HM Wealth Monthly Letter 2026

Welcome to the new year. Now that we have 2025 year-end data, let's quickly recap that, then move to January's topics and considerations for 2026. 

Markets in Review: 2025 Returns 

As we close the books on 2025, it’s worth taking stock of how major markets performed. Despite wide‑ranging headlines throughout the year, financial markets delivered notable returns: 

S&P 500: +17.9% 
International Developed Markets: +31.9% 
U.S. Aggregate Bonds: +7.3% 
Gold: +62.5% — the best annual return since 1979 
These outcomes weren’t random. They were the cumulative result of persistent economic momentum, resilient corporate earnings, and a backdrop that favored measured risk-taking. 

No Calendar Reset: Why 2026 Feels Like 2025 

A new year on the calendar doesn’t mean the economic story suddenly resets. Growth trends, inflation dynamics, investment cycles — these forces evolve, often gradually, not abruptly on January 1. 

As we enter 2026, many of the same supports that underpinned 2025 remain intact. That continuity matters. It points toward stability rather than disruption, and that’s important for long‑term investors who tend to do best in environments where fundamentals — not headlines — drive returns. 

The U.S. economy has shown notable resilience. Recession fears circled markets last year, yet growth persisted. Inflation pressures eased, and policy frameworks remained accommodative. That combination helped sustain both confidence and profits. 

Looking ahead, we expect moderate growth, easing price pressures, and policy support to remain in place through 2026 — conditions that reinforce our long‑term planning assumptions. 

Setting Aside the Noise: Short‑Term Headlines vs. Long‑Term Signals 

In an environment rich with media attention and daily data flashes, it’s worth pausing to distinguish noise from signal: 

Headlines are short‑term noise. They reflect what just happened — a surprise inflation print, a geopolitical flashpoint, or a political tweet. These can disrupt sentiment temporarily, but they rarely alter long‑term return drivers. 
Earnings are the long‑term signal. A company’s profit growth underlies its stock price over time. When earnings expand, markets tend to rise sustainably. When they contract, valuations become harder to defend. 
Through 2025, corporate earnings generally met expectations, and that resilience helped markets grind higher despite occasional turbulence. 

Policy Tailwinds: Monetary and Fiscal Support 

Looking into 2026, policy efforts on both sides of the ledger are supportive: 

• Fiscal policy: Higher tax refunds and business investment incentives are likely to buttress consumer spending and corporate capex. These elements help sustain economic activity without fueling excess. 
• Monetary policy: As inflation pressures mellow, the Federal Reserve is anticipated to continue a gradual trimming of interest rates. Lower borrowing costs can ease financial conditions and support investment. 

Together, these policies create a constructive environment — one that reinforces diversification and measured positioning rather than dramatic shifts. 

The AI Investment Landscape: Leadership With Perspective 

Recent research shows the U.S. firmly leading global private investment in artificial intelligence. In 2024, U.S. private AI funding reached over $109 billion — far outpacing China and Europe combined. This dominance is especially pronounced in generative AI, where U.S. investment exceeded the total in China, the EU, and the U.K. by more than $25 billion. 

At the same time, total AI capital spending remains modest relative to past technology waves. Current AI capex sits near 1% of GDP, compared with 1.5–4.5% of GDP in earlier technology booms such as the late‑1990s telecom surge. To reach that prior peak in 2026, capex would need to climb close to $700 billion. 

What this tells us is simple: Leadership in innovation matters, but scale and deployment take time. For investors, that means distinguishing between the enduring growth signals from real investments and the short‑lived excitement that often surrounds new technologies. 
 

Beyond Markets: Greenland and Strategic Considerations 

A media story that captured attention recently involved talk of the United States acquiring Greenland at a notional price of $700 billion. From a pure economic standpoint, such a transaction would be extraordinary — roughly half of the entire U.S. Department of Defense budget. 

Public opinion surveys show limited support for such a purchase, and Greenlanders themselves have expressed opposition. European partners, particularly Denmark, are equally clear in their reluctance to cede sovereignty. 

