Stocks, especially tech stocks, have gotten a little ahead of themselves and are ripe for a normal pullback. Equity indices have rallied sharply higher off their March lows with international stocks (pink) still higher year-to-date, the S&P 500 (green) up about 9%, the Dow (dark blue) up 4%, and US treasury bonds (red) still struggling for a positive return.
I’ve added the S&P 500 Dividend Aristocrats Index (light blue) this week to show a sharp division in the US market that has been highlighted over the past 30 days. Dividend Aristocrats are companies that have increased their dividends for at least 25 consecutive years. These established, large-cap companies must also meet strict requirements to qualify, making them popular choices for stable income and lower portfolio volatility. However, they are only mildly positive this year after starting the year with a bang.
These quality dividend-paying companies have dramatically underperformed the S&P 500 for at least 3 years as investors have preferred faster-growing tech and AI companies over the stability of higher dividends.
Markets have remained encouraged by very strong corporate earnings in the first quarter of 2026. When all is said and done, year-over-year earnings growth for Q1 is estimated to be at 27.7%, the highest rate since Q4 2021.
The US job market exceeded expectations for the 2nd month in a row as the US economy created 115,000 jobs in April vs. forecasts of 65,000. The unemployment rate remained steady at 4.3%. Additionally, US initial jobless claims dropped to 189,000 for the week of April 25, the lowest level since 1969. Expectations were for unemployment claims to be slightly above 215,000.
On a more concerning note, April saw prices rise as the inflation rate jumped from 3.3% to 3.8% due primarily to energy costs.
The longer the war in Iran drags on, the heavier these higher prices will weigh on consumers and the markets. While investors certainly have reasons to be positive on the US economy, optimism that a resolution to the war is just around the corner can only last so long.
Have a great weekend.
Jack C. Harmon II, CFP®, CIMA
Principal, Harmon Financial Advisors
Registered Principal, Raymond James Financial Services
Harmon Financial Advisors, Inc. is an independent, fee-based financial planning firm and an independent Registered Investment Advisor. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. and Harmon Financial Advisors, Inc. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Harmon Financial Advisors, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services, Inc.
The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information in this commercial email has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Harmon Financial Advisors, Inc. and not necessarily those of RJFS or Raymond James.
There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results.
Investing involves risk and you may incur a profit or loss regardless of strategy selected. International investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility.
The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stocks of companies maintained and reviewed by the editors of the Wall Street Journal.
The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market.
The MSCI World ex USA Index captures large and mid-cap companies across 22 of 23 Developed Markets (DM) countries excluding the United States. With 985 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.
S&P 500® Dividend Aristocrats® measure the performance of S&P 500 companies that have increased dividends every year for the last 25 consecutive years. The Index treats each constituent as a distinct investment opportunity without regard to its size by equally weighting each company.
Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investors’ results will vary.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, and CFP® in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
Investments & Wealth Institute™ (The Institute) is the owner of the certification marks “CIMA” and “Certified Investment Management Analyst.” Use of CIMA and/or Certified Investment Management Analyst signifies that the user has successfully completed The Institute’s initial and ongoing credentialing requirements for investment management professionals.
