Markets give you a lot to react to and not much context. This monthly note is our attempt to provide some of that context. Thank you for reading.
If you’re a client, we sincerely appreciate your business. If not, and you would like to learn more about our firm, please feel free to reach out. You’re also welcome to share this update with others who may find it useful.
May 2026 in Review
So much for “sell in May and go away.” The market rebound that started in April continued throughout May.
Most asset classes performed well, but the standouts were growth and technology. The Nasdaq 100 (+10.6%) led everything, more than doubling the S&P 500 (+5.3%) and the broad U.S. market (+5.1%). Break it down by sector and the picture gets even more lopsided: technology (+15.9%) was the clear leader, and the only other sectors in positive territory were consumer discretionary (+2.6%) and healthcare (+2.3%). That stark outperformance, paired with technology’s outsized weighting in the index, carried the whole market.
The lack of breadth on a run like this is a little concerning, but the rest of the equity asset classes were solidly positive: global stocks (+4.6%), international developed markets (+4.3%), the Dow (+2.9%), emerging markets (+1.6%), and U.S. small caps (+1.1%) all finished higher.
Bonds were also positive, consistent with a stable rate backdrop. Investment grade corporates (+0.9%), high yield (+0.4%), municipals (+0.3%), and the U.S. aggregate (+0.3%) all landed in roughly the same band.
The real-asset and inflation-hedge trades that led earlier this year went into reverse: REITs (-0.7%), gold (-1.5%), and commodities (-7.5%) all fell. Commodities are still up sharply on the year (+37.9% year to date) even after that drop, so May looked less like a new trend and more like money rotating out of defensive real assets and back into growth equities.
I can’t explain Bitcoin’s continued underperformance (-4.0%) in a high-flying, high-risk environment like this one. But I’ve rarely been able to explain it.
Market Narratives
The Mega IPOs Are on Deck
The largest wave of initial public offerings (IPOs) in market history is about to hit, and it is concentrated in three companies. SpaceX is set to list on the Nasdaq on June 12, looking to raise around $75 billion at a valuation near $1.8 trillion. That alone would be the largest equity offering ever, more than double the prior record set by Saudi Aramco in 2019. Right behind it are Anthropic, the maker of the Claude AI models, which filed on June 1 at a recent valuation around $965 billion, and OpenAI, the maker of ChatGPT. Each of those could come public somewhere between $1 trillion and $2 trillion. The AI-3. Their combined market value once public is expected to land around $4 to $5 trillion, with roughly $200 billion in new stock being sold.
There is some concern that these deals will suck the oxygen out of the rest of the market, pulling $200 billion of buying power away from everything else. I would note that the IPO market has already financed about $232 billion of new equity over the past year, and back in 2021 it absorbed more than $450 billion, so the dollar figure itself is digestible. However, they will continue to absorb more equity in the following few years as the amount of stock float expands.
That leads to the first concern that may be more valid. These companies are only floating a small portion of their shares. SpaceX is putting roughly 4% of its stock into public hands, and Anthropic and OpenAI are likely to float similarly small slices. So, while the headline market valuations are enormous, the actual tradable supply is small. For perspective, the Magnificent Seven alone total around $24 trillion with 81% to 98% of their shares publicly owned. The AI-3 will not be in that league on a tradable basis for a long time. Given the small amount of float and potential strong demand from retail investors, it is possible the IPOs will perform well due to market structural forces in the short term.
A currently undisclosed group of investors, including Elon Musk, will be locked up from selling for the first year. For other restricted shareholders, 20% of their shares will be available for sale two days after reporting earnings, with the rest of the lock-up (excluding the large investors and Musk) being released in stages until six months post-IPO.
The second concern revolves around that scarcity and index rules and mechanics. It is worth understanding because most investors own these companies through index funds. To get a company like SpaceX into the major benchmarks quickly, the index providers rewrote their own rules. Nasdaq cut the waiting period for inclusion in the Nasdaq 100 Index from three months to 15 trading days; FTSE Russell went further to 5 days; and S&P is expected to clear its own path into the S&P 500, though on a slower 6-month timeline, instead of 12 months. Some of those rules were loosened while Nasdaq and the New York Stock Exchange were competing for the listing, and after SpaceX’s own advisers had asked index providers to speed up its inclusion. NYSE, which lost the deal, publicly accused Nasdaq of bending its rules to land SpaceX and called the result a market integrity problem.