Yet the discussion reveals deeper strategic themes: 

• Geography matters. Greenland occupies a gateway between North America, Europe, and the Arctic — with infrastructure (like the Pituffik Space Base) that supports NORAD and allied defense interests as the Arctic evolves. 
• Resources are real, but development is slow. Greenland hosts iron, copper, rare earth elements, and more. Yet its infrastructure is minimal, costs are high, and environmental constraints — such as Greenland’s uranium mining ban — complicate rapid development. This pattern echoes other regions (Venezuela’s hydrocarbon story, for example), where potential does not automatically translate into near‑term returns. 
• Geopolitics and investment intersect. China has pursued influence in the region via infrastructure and commercial proposals, but many of these efforts have been blocked on security grounds. In this context, assertions about strategic control often reflect competing interests rather than imminent policy changes. 

For long‑term investors, such geopolitical narratives remind us why diversification, discipline, and fundamental analysis matter more than moment‑to‑moment sensation. 
 

Our Takeaways 

As we move into 2026, our view remains anchored in these enduring principles: 

• Markets reflect fundamentals over time, not headlines. 
• Policy continuity is supportive, not disruptive. (Greenland being an outlier) 
• Innovation cycles take years, not quarters, to meaningfully shift economic paths. 
• Strategic geopolitical stories influence sentiment but rarely alter long‑term return drivers directly. 

We continue to emphasize diversified portfolios, prudent risk management, and a focus on long‑term objectives. In markets as in life, discipline outperforms panic. 

-Thomas May AWMA® CRPC® CLTC®

Partner Herrera May Wealth Management

A Month of Policy, Politics, Technology, and Perspective 

Every month brings its share of headlines. Some are structural. Some are emotional. Our job is to separate the durable from the temporary and help you focus on what truly matters to long-term capital. 

This past month, four themes stood out: 

1. Trade policy and tariffs returned to center stage. 
2. Markets began to price in midterm election risk. 
3. Artificial intelligence rattled software valuations. 
4. And, in a lighter but surprisingly instructive moment, Olympic hockey reminded us what discipline and patience can achieve. 

Let’s walk through each—and what we believe investors should take from them. 

Tariffs: A Legal Setback, Not a Strategic Retreat 

The U.S. Supreme Court recently ruled against the administration’s use of emergency powers under the International Emergency Economic Powers Act to impose certain global tariffs. On the surface, that sounded dramatic. Markets reacted accordingly. 

But context matters. 

The ruling did not invalidate all tariffs. It only addressed those implemented under one specific legal authority. Sector-specific tariffs on steel, aluminum, and autos—imposed under different statutes—remain intact. And within hours of the ruling, the White House signaled its intention to pursue alternative, congressionally authorized pathways to reestablish much of the tariff structure. 

In other words, the architecture may change. The policy objective has not. 

A temporary 15% blanket tariff under Section 122 of the Trade Act is expected to serve as a bridge while longer-term, country-by-country investigations under Section 301 move forward. These authorities are generally considered more durable legally. 

For investors, the key takeaway is this: 

Trade policy remains a core strategic priority. Legal challenges may reshape the implementation, but they are unlikely to eliminate the direction. 

Markets dislike uncertainty. But uncertainty around process is different from uncertainty around intent. We believe this distinction matters. 

From a portfolio standpoint, tariffs influence inflation expectations, supply chains, and sector dispersion. They do not, by themselves, alter the long-term case for diversified exposure across industries and geographies. We continue to monitor how policy affects earnings power and pricing dynamics—but we are not positioning portfolios based on short-term legal headlines. 

Midterms: Volatility Is a Feature, Not a Flaw 

We are now firmly in the second year of the presidential cycle. Historically, this period has paired solid economic momentum with weaker equity returns and some of the largest intra-year drawdowns. 

That pattern is not a forecast. It is a reminder. 

Markets are forward-looking discounting mechanisms. As policy uncertainty rises—around rates, tariffs, fiscal spending, and the possibility of divided government—volatility tends to follow. Not because the economy is necessarily deteriorating, but because investors are recalibrating risk. 

History shows that voters have stripped power from the incumbent party in nine of the last ten federal election cycles. Markets know this. They will begin pricing it well before ballots are cast. 

Yet there is another side to this story. 

