Rockport Market Update – May 2026

Key Takeaways

• Stocks stage strong comeback

• Inflation edges upward

• Oil prices remain elevated

• The Fed faces a challenging environment

Stock Market Recap

After a challenging March, stocks rebounded strongly in April. The S&P 500 gained 10.42% for the month— its best performance since November 2020— while the NASDAQ Composite surged an even more impressive 15.29%. On a year to date basis the S&P 500 index is now up 5.31%, a pleasant turn around from the negative readings last month.

Given the significant selling pressure in late February and March, a sharp rebound was not entirely unexpected. Markets often experience powerful recoveries following periods of heightened volatility. That said, the strength of April’s rally is somewhat surprising considering that oil prices, while off their highs, remain elevated, and inflation appears to be settling closer to the 4% range.

Inflation

Inflation, as measured by the Consumer Price Index (CPI), rose to 3.3% year-over-year, up from 2.4% in the prior report. The increase reflects renewed pressure from higher energy prices, which are offsetting some of the easing we’ve seen in areas like housing and core services.

Looking ahead, if energy prices remain elevated, it would not be surprising to see inflation trend closer to 4% over the next couple of months.

Oil Prices

Oil prices have risen noticeably from around $65 per barrel for West Texas Intermediate crude oil in early March and have remained close to the $100 level in recent weeks. The longer prices stay elevated, the more impact they are likely to have on the broader economy.

Higher energy costs tend to act like a tax on consumers, leading to increased prices for gasoline, diesel, and jet fuel. Over time, these higher transportation and production costs can flow through to everyday goods, including food. This creates additional pressure on household budgets, particularly for those already managing tighter financial conditions.

Even if tensions in the Middle East were to ease in the near term, it would likely take time for oil prices to decline meaningfully due to ongoing disruptions and damage to production infrastructure. As a result, the most probable near-term outlook appears to be a period of “higher for longer” energy prices.

The Fed has a Tough Job Right Now

Ongoing inflation pressures and elevated energy costs continue to put the Federal Reserve in a difficult position. Adding to this dynamic is the leadership transition from Jerome Powell to Kevin Warsh, which can naturally introduce some uncertainty around the direction of interest rate policy.

At this point, persistent inflation makes it challenging for the Fed to begin cutting rates. While the desire to ease policy is clear, doing so too soon could risk adding further pressure to inflation, which has already been trending higher. As a result, expectations for rate cuts have been pushed out, with markets currently indicating that reductions are unlikely in the near term— even into the fall.

Source: CME FedWatch Tool – CME Group

While the past month has provided a welcome boost to account values and overall sentiment, there are still a number of challenges that markets will need to navigate in the months ahead. Factors such as elevated inflation, higher energy prices, and uncertainty around interest rate policy could continue to create periods of volatility.

As always, markets tend to look ahead and adjust quickly to changing conditions. Staying focused on long-term goals and maintaining a disciplined approach remains the most effective way to navigate both the opportunities and uncertainties that lie ahead.

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Information as of 5.5.26

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