Beware Half-Baked Narratives 

Six Things You Should Know

1. Equity Markets – were up this week with U.S. stocks (S&P 500) gaining +1.85% while international stocks (EAFE) rose +0.59%. 
2. Fixed Income Markets – were also up this week with investment grade bonds (AGG) increasing +0.74% and high yield bonds (JNK) adding +0.60%. 
3. U.S. GDP – Q1 growth numbers saw a downward revision to an annualized +1.6%, falling behind consensus expectations of 2%. Volatile global trade continues to weigh on growth, while the “Core” GDP (personal consumption/business investment/home building) growth number stood at +2.4%.
4. Personal Incomes – Incomes were unchanged in April despite expectations of a 0.4% improvement. Year-over-year personal income now stands at +2.5%, while spending has increased 5.9% over that same time frame. 
5. Cybersecurity Reminder – Scammers are increasingly using Remote Access Tools (RATs) along with phishing emails or texts to take control of devices like phones, tablets, and computers. Once installed, these tools can give cybercriminals access to sensitive information, including your Schwab accounts. These attacks can be hard to spot, so if something doesn’t feel right- like unusual account activity or suspicious messages- trust your instincts. If you sense suspicious activity, please call us immediately or report any concerns to Schwab at 800-515-2157. 
6. Key Insight – [VIDEO & ARTICLE] This week we discuss some of the common “scare” narratives that have been circulating of late and why they range from over-simplistic to naïve. 

Insights for Investors

By Tim Mitrovich

Beware Half-Baked Narratives 

After a couple of weeks of discussing concepts to help us get our general mindsets and investing frameworks oriented, this week we want to tackle the danger of narratives and specifically address some of the more popular ones making the rounds today. 

As stated by Donald Rissmiller of Strategas, “Narratives are an essential way in which humans communicate. But they are also prone to exaggeration.” (Source: Strategas, 5/27/26) 

Keith McCullough of Hedgeye had this great take on people and pundits creating market narratives around what they “feel” should happen, stating “Although Tourists would love it, it’s never just one narrative that’s driving a market – that said, both the Quads and ROC (rate of change) of The Pods (REVS and EPS) are 2 of the most impactful things and we’re leaving EPS season with 472 SPX companies having a y/y growth acceleration of 27.5% and NASDAQ’s 90 companies that have reported printing +46% y/y growth – the most consensus Net Short bet in Macro (Short QQQ) was dead wrong for the right reasons.” (Source: Hedgeye, 5/22/26) 

More simply put, there are real data points and market technicals that are driving markets and those catalysts do not care about the stories that people want to tell about what the market is, or should be, doing. 

But It’s Just like 1999! 

One of the popular narratives out there is that the market is due for a crash because “this is just like 1999.” Of course, all that is really behind that narrative is that (a) there has been a stock market rally and (b) it’s being driven by tech stocks. That hardly suffices for thorough or thoughtful analysis. 

The team at Strategas addressed this narrative this week and pointed out a few key differences. For one, they point out it wasn’t just that the Equal Weight S&P lagged (i.e. it was a narrow rally, like today) but more importantly that the Equal Weight Index was actually declining in 1999, whereas today it is hitting all-time highs (see accompanying charts below). (Source: Strategas, 5/26/26) 

Further addressing the concern of a narrow market, Strategas noted that “53% of the S&P is currently in an uptrend (50-day average > 200-day average) – that’s certainly a narrowed tape, but frankly, still a ways off from the only 27% of issues that were remaining in an uptrend at the March 24, 2000 market top.” (Source: Strategas, 5/12/26) 

Beyond the technical or quantitative comparisons is the more important fundamental difference regarding EARNINGS. As they point out, “one of most significant differences between today and the bull market top in March 2000 is that trailing earnings growth has been consistent with current total returns.  The S&P’s earnings growth in the last five years (+79%) is roughly equivalent to its total return (+85%) over the same time period.  This lies in stark contrast to the Dot.com bubble when earnings growth for the Index from 1995-1999 (+67%) trailed its total return (220%) by a wide margin.  There was, of course, a new, new thing at the time but capex spending then was largely being carried out by unprofitable companies.  Perhaps more interestingly, the broader Index notched its eighth weekly gain last week.  While this fact might prompt you to want to fade the current rally, it is important to note that this never occurred in 1999.  In fact, this has only happened in the filet periods of bull markets back to 1982.  If anything, this suggests that the current bull market is healthy.” (Source: Strategas, 5/27/26) 

With estimates for 2026 earnings growth at 22.5% and still 15.5% in 2027, the market has plenty of fuel and/or justification for both its current strength and potential gains going forward despite all the troubling headline news. 

Isn’t the Credit “Canary” Signaling Impending Doom? 

Another popular narrative that has driven headlines this year is that the credit markets are on the verge of collapsing. Torsten Slok, Chief Economist at Apollo points out that extrapolating such a phenomenon from a couple of bankruptcies last fall and/or panicked redemption requests, risks missing the actual reality. In a piece entitled “In Credit Markets, Things Are Getting Better, Not Worse” he states, “Default rates are falling, distressed exchanges are declining and the number of liability management exercises are declining, see charts below. The bottom line is that the economy is strong and there are no signs of a full-blown credit cycle.” (Source: Apollo, 5/12/26) 

Furthermore, it isn’t just corporate credit that looks sound, but also US households. As Slok points out, “The share of consumers who expect to miss a minimum debt payment in the next three months just hit its lowest level in several years, a quiet but meaningful sign that financial stress is easing. The bottom line is that households are feeling better about their finances.” (Source: Apollo, 5/15/26) 

Bond Yields are Rising Because of Economic Concerns 

It is true that higher bond yields can be a headwind to markets, which we discussed in last week’s Written Commentary. However, they don’t have to be a headwind. Nor do rising rates need to signal impending doom based on a lack of conviction in future US economic strength as some doomsayers are claiming. 