Nearly a trillion dollars of fiscal, monetary, and deregulatory stimulus remains in the pipeline. Rate cuts are working their way through the system. Liquidity conditions have improved relative to last year. Fiscal support remains meaningful as a share of GDP. 

That does not eliminate risk. It does provide a cushion. 

Importantly, since 1938, the S&P 500 has not declined in the 12 months following a midterm election. That does not guarantee outcomes. It does remind us that volatility around elections has historically rewarded patience. 

We are not bearish. We are also not complacent. 

Periods of anxiety are normal in this part of the cycle. Our discipline remains the same: stay invested, rebalance when necessary, and lean into dislocations selectively rather than attempting to sidestep every potential drawdown. Trying to perfectly time policy noise is rarely a durable strategy. 

AI and the Software Selloff: Repricing, Not Ruin 

In early February, software stocks experienced an abrupt and broad sell-off. Advances in AI-driven code generation—particularly “agentic” systems capable of handling complex, multi-step workflows—sparked concerns about the durability of traditional software-as-a-service (SaaS) business models. 

The fear was straightforward: 
If AI can write code cheaply and autonomously, do established software companies lose their competitive moat? 

Valuations, already elevated in parts of the sector, adjusted quickly. 

The ripple effects extended beyond public markets. The S&P BDC Index—a bellwether for publicly traded business development companies and a proxy for private credit sentiment—fell sharply as investors reassessed exposure to private funds with software-heavy portfolios. 

Software has long been a cornerstone of private equity and private credit strategies due to recurring revenue, high margins, and perceived customer stickiness. Yet one underappreciated risk is classification opacity. A healthcare software company might be labeled “healthcare” in one fund and “technology” in another. Concentration risk is not always obvious. 

That said, we believe the most aggressive bear case oversimplifies what makes enterprise software valuable. 

Strong software businesses are more than their codebase. They are embedded in workflows. They have distribution networks, contractual relationships, switching costs, and years—sometimes decades—of proprietary data. AI may compress margins for weaker players. It may enhance productivity for stronger ones. 

Disruption does not eliminate quality. It separates it. 

From an investment standpoint, this is a classic repricing event. Markets are recalibrating expectations. That is healthy. We are focused on durability of cash flows, balance sheet strength, and competitive positioning—not headline volatility. 

Technological change has always produced winners and losers. Diversification remains our primary defense against being overly exposed to either. 

A Brief Detour: Olympic Hockey and the Power of Discipline 

It can be difficult to pause for global events like the Olympics amid busy schedules. The Olympics still have that allure of a time and place where we are able to see the best of the best compete on a global stage. Now, I am not a follower of professional hockey in any way, but like many of you, I have seen (many times, probably going to watch it again this weekend) the 2004 film "Miracle" starring Kurt Russell. This film tells the story of the last time the USA won gold in Men's hockey, 1980. I love this story. The 2026 Gold medal round against Canada was absolutely electric. Once the game started, I couldn't peel my eyes off the TV, even to go make some popcorn and grab a drink.  

The U.S. men’s team defeated Canada 2–1 in overtime, with Jack Hughes delivering the golden goal—securing America’s first men’s hockey gold medal since the 1980 “Miracle on Ice.” 

Canada entered with a storied history and nine Olympic gold medals.  

What struck me most was not the highlight reel. It was the discipline. 

Championship games are rarely won on emotion alone. They are won on preparation, structure, and execution under pressure. The same principles apply to investing. 

When markets are volatile—whether due to tariffs, elections, or technological disruption—the temptation is to react emotionally. But durable success is usually built quietly, through adherence to a process when it feels hardest. 

Patience is not passive. It is an active restraint. 

The Recap

This month’s headlines may feel disconnected—trade law, midterm politics, AI disruption, Olympic competition. But the underlying thread is consistent: markets are navigating transition. 

• Trade policy is evolving, not disappearing. 
• Political risk is rising, as it historically does in year two. 
• Technology is repricing expectations, not ending business models. 
• And discipline continues to matter more than prediction. 

We do not control court rulings, election outcomes, or technological breakthroughs. We do control portfolio construction, risk management, and behavioral discipline. 

That remains our focus. 

Volatility is uncomfortable. It is also normal. Our responsibility is to ensure that short-term noise does not compromise long-term strategy.  