Index funds are price-insensitive by design. They buy what the benchmark tells them to, at whatever price the market is quoting. The float is small, and the insider lockups are set to release in stages rather than all at once, so the index buying arrives in waves. In the first few weeks, the fast-entry benchmarks pile in against that thin float. The Nasdaq 100 will count SpaceX at three times its tradable shares, giving it roughly a 0.7% weight and close to $5 billion of buying, and Vanguard’s Total Market Index (CRSP Index) adds most big IPOs within 5 trading days. That concentrated, price-blind demand props up the early price. The largest wave comes later. SpaceX cannot enter the S&P 500 for at least 6 months, by which point much of the insider stock has unlocked, and at that point it could be around 1.5% of the index, on the order of $175 billion of buying from S&P 500 funds. The biggest slug of index demand, in other words, lands right as early investors and insiders are finally free to sell, with passive money on the other side of those trades.
All that to say, this first stretch of trading will likely tell you very little about the company, its stock patterns, or fundamentals.
Why the Wait?
For most of market history, the IPO was a handoff. A company raised private money while it was small and unproven, then sold stock to the public once it was established but still had its biggest growth ahead of it. The early venture capital backers cashed out, and ordinary public investors got in early enough to ride the next leg up. That is the story of nearly every great stock people own today. Nvidia listed at roughly $600 million in 1999, Google (now Alphabet) at $23 billion in 2004, Facebook (now Meta) at $104 billion in 2012. The enormous wealth those companies generated was created in public markets.
That model has been turned on its head. With private markets now flush with cash, the most sought-after companies can raise almost unlimited money without ever filing with the SEC, so they stay private far longer and arrive on the public market already enormous. The escalation is easy to see, and this year’s headliners are coming public valued near or above a trillion dollars apiece. The median company going public today is around 14 years old, more than double what it was in 1980, and it shows up far larger and more mature. SpaceX is even older than most. It was founded in 2002, making it older than Meta, Uber, and several of the U.S.’s largest publicly traded companies.
When a company debuts already valued like Big Tech, most of the growth that used to reward public shareholders has already been captured in private. The Magnificent Seven came public at a median value of about $1.2 billion and are now worth a median of roughly $3.1 trillion, a climb of more than 2,500 times.
In the best case, public buyers get a mature business with far less room to run. In the worst case, if the growth does not show up, these debuts become a transfer of wealth from ordinary investors to the private and venture funds cashing out at the top.
A Word on Concentration
It is worth pulling back from the individual deals as they are landing in a market that is already extraordinarily top-heavy. The 10 largest companies now make up about 41% of the S&P 500. That’s well above the 27% dot-com era peak in 2000 per J.P. Morgan. Counterintuitively, SpaceX and Anthropic may nudge that concentration figure down at first (see index and stock float rules above) before potentially climbing into the top ranks.
The difference from 2000 is that the earnings are real this time. Those same 10 companies produce 34% of the entire index’s profits, which is a legitimate reason to own them. The catch is price and crowding. The group trades around 26 times forward earnings, roughly a quarter above its long-run average, so when sentiment turns (and AI headlines and geopolitics have turned it more than once in the past year and a half), those few names swing the whole market.
There is even a hidden version of the problem. Several of these giants sit in both growth and value index funds, so plenty of investors who believe they have diversified actually own the same companies twice.
Closing Thoughts
I have spent most of this space poking at the plumbing of the equity markets. How do these giant IPOs get priced, who captures the gains, and how concentrated the index has quietly become. I am not trying to ring an alarm bell. These are real and remarkable companies, and much of the excitement around them is warranted.
Some of it is worth taking seriously, though. When a handful of names drive the headlines, the prices, and the index itself, the danger is ending up with too much riding on too few companies without ever deciding to.
The reassuring part is that the answer is not complicated. Stay diversified and rebalance. A diversified portfolio still owns these companies. You take part in SpaceX, in the AI build-out, in the Magnificent Seven, alongside the rest of your holdings. Exposure without being exposed.
So, enjoy the headlines this summer for the entertainment they are, and let the plan do the work underneath.
As always, please reach out if you’d like to talk through how any of this affects your specific situation.
Thank you for reading.