Bond yields can also rise due to a belief in future economic strength, and a competitive demand for higher yields to persuade investors to consider them in lieu of other risk assets. 

As Donald Luskin of TrendMacro stated, “Don’t worry that yields have moved higher. Worry if they move lower.” He continued, “The US 10-year yield has backed up to 4.6%, 68 bp from the lows of the year, the day the war in Iran started. We said “four is the floor,” but that prediction was based only on our belief that we are in a productivity supercycle in which riskless bonds would have to pay to compete with risk-on opportunities…Since 1962, the 10-year yield has been on average far higher, at 5.8%  In the productivity supercycle that began in 1983, it averaged even higher at 7.1%. Throughout history, higher Treasury yields have pointed to higher growth in the coming year, just the opposite of the conventional wisdom that high yields suppress growth and lower yields stimulate it. From here, beware of real yields falling, because this could imply central banks are making the error of tightening into higher oil prices, mistaking an energy supply-shock for inflation.” (Source: TrendMacro, 5/18/26) 

Like all of the “narratives” this week, it isn’t that the bearish view could never play out, just that it actually is the less plausible explanation let alone the ONLY one as they often would have you believe. 

Inflation will Destroy the Economy 

Brian Wesbury has this to say regarding the current inflationary environment, “In terms of the official inflation reports, the popular narrative has a point.  Over time, inflation is a monetary phenomenon, but in the very short term an oil price spike can change measured inflation because consumers (and businesses) dip into savings temporarily to spend more and the basket of goods and services used to measure inflation doesn’t immediately change. As a result, the Consumer Price Index is up 3.8% from a year ago, which is well above the Federal Reserve’s 2.0% target.  This will likely keep the Fed from cutting short-term interest rates for at least the next few months.  However, an oil price shock is typically a temporary issue.  And the impact on the economy has been muted.  After adjusting for inflation – things appear not much different than before the war with Iran started.” (Source: First Trust, 5/26/26) 
 

After the recent CPI/PPI report, the team at TrendMacro echoed Wesbury’s thoughts/caution on reading too much into what is likely a temporary phenomenon saying, “CPI was horrible, but it was expected to be. That said, at 0.6% for the month, headline came in far below last month’s 0.9%. Core, on the other hand, grew 0.3% versus last month’s .2%. For what it’s worth, our favorite measure, core CPI ex OER, is now 2.37% year-on-year. The Fed’s target for it is 2.5%. They key now is not these statistics, it is simply the reality of the war in Iran and its effect on oil prices — and more important, the meta-reality of whether or not the Fed and other central banks have the smarts to “look through” this supply shock rather than mistaking it for canonical inflation.” (Source: TrendMacro, 5/12/26) 

On the contrary, the critical indicator of the US job market is signaling real strength. As highlighted by TrendMacro after the stellar jobs report earlier this month, “A strong beat for payrolls overall, despite a slight decline in government jobs. With two whole months of the Iran oil-shock rippling through the economy, it appears that the labor market is shock-proof.” (Source: TrendMacro, 5/8/26) 

On this same topic, Strategas also noted that this is not a new reality stating, “Initial jobless claims released yesterday were notably strong, coming in below 190K. Just as important, the trend over the past four months has been moving lower. The bottom line is that the labor market, a key pillar of the economy, remains in solid shape.”  

In Closing 

In a summary we would cosign on, Don Rissmiller of Strategas concluded “Bottom line: the U.S. economy has digested numerous shocks over the past year (tariffs, reduced U.S. labor supply, an energy price surge due to the conflict in the Middle East). There are lingering risks. But with capex solid, profits robust, and the labor market muddling through the U.S. business cycle looks like it has some cushion. We believe the U.S. could see a mid-cycle slowdown, but not a recession.” They recently lowered their recession odds to just 25%. (Source: Strategas, 5/26/26) 

This should all sound familiar as we have stated in a number of Commentaries this year our belief in the resiliency of the economy but also likely market headwinds that could manifest in Q3 of this year – most recently in our article last week, see HERE. 

This article isn’t to convince you to be bullish or bearish, but rather question the narratives you often hear in the press and the various perma-bears trying to sell you newsletters full of promises of priceless predictions. 

Process, balance, and a fully informed range of possible outcomes for both financial and emotional preparation are the foundation to a sound investment strategy. 

Have a wonderful weekend, 

Tim and the team at TEN Capital 

Data, Just the Data

• U.S. Jobless Claims – initial claims rose by 5,000 last week to 215,000, slightly above expectations. Continuing claims also moved higher by 15,000 to 1,786,000.
• U.S. New Home Sales – single-family home sales fell by 6.2% in April to an annualized rate of 622,000 units for the lowest level in 3 months. Housing supply was unchanged at 489,000 units, roughly 9.4 months of supply.
• U.S. Durable Goods Orders – spiked 7.9% in April to $346 billion, more than doubling expectations of 3.5%. This marked the strongest monthly increase since May of last year.

• U.S. Consumer Sentiment – according to the University of Michigan index consumer sentiment plummeted to a record low of 44.8 in May, with cost of living remaining the top concern.