-Thomas May AWMA® CRPC® CLTC®

Partner Herrera May Wealth Management

A Macro Shock With Real Channels—But Also Natural Limits 

The closure of the Strait of Hormuz is not a marginal development. It is a visible macro shock moving through one of the most critical arteries in the global economy. 

For perspective, roughly one-fifth of the world’s oil and liquefied natural gas flows through that corridor. When that flow is disrupted, the effects are immediate. Energy prices rise. Transportation costs follow. Production becomes more expensive. 

And from there, the transmission broadens. 

Higher input costs pressure corporate margins. Supply chains slow. Inflation—already a concern in many regions—finds a new source of persistence. Bond yields adjust upward as markets reprice both inflation expectations and policy responses. 

This is how localized conflict becomes global in consequence. 

Even large-scale responses, such as the International Energy Agency’s release of strategic reserves, have provided only partial relief. Helpful, but not decisive. The longer the disruption persists, the more pronounced the second-order effects become. 

Yet there is an important counterbalance worth recognizing. 

The Feedback Loop 

Geopolitical shocks often contain the seeds of their own constraint. 

Higher energy prices can strain the very economies involved in or adjacent to the conflict. Political pressure builds. Economic costs accumulate. Over time, these forces can act as a stabilizing mechanism—limiting duration or intensity. 

In other words, the same dynamics pushing prices higher may also work to contain the shock. 

We view this not as a resolution, but as a reminder: markets and economies are adaptive systems. They respond. They adjust. 

History’s Perspective on Geopolitical Events 

It is natural to assume that events of this magnitude should derail markets. History suggests otherwise. 

When we examine major geopolitical shocks—from Pearl Harbor to the onset of the Russia–Ukraine war—the pattern is surprisingly consistent. Over the subsequent 12 months, equity markets have, on average, delivered returns close to their long-term trend—roughly 8%. 

That does not diminish the seriousness of the events themselves. It does, however, reinforce an important distinction: 

Markets price disruption quickly. Long-term outcomes tend to be driven elsewhere. 

Midterm Years: Volatility by Design 

Layered on top of this backdrop is the rhythm of the presidential cycle. 

We are in the second year—a period that has historically combined solid economic footing with uneven market performance and some of the larger intra-year drawdowns. Not a forecast. A tendency. 

Why does this happen? 

Policy uncertainty increases. Questions around interest rates, fiscal direction, trade policy, and the potential for divided government all come into sharper focus. Markets, being forward-looking, begin to reprice risk. 

Volatility follows. 

Not necessarily because conditions are deteriorating—but because expectations are shifting. 

Recent headlines surrounding Iran and disruptions in the Strait of Hormuz are a clear example. New information. Rapid repricing. Elevated uncertainty. 

And yet, there is another side to this pattern. 

Since 1938, the S&P 500 has not declined in the 12 months following a midterm election. That history does not guarantee future outcomes. It does offer perspective. 

Periods of uncertainty have often been followed by periods of stabilization. 

The Federal Reserve: Limited Flexibility 

Against this backdrop, the Federal Reserve faces a more complicated landscape. 

The recent decision to hold rates steady reflects that complexity. Policy is now closer to what economists would call “neutral”—a level that neither stimulates nor restricts growth meaningfully. That positioning reduces flexibility. 

Normally, central banks can look through supply shocks—recognizing that weaker growth and higher inflation may offset one another over time. 

But that approach depends on stable inflation expectations. 

If households and businesses begin to expect persistently higher inflation—driven, for example, by sustained energy disruptions—then the calculus changes. Rate cuts become harder to justify. Policy may need to remain tighter for longer than markets anticipate. 

A narrower path. Less room for error. 

What Matters for Investors 

In periods like this, it is tempting to focus on the immediacy of headlines. The more productive approach is to step back and ask a different question: 

What has actually changed for long-term investors? 

A few things. But not everything. 

• Inflation risks may remain elevated if supply disruptions persist  
• Interest rates may stay higher for longer than previously expected  
• Market volatility may increase, particularly in the near term  

These are meaningful considerations. They influence portfolio construction, risk exposure, and rebalancing decisions. 

But they do not invalidate the broader framework. 

