As we progress through May, financial markets are telling a story of resilience tempered by caution. Corporate earnings have provided meaningful support for equities, yet persistent geopolitical uncertainty and rising bond yields continue to test investor conviction. Here's what you need to know and why staying the course remains our view. 

Earnings Deliver, But Concentration Matters

The completed U.S. first-quarter earnings season has been a bright spot. Corporate results broadly exceeded expectations, and forward profit estimates continue to move higher. U.S. equities have rebounded strongly from March lows, now up roughly 8% year to date.

However, there's an important caveat: this uplift is heavily concentrated. Technology and AI-linked companies are driving much of the earnings momentum, while the energy sector benefits from elevated commodity prices. This concentration isn't inherently problematic—as long as fundamental results validate it. But with valuations already reflecting a favorable outlook, markets will need continued delivery to sustain upward momentum. Stock-picking matters significantly in this environment.

Geopolitics & Energy: Progress, But Risks Linger

The U.S.-Iran impasse remains the macro wild card. The primary question now is whether current energy disruptions prove temporary or evolve into prolonged supply imbalance. Without a diplomatic breakthrough reopening the Strait of Hormuz, energy markets could become significantly undersupplied as inventory buffers diminish—creating renewed upward pressure on oil prices and inflation precisely as seasonal energy demand strengthens into summer.

The silver lining: President Trump's Beijing visit produced a constructive shift in U.S.-China tone, with both sides describing discussions favorably. While trade truce continuity reduces escalation risk, the meetings did not appear to yield progress on resolving the Strait of Hormuz crisis.

The Bond Market Message: Inflation Vigilance

Global bond yields have risen meaningfully since late February. The U.S. 10-year Treasury now sits at 4.56%, while the Canadian 10-year reached 3.58%—both up roughly half a percentage point. This repricing reflects markets reassessing inflation trajectories and central bank policy in light of the oil shock.

What This Means for You

Rising yields create near-term downward pressure on bond prices, but they've also improved income opportunities moving forward. For equities, higher yields are digestible when growth remains resilient. Our concern: elevated borrowing costs could pressure household spending—a crucial economic pillar—if energy disruptions persist and dampen growth.

Our Position: Remain Invested, Stay Diversified

Despite headline uncertainty, fundamentals remain sound. The post-pandemic expansion—now in its sixth year—has proven exceptionally durable, absorbing successive shocks without derailing growth.

Our Conviction

Maintain your strategic equity allocation in line with long-term targets while preserving diversified exposures to navigate a wider range of outcomes.

Volatility may persist, but history is clear: pullbacks are temporary, recoveries are swift and abandoning your plan locks in losses. Your portfolio was designed precisely for this environment.

If energy developments or market moves are creating anxiety, we're here to talk.

Best regards,

Hayes Vickers Private Wealth