The Panic, the Rebound, and Now…? 

Six Things You Should Know

1. Equity Markets – Equity Markets – were up this week with U.S. stocks (S&P 500) rising +0.88% while international stocks (EAFE) gained +2.21%.
2. Fixed Income Markets – were also up this week with investment grade bonds (AGG) adding +0.42% and high yield bonds (JNK) increasing +0.55%.
3. FOMC Minutes – In the most recent Fed meeting officials expressed concerns over Iran war-related inflation spikes, with a majority of policy makers stating “some policy firming would likely become appropriate” if inflation stays above the central banks target of 2%. This marks a more hawkish tone and suggests rate hikes are now on the table if necessary. 
4. U.K. Labour Report – U.K. unemployment unexpectedly rose to 5% in Q1 as job vacancies decreased to its lowest level in five years. Earnings growth also slowed to 3.4% year-over-year, just slightly above year-over-year inflation growth of 3.3% 
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] In this week’s video we share some of the questions the TEN Capital team had for Stephanie Link of Hightower Advisors on her visit, ranging from outlooks to philosophies, in a fun, lightning-round Q&A. [ARTICLE] In what isn’t really a new pattern, but one that has perhaps coincided with some “bigger” headlines in recent years, the equity markets have once again experienced a panic and large rebound and now seem to be in a holding pattern waiting for their next catalyst. We discuss this week what those may be. 

Insights for Investors

By Tim Mitrovich

The Panic, the Rebound, and Now…? 

A common refrain for investors these days is, “What is going on with the markets?” For some, this means the somewhat wild swings in equity prices from the correction and corresponding lows at the end of March, to the then somewhat stunning rebound of approximately +17% in the S&P 500 since then. For others, it’s simply that in a world of conflict and so many unknowns, you wonder how markets can maintain such a “positive outlook.” 

As we shared back on March 6^th before the lows, this is nothing new for markets. They have a history of V-shaped recoveries that surprise investors, of rallying during times of war, and of looking past a lot of the news that makes headlines to keep a very counter-intuitive and narrow focus on earnings. 

The markets can certainly become emotional (e.g. the Covid Crash of 2020 or Tariff Tantrum of 2025) for a time, but more times than not, their seemingly cold and callous focus on earnings at what appears to be the expense of the “human side” of life leaves investors befuddled. On that note, while much in the world may be struggling, from the conflict in the Middle East to persistently high inflation and oil prices, corporate earnings continue to surprise to the upside.  

As summarized by Ryan Grabinski of Strategas, “With 1Q earnings season now more than 90% complete and only a few large companies left to report, it’s clear this has been a strong reporting period. Much of the attention has gone to the 28% earnings growth, but far less has been said about the revenue side of the story. At 11.1%, double-digit revenue growth is impressive in its own right. Even more notable is the fact that every sector has reported revenue growth that exceeded initial expectations at the start of the quarter. This broad-based strength underscores just how resilient the economy was during the first three months of the year. The 2026 EPS estimate now sits at $334, which implies a growth rate of roughly 22%. What remains remarkable about today’s earnings trajectory is that these kinds of growth rates are typically associated with earnings recoveries, not midcycle environments.” (Source: Strategas, 5/19/26) 

With markets continuing to hover near all-time highs, investors have responded in kind with a shift back to sentiments reflecting “greed” (Chart #1). A look at the following chart shows, in the bottom right, investors’ sentiment reaching a “6” on the scale of Extreme Fear. 

The simple lesson is that when those around you, or perhaps even your own fears, are screaming one thing it’s often better to fade such sentiment. As Warren Buffet’s famous quote states, “Be fearful when others are greedy, and greedy when others are fearful.” 

If you were able to follow the above advice last year during the April tariff-related sell-off and kept or added to your equity exposure and similarly made it through the drawdown this March, now may be the time to consider banking some profits. Not because one should “time markets,” but because you should be sitting on some very nice gains in that case and as such could very well be in need of rebalancing back to your original risk tolerance/allocation. 

“But markets are surging again, what could possibly go wrong?” you may ask. 

Here are a few things to consider, not to make you panic, but to serve during these strong markets in which things arise and create volatility all the time. Following a process and not your emotions is critical to any sound investing philosophy. 

What are these potential challenges? 

Tom Lee of Fundstrat has been outlining some likely “contenders” (see last week’s Commentary on embracing the mindset of a fighter/boxer when it comes to investing HERE) that could challenge markets this summer and/or early fall. 

The Timeless Headwinds to Markets 

If there are two challenges to markets that have reared their heads a number of times over the years, they are oil prices and the Treasury yields. Oil prices, as you well know, are a critical cost input to our economy from household budgets to transportation costs for any number of industries. As costs go up, consumer consumption often declines along with corporate profitability. Bond yields matter because the perceived value of equities is often viewed in light of the “risk-free” rate of return of Treasuries. The higher the risk-free yield, the higher the hurdle the equity markets have in terms of profitability to justify their price levels.  

As you can see from the chart below, there are recent highs which, if these levels persist, should at the least slow down markets, if not set them back for a time. 

Inflation Still Likely to Peak 

Related to the oil prices above, but certainly also a function of recent monetary policy and government spending, is our still-high rates of inflation here in the U.S. The team at Fundstrat believes they will likely peak in June (see chart below), and the markets could look past that peak, but the reporting of higher numbers in June and July right as Fed Chair Warsh is taking over could be another source of volatility.  

The Markets Love to Challenge New Fed Chairs 

Finally, the markets already have (for whatever reason) a history of challenging the arrival of a new Fed Chair. Tom Lee points out that 10 of the last 13 changes in the Chairman of the Fed resulted in/corresponded with 10%+ drawdowns in the S&P500. (Source: Fundstrat, 4/21/26) This approximate 75% chance of a drawdown has held with the four most recent occurrences as well. (See chart below).

The Takeaway 

As we have cautioned many times before, successful investing doesn’t depend on prognostication but rather process.  

We highlight the potential challenges that may lie ahead for markets not to tempt you into the former, but rather challenge you to question your thoughts and emotions to help ensure that you are not getting swept up in the sentiment of the moment, but following a process built around (a) historical fact, and (b) a more comprehensive understanding of both catalysts and challenges to markets at any given time. 

With markets back off the lows and reaching for new highs, it is easy to fall prey to greed and bullishness when– depending on your circumstances, current allocation, and long-term goals– it may be time to “bank some gains.” 

As Stephanie Link highlighted during her visit with us, “selling is much harder than buying.” 

If you need help knowing what the right next step is for you, we are always here to talk. 

Have a wonderful weekend and keep a special thought this weekend for those that give it all for our special country, 

Tim and the team at TEN Capital 

Data, Just the Data

• U.S. Housing Starts – fell 2.8% month-over-month is April to a seasonally adjusted annual rate of 1.465 million. Data suggests high mortgage rates continue to weigh on builders.  
• U.S. Jobless Claims – initial claims fell by 3,000 last week for a total of 209,000, slightly better than expected. Continuing claims rose by 6,000 to 1,782,000.
• U.K. Retail Sales – fell 1.3% in the month of April, worse than expectations of a 0.6% decline. Year-over-year sales are up 1.3%.
• Eurozone PMI – manufacturing pmi for the region fell to 51.4 in May but remained in expansionary territory for the 4^th consecutive month.