Geopolitical shocks, even significant ones, have historically been absorbed over time. Markets adjust. Economies adapt. Capital finds its way forward. This March has certainly had more than its share of pessimism for the month. Long-term investors may be able to find attractive entry points in companies they may have felt were too expensive just a few weeks ago. 

-Thomas May AWMA® CRPC® CLTC®

Partner Herrera May Wealth Management

Every month brings its own mix of surprises, and April was no exception. We saw a new AI development that has real implications for your digital security, some meaningful tax law changes that could affect your planning this year, and continued market volatility tied to the Iran conflict. Let me walk you through what happened — and what I think it means for you.  

The AI Story Nobody Expected  

When Anthropic — one of the leading AI companies — unveiled its newest model this month, most people expected the usual fanfare about superhuman performance or dazzling creative output. What they got instead was a bug report.  

Their new model, called Mythos, reportedly identified thousands of critical security vulnerabilities across every major operating system and web browser in use today. The implications were serious enough that Anthropic chose not to release it publicly. Instead, they quietly handed early access to roughly 40 major tech companies — including Apple, Google, and Amazon — so those companies could patch their systems before bad actors could exploit the weaknesses.  

Here's my honest take: this is both reassuring and a little unsettling. Reassuring because responsible disclosure like this is exactly how the system should work. Unsettling because it's a reminder of just how much of our financial and personal lives live inside software that, until recently, had unknown holes in it.  

So what should you actually do? Two things, and neither takes more than a few minutes.  

First, set your phone, computer, and browser to update automatically. I know it feels like a nuisance, but every update that patches a vulnerability closes a door before criminals can walk through it. The longer you delay, the more time bad actors have to reverse-engineer what was fixed — and exploit it.  

Second — and this one I really want you to take seriously — create a family code word. AI can now generate voice audio that sounds convincingly like your child, your spouse, or your parent. Scammers use this to fabricate emergency situations and pressure you into wiring money. A simple, pre-agreed code word that only your family knows can stop that cold. Think of it like a password for trust.  

Tax Updates Worth Your Attention Right Now- Now that Most of you have closed the book on 2025  

Tax law changed more than usual this year, and a few of those changes are genuinely worth acting on before the end of 2026.  

Withholding and estimated taxes. If your 2025 refund was unexpectedly large — possibly because of the new SALT deduction — or if you're anticipating higher income this year, now is a good time to revisit your withholding or quarterly estimated payments. The IRS underpayment penalty is currently running at 6%, and to avoid it, you need to have paid either 90% of your 2026 liability or 110% of your 2025 taxes by year-end.   

Charitable giving just got more flexible. Starting this year, even if you take the standard deduction (and most people do), you can now deduct up to $1,000 in cash donations if you're single, or $2,000 if you're married filing jointly. That's new, and it's meaningful. The catch: it must be cash — not stock, not clothes, not property — and it can't go to a donor-advised fund. For those of you who do itemize, there are new limits on how much of your adjusted gross income those deductions can offset, so it's worth running the numbers with your CPA if you're a larger giver.  

529 plans got a quiet expansion. Starting in 2026, you can now withdraw up to $20,000 tax-free for K-12 expenses — double the prior limit. And the list of qualifying expenses has grown to include tutoring, SAT prep, trade and vocational licensing, bar and CPA exam fees, and even continuing education costs. If you have a 529 and children or grandchildren in the mix, it's worth revisiting what's now eligible. One important caveat: state rules don't always match federal rules, so check what your specific state allows before making withdrawals.  

My opinion on all of this? The tax changes this year actually create real opportunities — not just headaches. But they require proactive attention, not reactive filing. If we haven't already discussed how these affect your specific situation, let's do that soon.  

Markets: Celebrating, But Not Everyone Got the Memo  

The headlines tell one story. The S&P 500 and Nasdaq are both sitting at all-time highs. Risk-on sentiment is back.  

But look a little deeper, and a more complicated picture emerges.  

Oil futures — particularly for longer-dated contracts — remain well above where they were before the Iran conflict began. Treasury yields are still elevated, with bond investors clearly worried that Middle East energy disruptions could reignite inflation and make it harder for the Fed to cut rates. In other words, equity investors are pricing in a clean resolution; everyone else is hedging.  

