🔎May 2026 Market Strategy
A new Black Monday in the making?
In my April 2026 Market Strategy, I highlighted how the Iran conflict is rotating capital back into the US, likely a strong and underappreciated force for this astonishing bull market. I further emphasized the valuation and sentiment disconnect between B2B and B2C businesses. The former can’t live without the latter, but markets don’t seem to care for now. Let’s see how the picture has evolved since then.
TLDR Summary
Institutional investors seem fairly desperate in chasing the current rally, in part because they are afraid to miss out on the technology boom (AI Trade), in part because they fear another inflation wave (Debasement Trade). Portfolio imbalances feel severe enough once again to trigger a significant correction.
Both the AI Trade and the Debasement Trade ultimately depend on a resurrection of the (US) consumer. Corporate capex can only be sustainable if it creates products that customers are willing and financially able to buy. And that’s also the only scenario where a lasting inflationary impulse could occur.
Interestingly, investors don’t expect anything from actual consumers. Betting on AI and monetary debasement while at the same time holding an ultrabearish view on consumers is a disconnect that will in my opinion ultimately drive a consolidation in the assets leading this bull market.
Various market segments look hopelessly overbought. Some are getting interesting though. B2C generally of course. But I’m also closely watching the capitulation in healthcare for example.
The momentum factor still rules the US stock market. Buying call options or levered ETFs is the technically the same as hedging an oversized stock portfolio with put options. The greatest single day crash in US stock market history happened when investors did exactly that.
