Speaker: Charlie Bilello, Chief Market Strategist at Creative Planning [00:00:00].
Core Theme: Strong corporate earnings are propelling equities to all-time highs despite a historic bond drawdown, sticky global inflation, and emerging pressure on real wage growth.
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The U.S. stock market has experienced a rapid recovery from its early-2026 correction.
Market Milestones: The S&P 500 suffered a 10% decline that bottomed on March 30, 2026, before staging a near straight-line rally to new all-time highs [00:00:25]. This milestone marked 18 all-time highs so far in 2026, following 39 in 2025 and 57 in 2024 [00:00:48]. The S&P 500 crossed the 7,500 milestone for the first time, up from ~2,000 a decade ago in 2016 [00:01:04]. The NASDAQ 100 hit 26,000, taking less than a week to transition from 25,000 [00:01:29].
Unprecedented Momentum: The 16% rally over the six weeks following the March low ranks as the 11th largest 6-week gain since 1950 [00:01:52]. Crucially, it is the only rally on this historical list that did not occur during or immediately following a full 20% bear market or tariff tantrum; it happened after a mere 10% pullback [00:02:01]. Historical data reveals that after such rapid moves, momentum typically takes hold and driving forces like performance chasing lead investors to push markets higher over subsequent 1- to 5-year periods [00:02:48]. This highlights a core paradox: markets frequently deliver above-average returns due to mean reversion following big down moves and momentum following big up moves [00:03:41].
Earnings Explosion: First-quarter earnings for 2026 dramatically outpaced expectations [00:04:41]. Wall Street projected a 13% year-over-year increase for Q1; corporate America delivered 28%, marking the fastest growth rate since 2021 with every major company beating estimates by a wide margin [00:04:50]. Full-year 2026 earnings are now expected to grow by 23%, more than triple the historical average of 6% to 7% [00:05:47]. Unlike historical spikes (e.g., 2021) that followed recessions, this expansion occurs on top of consecutive strong years [00:06:00].
Record Margins: Q1 2026 net profit margins surged to a record 14.7%, soundly beating the prior record of 13.2% set in Q4 2025 [00:07:07]. Valuations remain elevated with a trailing 12-month P/E ratio of 24.2x, compared to 23.9x a year ago [00:07:48]. This minimal multiple expansion despite massive gains is entirely due to trailing earnings jumping 18% [00:07:59].
Sector & Factor Trends: International equities led throughout 2025, but leadership has narrowed [00:08:26]. High-momentum stocks lead year-to-date performance (up nearly 18%), followed by small caps, value, international, and midcaps [00:09:02]. Growth stocks and the Magnificent Seven lag the broader factor list at a 5% gain [00:09:18]. Technology relative to the S&P 500 reached a fresh record high, surpassing its March 2000 dot-com bubble peak [00:10:01]. Over the last decade, semiconductors dominate industry performance, climbing 1,800% versus the NASDAQ 100's 613% and S&P 500's 321% [00:10:37]. Energy remains the top-performing sector in 2026 (up 36%) due to soaring crude oil [00:11:07], while financials lag, down 5% year-to-date despite a pickup in merger and IPO activity [].
Index Concentration: Concentration has reached historical extremes. The top two stocks (Nvidia and Apple) comprise 15.7% of the S&P 500, with Nvidia alone near 9% [00:12:21]. The top 10 stocks make up close to 40% of the index [00:12:35]. However, this is backed by fundamentals: the top 10 companies generate 34% of all S&P 500 earnings, double their 17% share in 1996 [00:13:24].
The fixed income landscape remains highly restrictive, driven by shifting macroeconomic targets.
The Historic Bond Drawdown: The U.S. bond market is in its longest drawdown in history, spanning 69 months since August 2020 [00:15:37]. Long-duration instruments have borne the brunt of the damage as yields rose; 25+ year zero-coupon bonds remain caught in a 62% drawdown from their 2020 highs [00:17:26]. This performance debunks the notion that long-duration bonds are risk-free instruments relative to short-term Treasury bills [00:17:46]. Year-to-date, high-yield bonds and leveraged loans remain positive while long duration drags the aggregate bond index down 60 basis points [00:16:48].
Yield Projections: The 10-year U.S. Treasury yield stands at 4.6%, with real yields tracking above 2% [00:18:06]. Historically, a starting yield in this decile points to a predictable 4.5% to 5% annualized return over a 7-year holding period [00:19:08]. The 30-year Treasury yield reached 5.14%, its highest level since July 2007, up from sub-1% lows in March 2020 [00:19:54].
Corporate Credit Calm: Despite spiking benchmark yields, credit spreads remain unusually tight [00:20:25]. Investment-grade spreads are at 75 basis points (vs. a 146 bps historical average), and high-yield spreads are at 283 basis points (vs. a 519 bps average), indicating that the market anticipates low default and recession risk [00:20:55].
Loose Monetary Policy: With April CPI arriving at 3.8%, the inflation rate has crossed above the Federal Funds Rate target of 3.50%–3.75% [00:21:53]. This indicates monetary policy has shifted from restrictive to loose [00:25:22]. The 2-year yield has jumped to 4.13%, signaling projection pressures for a rate hike rather than cuts [00:21:58]. Federal Reserve members have cut interest rates by a cumulative 175 basis points since 2020, even though inflation has averaged 4.1% over that window—double the central bank's official 2% target [00:26:18].
Fed Chair Transition: The upcoming June meeting will mark the first under new Fed Chairman Kevin Warsh [00:22:59]. While the market expects no policy change [00:23:06], the Cleveland Fed's Nowcast predicts May CPI will jump to 4.2% [00:26:57]. Global inflation pressures are rising synchronously, with the Eurozone hitting 3% and central banks tracking rate hikes ahead of the June meeting [00:27:30].