The sequence of events matters here. The S&P 500 fell roughly 8% in March after the conflict escalated, then reversed sharply when President Trump announced a two-week cease-fire on April 7th. Markets hit record highs even as a naval blockade of Iranian ports was implemented — and extended those gains after Iran's foreign minister confirmed the Strait of Hormuz remained open to commercial shipping.  

Here's where I land on this: stock markets are forward-looking by nature and tend to move fast on good headlines. But the bond and energy markets are telling us that not everyone is fully convinced the structural risks have disappeared. A cease-fire is not a peace agreement. Supply chain risks in the Gulf haven't been resolved, just paused.  

For most of you, my advice is the same it always is: your portfolio is built for uncertainty, not headlines. If the current run-up has meaningfully changed your allocation, that's worth a conversation. But reacting to either the fear or the euphoria is rarely the right move.  

The Bottom Line This Month  

Three themes worth carrying into May: update your devices and create that family code word — AI-enabled fraud is becoming more sophisticated, not less. Take a fresh look at your withholding and your 529 if either is relevant to you; the law has changed in your favor, but only if you use it. And on markets — enjoy the rally, but stay grounded.    

 -Thomas May AWMA® CRPC® CLTC®

Partner Herrera May Wealth Management

May gave us a lot to chew on. Inflation is running hotter than expected, the Fed is quietly shifting its posture, and the housing market is stuck in a rut that feels increasingly familiar. Let me walk you through what happened and, more importantly, what I think it means for you. 
 

Inflation: The Iran Tax Nobody Voted For 

You've probably felt it at the pump. Gas prices are up 28% from a year ago. Fuel oil is up over 50%. Airfare has jumped 21%. The Consumer Price Index came in at 3.8% for April — the highest reading in three years and above what virtually every economist was forecasting. 

The popular narrative, and it's not entirely wrong, is that high energy prices are squeezing household budgets and threatening to tip the economy into a rough patch. Many economists have historically linked oil price spikes to recessions, and the headlines are happy to remind you of that. 

Here's my take: the narrative is real, but it's probably not as dire as the commentary suggests. 

Oil price shocks are almost always temporary in nature. They cause a short-term spike in measured inflation because consumers dip into savings to cover higher costs, and the basket of goods used to calculate the CPI doesn't immediately adjust. Once energy prices stabilize — and they will — the inflation math gets easier quickly. When you strip out the energy distortion and look at the broader economy after adjusting for inflation, things don't look dramatically different than they did before the Iran conflict began. 

The more important question isn't whether gas prices are high right now — they are. It's whether this becomes embedded in the broader economy through what economists call "second-round effects": higher wages demanded to cover rising costs, higher prices across all goods and services, a wage-price spiral. That's the scenario the Fed is watching most closely, and so far we haven't seen convincing evidence of it taking hold. 

The wildcard, as always, is the Strait of Hormuz. Commercial traffic through that corridor — which carries roughly 20% of global oil supply — remains largely at a standstill. President Trump rejected Iran's latest peace proposal, describing the cease-fire as on "massive life support." If and when that channel reopens, the inflation picture changes fairly rapidly. Until then, elevated energy prices are the reality we're navigating. 

The Fed: A Harder Job Just Got Harder 

At the start of 2026, markets were confidently pricing in multiple Fed rate cuts this year. That conversation is effectively over. 

The April inflation data was the final nail in that coffin. Four months ago, the central debate inside the Federal Reserve was whether to keep cutting rates to support a labor market that looked fragile. The labor market has since steadied. That shift puts all the weight back on inflation — and with CPI running at 3.8% against a 2% target, the math simply doesn't support cuts. 

What's changed — and this is the part most people aren't talking about — is that the internal Fed conversation has quietly moved from "when do we cut?" to "do we need to consider raising rates?" That's a significant psychological and policy shift, and it hasn't gotten nearly enough attention in the popular press. 

This is also the environment that Kevin Warsh is inheriting as he prepares to take the helm at the Fed. He arrives at a moment when his boss, President Trump, has been vocal about wanting lower rates — and the data is pointing in exactly the opposite direction. That tension is worth watching. 

