and the Nasdaq went up 85.59%. 1995-1999 were 5 straight years of rallies driven by technology and innovation; our current bull is 3.5 years old and has had multiple sharp pullbacks of 10-18%. We anticipate more sharp drawdowns as AI disrupts itself and markets overreact, but our bull thesis is intact. And history says there is plenty of time and room to run – even if we have a stumble and speed bump along the way. Sell in May and Go Away has been a horrible trade the last 5 years and we advocate staying long risk through the summer.