May 2026 | War, Capital Spending, and a Positive Market
Happy Saturday from Perennial Wealth Advisors! In the spirit of transparency, this newsletter was intended to go out yesterday. Yet, after a day filled with unexpected surprises, not least of which was a mid-flight migraine, I was forced to push it forward. Just like the stock market, life is full of unexpected events arriving all too inconveniently, that must be met with adjustments. Regardless, I hope this edition of “PWA Insights” finds you well.
I’ve shared a quick market update discussing energy prices, China, the 1970s economy, and more. Following, there is a short piece on the expected volatility of investing and the growth you stand to earn. Please don’t hesitate to reach out if you have any questions.
MARKET UPDATE
The markets seem to be at an interesting spot right now. It looks like the market priced in some misplaced hope going into the Trump-Xi Summit. In reality, the number of Boeing planes bought by China fell short, there was no progress on Iran and the Strait of Hormuz, and Tawain tensions escalated. If the strait stays blocked, this will likely mean increased oil prices, which will could hurt inflation and interest rates, creating some headwinds for stocks.
However, the U.S. economy looks strong. Jobless claims came in higher, but not significantly. Manufacturing data is positive, the consumer is still spending, and the majority of S&P 500 companies have reported earnings above estimates for Q1 2026. Further, Jeremy Siegel noted in his newsletter this week that the U.S. is in a much better position to weather the volatility of energy prices than it was in the 1970s. Incredibly, the U.S. is now a net exporter of oil, compared with the huge energy dependence we had on OPEC in the 70s when we were net importers.
Another positive point on energy was outlined in a Wall Street Journal article titled, “U.S. LNG Exports to the World’s Rescue.” In March, Qatar was forced to halt liquid natural gas production due to Iranian drone strikes. Europe also found themselves in a bind, extremely dependent on Russia’s natural gas when Russia invaded Ukraine in February 2022. Yet, the U.S. now provides about as much natural gas to Europe as Russia did before the war, and also increased exports to essentially replace the output caused by the drone strikes in Qatar.
Though we might see an uneasy market in the short-term with global politics in flux, there is underlying hope and resilience. A few months ago, in light of the war in Iran and fears that capital spending on AI were excessive (just to name two), I would not have expected the market to go on to reach all-time highs. As I write, the S&P 500 is up 8% YTD. Who would have thought? Yet, if I’ve learned anything it’s that the predicting market movement in the short-term is a fool’s errand. We will see what the rest of the year has in store.
HERE’S “THE DEAL”
In light of the review on current events above, I thought it might be high-time to restate the reality of being an investor in the stock market. If we’ve had the pleasure of being in a meeting together, we’ve likely discussed the trade-off between volatility and returns. There is much money to be made investing in common stocks, but the cost is fluctuations in price that can prove to be psychologically and emotionally testing even to the most rationally minded. Here’s “the deal.”
Since 1950, the S&P 500 has annually declined from peak to trough an average of nearly 15%.
Every five years or so, it has declined an average of nearly 30%.
It has essentially halved on 3 occasions since 1950.
Yet – the annual compound rate of return (dividends reinvested) over this period is approximately 11%.
In all this time, the longest it took an S&P 500 investor to break even, with dividends reinvested was 5 years and 8 months (August 2000-April 2026, Jeremy Siegel, Stocks for the Long Run, sixth edition, page 8).
This is the deal. Weather the volatility, get the return. To the degree that your portfolio is made up of stocks, you should have these expectations. Do your best to keep this in mind upon the next market downturn, and should you forget, I’ll be happy to remind you. Until then, we press on.
FRIENDLY REMINDERS
Trump Accounts – We’ve had a lot of clients asking about “Trump Accounts.” These are tax deferred accounts for children under the age of 18, and there is a $1,000 contribution available for U.S. children born between 2025 – 2028. More information is available on this website, https://trumpaccounts.gov/, and we will be in touch as we learn more.
Please keep in mind that some sections of the newsletter, quite often the “Friendly Reminders,” have been redacted in order to communicate with the larger audience of the internet. Our client’s receive the full, original newsletter. If you’d like to learn more about becoming a client, please reach out to us in the “Contact” section of our website.
Sincerely,
Brock Hedgecoke, CFP®
Financial Advisor