My honest opinion: the Fed is in a genuinely difficult spot, and anyone who tells you they know exactly how this plays out is overselling their certainty. What I'm confident in is that higher-for-longer rates remain the base case, and planning around the assumption of near-term cuts would be a mistake. 

Housing: The Spring That Wasn't 

I'll be transparent here: this one hits close to home. Literally. 

My wife and I are in the middle of selling our starter home in Sacramento and moving to a new home about 20 miles away. I can tell you firsthand what it feels like to mentally let go of a 3% mortgage and sign up for one at more than double that rate. It's not a comfortable feeling, even when the move makes complete sense — and for my wife and I, it does. More space, closer to family, room to grow. But the financial reality of today's rate environment is something I live alongside my clients, not just observe from a distance. This transition has had way more hurdles, speed bumps, blind corners....than I anticipated. But it reinforced a few helpful lessons that I shared on my LinkedIn page so that you can see how financial planning can affect real life today. 

And the data reflects exactly what we're experiencing out there. Existing home sales rose just 0.2% in April — essentially flat — against economist forecasts of a 3% increase. The spring selling season, which the housing industry had been counting on for a real recovery, is shaping up as another disappointment. This is now the fourth consecutive spring that has failed to deliver the rebound buyers and sellers were hoping for. 

The underlying dynamic hasn't changed much. Mortgage rates dropped below 6% briefly in late February, which sparked real optimism. Then the Iran conflict pushed inflation expectations higher, and rates climbed back above 6.50% in May. That's enough to sideline a meaningful number of buyers — especially when you layer in lingering job market anxiety and home prices that haven't come down. The national median existing-home price hit $417,700 in April, the highest ever for that month. 

Supply is slowly improving but remains below pre-pandemic norms, which is why prices keep edging higher even as sales volume sits near multi-year lows. The market is stuck in an uncomfortable equilibrium: not enough homes to push prices down, not enough affordability to bring buyers back in force. 

The clearest path to a housing recovery remains mortgage rates falling and staying below 6%. That could happen — particularly if the Iran situation resolves and energy prices come down — but counting on it as a planning assumption feels premature right now. 

The Bottom Line This Month 

Three things I want you to carry into June. 

Energy-driven inflation is real but likely temporary — don't let the headlines convince you the economy is falling apart. The underlying data, outside of energy, is more resilient than the coverage suggests. 

The Fed is not cutting rates anytime soon, and there's a non-trivial chance the next move could be a hike. If you have variable-rate debt or are sitting on cash waiting for rates to fall before making a decision, that calculus deserves a second look. 

And on housing — whether you're a buyer, seller, or just watching from the sidelines — the market remains challenging but not broken. Patience and a clear sense of your personal "why" matter more than trying to time rates perfectly. Trust me, I know.  

-Thomas May AWMA® CRPC® CLTC®

Partner Herrera May Wealth Management

The Strait of Hormuz: Energy, Inflation, and a Fragile Deal 

The most consequential story of the past several months has been the one receiving the least calm analysis: the U.S.-Iran conflict and its impact on global energy and supply chains.                                                                                                                                                               
A newly signed agreement between the United States and Iran has taken a first step toward reopening the Strait of Hormuz — a critical chokepoint through which a significant share of the world's seaborne oil passes. According to Fidelity's most recent market analysis, U.S. petroleum reserves have fallen to their lowest level since 1983, sitting at roughly 340 million barrels. At current withdrawal rates, reserves could reach critically low levels by mid-September. That context helps explain why negotiators moved as quickly as they did.    
The situation has had measurable downstream effects. The Producer Price Index rose to 6.5% year-over-year in May — the largest 12-month increase since late 2022 — suggesting consumer inflation has further to climb before it settles. Supply chain stress indicators have reached levels not seen since the height of the COVID-19 pandemic. And one commodity that rarely makes headlines, sulfur, has surged over 250% since the conflict began. That matters more than it sounds: sulfur is a key input in refining copper and producing phosphate fertilizers, and copper is foundational to AI infrastructure, electric vehicles, and renewable energy buildout.                              
We view this agreement as a constructive development, though it remains early. Sixty days of negotiations still lie ahead, and outcomes are genuinely uncertain. What's worth noting is that the risk of a severe energy shock — which was very real just weeks ago — has moderated. That doesn't mean it's gone. Portfolios with intentional diversification and real asset exposure remain well-positioned for environments like this one. 
 