Physical asset classes are adjusting to changing supply realities and geopolitical events.
REITs vs. The S&P: Real Estate Investment Trusts remain locked in a multi-year drawdown dating back to early 2022 [00:28:05]. Property prices have staged a subtle 3% recovery over the past year but remain below peak levels [00:28:38]. The ratio of REITs to the S&P 500 has plummeted to its lowest level since June 2000, extending a nearly 20-year structural decline from the pre-GFC housing bubble peak in February 2007 [00:29:05].
The Housing Inventory Shift: Home prices hover near all-time highs while affordability sits near record lows [00:29:27]. However, price appreciation is stalling due to a 46% gap between expanding sellers and shrinking buyers [00:29:46]. The Case-Shiller National Home Price Index registered a modest 0.7% year-over-year increase for February, while Zillow data for April showed a 0.6% rise [00:30:08]. Regionally, 11 out of 20 major cities are experiencing year-over-year price declines, with select Florida markets down more than 20% from their peaks [00:30:27]. Average 30-year mortgage rates hover around 6.5% [00:31:17].
The Rental Safety Valve: The median U.S. asking rent has logged nearly four years without a new high, declining 1.7% over the past year [00:31:42]. This shift allows flat or declining rent lines to balance out expanding incomes [00:32:18]. This adjustment is driven by elevated multifamily housing vacancies fueled by aggressive construction completions spanning 2023 through 2025 [00:32:44].
The Commodity Super-Spike: Broad commodities lead all asset classes in 2026, gaining roughly 40% year-to-date [00:48:01]. Retail gasoline has cleared $4.50 per gallon, hitting its highest mark since 2022, following supply disruptions linked directly to the outbreak of the war in Iran in late February [00:39:43]. Spikes extend across energy, heating oil, copper, and aluminum, presenting severe inflation headwinds [00:38:10].
Gold’s Long-Term Track Record: Following a 64% return in 2025 (its best year since 1979), gold went parabolic in January and February before entering a 20% correction [00:33:14]. Since the launch of the first gold ETF in November 2004, gold has gained 838%, matching the S&P 500's 826% return over the same period [00:33:53]. Adjusted for inflation, gold cleared its 1980 purchasing power peak in 2025, ending a 45-year real drawdown [00:35:59]. Gold remains sensitive to opportunity costs driven by rising real interest rates, selling off since the start of the Iran conflict while industrial commodities moved higher [00:38:10].
Digital assets are displaying a notable divergence from traditional risk assets.
Deep Corrections: While equity markets establish fresh highs, major cryptocurrencies are in deep corrections. Bitcoin is currently caught in a 38% drawdown from its peak, while Ethereum sits 56% below its all time high [00:42:08].
The Divergence Timeline: This performance disconnect began in October 2025, when Bitcoin topped out at $126,000 [00:42:30]. During the correction, Bitcoin fell as low as $60,000 in February 2026—a 52% absolute peak-to-trough decline before finding a local floor [00:42:54].
The Narrative Pivot: Despite being down 6% in 2025 and an additional 12% year-to-date in 2026, multi-year compounding remains high due to outsized historical gains of 156% in 2023 and 121% in 2024 [00:43:23]. Capital allocations are temporarily rotating away from digital assets and toward megacap semiconductor and AI technology infrastructure plays, which boast a more immediate corporate earnings story [00:43:54]. Over a longer 5-year view, the performance ratio between the U.S. stock market and Bitcoin is flat [00:47:32].
The U.S. economic expansion continues at a mature pace, showing a unique contrast between hard data and sentiment metrics.
The Mature Expansion: The current U.S. economic expansion reached 71 months in Q1 2026, climbing above the post-1949 historical average expansion length of 67 months [00:48:21]. While long expansions have historical precedents (e.g., 128 months from 2009–2020 and 120 months from 1991–2001), current economic signals show no immediate recessionary markers [00:48:39].
Labor Market Realities: Initial jobless claims hover near multi-year lows, and the national unemployment rate has ticked down to 4.3%, well below the historical average of 5.7% [00:49:27]. Over the last six months, non-farm payrolls averaged 55,000 new jobs per month, marking the strongest sustained hiring pace since May 2025 [00:49:31].
The Consumer Sentiment Paradox: Consumer sentiment has plunged to historic lows because of persistent inflation expectations [00:50:10]. Yet, this psychological distress has not altered actual spending habits [00:50:22]. Nominal retail sales are up 5.2% year-over-year [00:50:31]. Adjusted for inflation, real retail sales are positive at 1.4%, though they remain below the absolute real volume peak established in 2021 [00:50:38]. This validates the advice to look at consumer behavior rather than consumer sentiment [00:50:53].
Wages Fall Behind Inflation: A critical warning sign has emerged in labor dynamics. After 35 consecutive months of positive real wage growth, the trend has flipped negative for the first time since 2023 [00:51:30]. This contraction in consumer purchasing power is expected to worsen as higher May inflation numbers filter through the economy, highlighting the need to address fiscal deficits and monetary policy [00:51:51].
Asset Class Performance Matrix (Year-to-Date 2026) [00:47:56]
March 30, 2026: Market bottom for the 10% S&P 500 correction [00:00:25].
14.7%: U.S. corporate net profit margins, marking a record high [00:07:07].
69 Months: The duration of the current bond market drawdown [00:15:37].
$4.50 / Gallon: Average U.S. retail gasoline price following the late-February oil shock [00:39:43].
35 Months: The length of the positive real-wage streak that ended this month [00:51:30].
Jun 2, 2026
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