It's Going to Be May?

Justin Timberlake has been making this joke since the early 2000s, and somehow it still works every single year. But this one hits a little differently — because how on earth is it already May?

Take a beat with us for a second. Four months ago we were toasting the new year. Since then we've already seen geopolitical conflict, inflation worries, tariff headlines, a market that has had to digest a lot quickly, and an AI infrastructure cycle that keeps pulling capital into hardware, chips, data centers, power, and cooling.

That's a lot of plot for four months. No wonder it feels like the year vanished — there's barely been a week without a story that would have been the headline of an entire quarter five years ago.

So before we lose another four months in a blur, let's actually catch our breath, look at where we are, and talk about what we think the rest of the year may hold.

Where we are heading into May

The market story this year has not been a straight line. We have had stretches of optimism, pockets of anxiety, and sharp reversals that made the headline number less useful than the path it took to get there.

That path matters, because it is a preview of what we think the rest of the year may look like.

Our base case for the rest of 2026: more turbulence before relief

We're not in the business of pretending we know exactly what the next eight months will bring. But the setup is fairly clear, and we'd rather tell you what we're watching than dress it up.

Volatility may stay elevated through the back half of the year. Oil, inflation, geopolitics, trade policy, election-year noise, and the path of monetary policy can all move markets quickly. Those forces rarely unwind cleanly in a quarter. Markets may need to reprice more than once before this is over.

That does not mean panic. It means the plan has to be built for weather, not sunshine.

The policy backdrop still matters

Markets generally do not love uncertainty around monetary policy. Any transition, change in tone, or shift in inflation expectations can ripple through stocks, bonds, cash, and real assets. We are watching the Fed, the yield curve, credit spreads, and inflation expectations more closely than the daily headline cycle.

The important point for investors is not to guess every policy move. It is to know whether your plan depends on one outcome being right.

Geopolitical tension is not going anywhere

The Middle East, China, trade policy, energy supply, and election-year domestic politics all remain capable of moving markets. The honest answer is that no one knows the timing or resolution of any of these.

The portfolio answer is the one we always come back to: diversification, quality, liquidity, and a plan you can actually stick with when the headlines get loud.

Where we still see structural favorability: hardware

If there is a part of the market we would argue is on solid structural footing, it is the hardware layer of the AI buildout — semiconductors, networking, memory, packaging, and the data center infrastructure underneath all of it.

The demand side is concrete. AI may feel abstract when people talk about software demos and chatbots, but the physical layer is very real: chips, servers, electricity, cooling, copper, grid infrastructure, and specialized manufacturing capacity.

That does not make every chip stock a buy. Valuations can stretch. Cycles can turn. The difference between picks-and-shovels businesses and overhyped storylines matters more now than it did 18 months ago.

But the companies actually shipping the steel that AI runs on are, in our view, in a different category than the ones simply talking about AI in their earnings calls.

AI: a blessing for some, a threat for others

The most underappreciated story is not whether AI is real. It is. The question is who benefits and who gets squeezed.

Companies with proprietary data, real distribution, and pricing power can use AI to compress costs and expand margins. Companies whose moat was mostly manual labor dressed up as expertise may find that moat narrower than it looked.

From a portfolio standpoint, this is one of the strongest arguments for being thoughtful about what you own inside an index, not just whether you own one. Concentration risk in the largest names is real. The bifurcation underneath is real too. Index investing still works, but understanding the engine driving it matters more than it has in a long time.

What this means for your plan

Here is the thing about every market outlook ever written: it is interesting, and it is not a financial plan.

Volatility does not change long-term goals. Headlines do not change time horizons. Policy shifts do not rewrite your retirement income strategy by themselves. The investors who tend to come out of years like this in the best shape are not the ones who timed every turn. They are the ones who had a plan that already accounted for the fact that turns happen.

If your strategy was built assuming smooth seas, the back half of 2026 may be a good time to revisit it. If your strategy was built knowing volatility comes with the territory, then the next several months may simply be doing what markets do.

Either way, we are here to walk through it with you.

It's going to be May. Then June. Then we blink, and it is the back-to-school sales. Let's make sure your plan is keeping up with the calendar.

Compound Advisory LLC is a registered investment adviser. This material is for informational and educational purposes only and does not constitute investment, legal, or tax advice. Market commentary reflects the views of Compound Advisory as of the date written and is subject to change without notice. Past performance is not indicative of future results. All investments involve risk, including the possible loss of principal. Please consult with your advisor regarding your specific situation before making any investment decisions.