 
The New Fed Chair and the Art of Saying Less 

Kevin Warsh officially stepped into the Fed chair role, and the financial press has spent considerable energy trying to decode what he'll do next. The honest answer: that's partly by design.                                                                                                                                                      
Warsh has pulled back meaningfully on what central bankers call "forward guidance" — the practice of telegraphing future rate moves through speech and statement. There's a reasonable case for this. When the Fed hints too clearly at its next move, markets can over-anchor to an assumed path that later proves wrong. The resulting whipsaw can be more disruptive than the uncertainty the guidance was meant to resolve.                                                                                                                                                                                                           
What makes Warsh's approach more unusual is that he's also pulled back on explaining how incoming economic data influences his decisions — what's called the Fed's "reaction function." Markets don't just want to know what the Fed will do; they want to understand how it thinks. Without that, interpreting each data release becomes a more speculative exercise.                                                                      
A useful historical parallel: Alan Greenspan's early years were marked by similar inscrutability. He once famously acknowledged he had learned to "mumble with great incoherence." That approach eventually gave way to more open communication after 1994, largely because markets and Congress demanded greater accountability. Whether Warsh follows a similar arc remains to be seen.                         
What we do know: markets interpreted the Fed's first meeting under Warsh as more hawkish than expected. That suggests the committee may lean toward keeping rates elevated longer than many had hoped. For clients holding longer-duration bonds or rate-sensitive positions, that's worth keeping in mind — not as a reason to panic, but as a factor in ongoing portfolio conversations. 
 
 
SpaceX Joins the Nasdaq 100 

On July 7, SpaceX will officially be added to the Nasdaq 100 index. This is a notable moment — SpaceX is one of the most closely watched private-to-public transitions in recent memory, and index inclusion brings with it a predictable surge in passive buying. ETFs designed to track the Nasdaq 100, including some of the most widely held funds in the world, will need to purchase shares to match the index. That mechanical demand tends to support prices in the near term.                                                                                                        
We covered the index inclusion mechanics in some detail in a prior newsletter — specifically the Nasdaq's Fast Entry rule and how it affects the timing and scale of inflows. This is a continuation of that story. SpaceX's inclusion is a reminder that the Nasdaq 100 is a living index, and its composition shapes the returns of anyone invested in QQQ or similar vehicles. Worth knowing what's inside the box. 
 
 
Midterms: Framework, Not Forecast 

Midterm positioning is beginning in earnest. Republicans currently hold a unified government — the White House and both chambers of Congress — but the margins are slim enough that either chamber may shift in November. J.P. Morgan's most recent election analysis suggests Democrats may be marginally favored to retake the House, while the Senate math is more challenging for them.          
I raise this not to make political predictions, but to offer the framework I think serves investors best.                                                               
Political opinion and investment discipline are two separate things. The data on this is consistent and worth revisiting: S&P 500 average annual returns during the Obama administration were 16.3%. During the first Trump administration, they were 16.0%. The market doesn't particularly care which party is in power — it cares about earnings, interest rates, and the underlying strength of the economy. Macro conditions, not political outcomes, have historically been the dominant driver of returns.                                                     
There's a practical risk here worth naming directly. Research from Pew consistently shows that people feel better or worse about the economy depending on which party controls the White House — regardless of the actual data. When investors let that sentiment drive portfolio decisions, they risk sitting out of markets during administrations they didn't vote for, and missing returns as a result. 
                                                                                                                                                                                                                                            The more disciplined approach: stay allocated, stay diversified, and let the underlying fundamentals — not the political headlines — guide positioning. 
 
 
Putting It Together 

June's themes share a common thread: uncertainty managed through framework, not reaction. The Hormuz deal is encouraging but unresolved. The new Fed chair is readable but deliberately harder to read than his predecessors. SpaceX's index inclusion is real and meaningful, even if the headlines overstate it. The midterms will matter at the margins, but less than most investors assume. 

-Thomas May AWMA® CRPC® CLTC®

Partner Herrera May Wealth Management