Over the final trading week of May 2026, the S&P 500 (Index: SPX) rose 1.4% over its previous week's close to reach 7,580.06, a new record high for the index.

According to news headlines, it did so because of hopes of realizing a Middle East peace deal that might reopen the Hormuz Strait to oil shipping and because of strong earnings among technology companies whose products have become in high demand to build out the infrastructure to support Artificial Intelligence (AI) systems.

But we can't help noticing that these are variations of the same headlines that have accompanied the rise of the S&P 500 over much of the last two months. Can the prospect of a negotiated end to the Iran war geopolitical event still be powering stock prices higher? At what point are the expectations associated with a Middle East peace deal fully priced into the market? Especially when the proverbial can for actually reaching a deal to satisfactorily end the conflict keeps getting kicked down the road?

The real story is the outlook for both earnings and dividends has improved substantially throughout the past two months as the conflict's cease fire has held. These positive changes are the main drivers behind the rise in stock prices and they have benefited stock prices in two ways:

• They reversed the negative momentum that had sent stock prices substantially lower from the end of February through the end of March 2026.
• As affected firms have progressively reported the associated improvement in their outlooks, stock prices have continued rising, even though no deal has yet been reached.

That's a state of affairs that could change quickly and negatively if the cease fire breaks down, but short of the announcement of a deal that definitively ends the conflict, there's little room left for stock prices to rise more on these headlines with 2026-Q2's earnings season mostly having come and gone.

Meanwhile, the progress of AI technologies and the massive investments being made to advance them continues to be *the* market moving story of the year. There's a strong argument to be made the development is a modern day analog of the 19th century's boom in railroads. The booming earnings of companies whose products have become essential to the rapid, widespread adoption of AI technologies have been key in powering stock prices higher.

Speaking of which, the latest update of the alternative futures chart shows we have come to the end of the redzone forecast range we added in late February. The S&P 500's trajectory has shifted in the last few days away from the trajectory associated with investors focusing mainly on 2026-Q2 in setting stock prices to the more distant future quarter of 2026-Q4.

Although this is a relatively small change, the shift in how far forward in time investors are focusing their attention represents a Lévy flight event.

That timing is interesting because it coincides with a growing expectation of when the Fed might act to next change U.S. interest rates. The CME Group's FedWatch Tool pushed back the expected timing of a quarter point increase in the Federal Funds Rate to 9 December (2026-Q4), six weeks later than it had projected on Friday, 22 May 2026. Beyond that hike, the FedWatch tool no longer anticipates the Fed will hold the Federal Funds Rate at a target rate of 3.75-4.00% through all of 2027.

But there's a bigger question that now needs to be asked. Since the S&P 500 bottomed on 30 March 2026, has the index risen too far too fast? We'll take that question on in the very near future.

Meanwhile, how long investor expectations might hold depends upon the random onset of new information. Here are the market moving headlines that affected investor outlooks for stock prices in the Memorial Day holiday-shortened trading week.

Tuesday, 26 May 2026

• Signs and portents for the U.S. economy:
• US single-family home prices edge up in March, FHFA says
• Oil prices bounce around over Memorial Day holiday weekend with geopolitics:
• Oil tumbles nearly 7% as US and Iran seen moving closer to deal
• Brent crude jumps 4%, as US strikes in Iran set back hopes for Hormuz re-opening
• Oil and LNG tankers exit Hormuz, heading for Pakistan and China
• Bigger trouble, stimulus developing in China:
• China's weak steel output, strong iron ore imports show structural shift
• Explainer: China's latest coal mine closures, in context
• BOJ minions excited to see inflation data to support plan to hike Japan's interest rates:
• BOJ's new trend gauge shows inflation exceeding target
• ECB minions getting ready to ditch their perfect monetary policy for the Eurozone, say private credit is no big deal:
• ECB to revise inflation, growth forecasts, its chief economist says
• ECB should raise rates in June, even if Iran peace deal is struck, Schnabel says
• ECB will not hesitate to act to bring down inflation, Villeroy says
• Euro zone may face pockets of stress from private credit, not systemic risk: ECB
• S&P 500, Nasdaq hit record closing highs on AI optimism, Micron joins $1 trillion club
• Wall Street ended mostly higher on hopes of U.S.-Iran conflict resolution
• Micron joins $1 trillion club as AI race powers memory chip boom

Wednesday, 27 May 2026

• Signs and portents for the U.S. economy:
• US mortgage rate rises to nine-month high
• Oil prices drop as traders look for US-Iran talks progress
• Fed minions want to see lower demand, worry about inflation:
• Fed's Logan: world may need to cut use of oil and natural gas
• Fed's Kashkari calls for focus on inflation risk, mum on timing of next rate move
• Fed's Cook says she is prepared to raise rates if inflation doesn't ease
• Fed's Jefferson says monetary policy is 'well positioned' amid inflation risks
• Fed's Goolsbee says oil shock could exacerbate inflationary impulse of AI hype
• Bigger trouble, stimulus developing in China:
• Job ad for shepherds goes viral in China, exposing labour market strains
• China's new carbon metrics 'erased half' of emissions growth reported from 2020 to 2025, report says
• BOJ minions making less money because of their higher interest rates, worry energy shock may not be temporary, may need action to bailout Japan's currency again:
• BOJ's net income falls due to higher interest payments on reserves
• BOJ's Ueda warns temporary energy shock could become persistent
• Japan yen nears intervention zone; dollar steady as traders watch Iran
• Bigger trouble developing in Eurozone:
• Chinese brands gain as Europe car sales rise
• ECB tells banks to invest more to get a grip on AI security risk
• Wall Street indexes post closing record highs, AI rally pauses
• Wall Street ended slightly higher as eyes remained focused on U.S.-Iran negotiations

Thursday, 28 May 2026

• Signs and portents for the U.S. economy:
• US new home sales slump in April amid higher mortgage rates, prices
• US first-quarter GDP growth revised lower to 1.6% pace
• US PCE inflation firmer in April
• VIEW Inflation rises but isn't hotter than expected while GDP slips
• Oil prices fall as market awaits possible US-Iran ceasefire deal
• Fed minions say they have monetary policy right where they want it, don't think AK will reduce inflation:
• Fed's Williams reiterates rate policy is in right place given outlook
• Fed's Musalem says it's risky to bet that AI will ease inflation
• Fed's Williams: Productivity shifts hard to spot in real time
• Fed's Jefferson says he is focusing on inflation as US labour market 'very resilient'
• Bigger trouble, stimulus developing in China:
• China's auto industry is unlikely to return to 'golden era,' NIO CEO says
• BOJ minions getting Japan ready for their plan to hike interest rates:
• BOJ rate hike timing secondary to economy's readiness, ex-BOJ Deputy Governor Wakatabe says
• Japan banks battle to secure deposits as savers chase market highs
• ECB minions say Eurozone inflation will be persistent:
• ECB chief economist sees persistent impact on inflation from Iran war
• S&P 500 and Nasdaq hit record closing highs as US and Iran agree to extend ceasefire
• Wall Street closed in the green as speculation of a U.S.-Iran deal surfaced
• S&P 500 hits new record high while VIX falls to a 4-month low on U.S.-Iran news

Friday, 29 May 2026

• Signs and portents for the U.S. economy:
• US goods trade deficit narrows in April on strong exports
• Oil tumbles, stocks gain on US-Iran deal hopes
• Fed minions starting to eye rate hike as next move:
• More Fed policymakers eye possible rate hike as inflation risks rise
• Fed's Bowman backs 'easing bias' as core inflation runs 'a bit above 2%'
• Fed's Bowman says extended energy shock could drive shift in policy outlook
• Fed's Schmid warns against viewing oil shock as transitory
• BOJ minions busy with yen bailout, see inflation come in lower than they want to justify next rate hike:
• BOJ may heed calls to pause bond taper next year
• Japan spent $73 billion in yen-buying intervention, ministry data shows
• Core inflation in Tokyo stays below BOJ goal, factory output rebounds
• ECB minions getting excited for Eurozone interest rate hikes:
• ECB will act to head off persistent inflation, Panetta says
• German inflation eases in May, even as core inflation rises
• S&P 500 logs strong May gain as tech stocks lead rally
• Wall Street hits new closing highs on tech strength, Middle East deal hopes

The Atlanta Fed's GDPNow toolestimate of real GDP growth for the U.S. economy in the current quarter of 2026-Q2 decreased to +3.8%, falling back from the +4.3% it projected a week earlier.

Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a suit wearing Wall Street bull who is happy the S&P 500 has hit a new high and a bear who is reading a newspaper that says 'STOCKS UP ON MIDDLE EAST DEAL HOPES' and asks 'HOW MANY DAYS CAN STOCKS BE UP ON THE SAME HEADLINE?'"