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Featuring a 14-Minute Educational Video with Blair Tushaus

There has been a lot going on in the economy and markets lately. Some of it gives us reason to be thankful. Some of it deserves caution. And some of it may create opportunities if we are willing to look past the headlines and back into the planning work.

That is really the goal of this May 2026 Market Update: take the big moving pieces like interest rates, inflation, the Fed, AI, market volatility, and planning strategy, and translate them into a few practical questions for investors, retirees, and pre-retirees.

Markets can feel like the tide coming in and out faster than we can reset the beach chairs. The key is not to predict every wave. The key is to know whether your financial plan can ride through the chop.

Key Takeaways

  • Higher interest rates can feel frustrating for borrowers, but they may create opportunities to review annuities, fixed income, cash, and other yield-based strategies.
  • Consumer spending still looks healthy overall, but people may be becoming more selective about wants versus needs.
  • Inflation has cooled from the worst levels of 2022 and 2023, but it remains sticky and still above the Federal Reserve’s 2% longer-run target.
  • Market rebounds can happen quickly, which is why I do not want to make emotional, all-or-nothing portfolio decisions around short-term headlines.
  • For retirees and pre-retirees, the planning conversation should focus on risk tolerance, income needs, tax efficiency, and how much upside exposure is appropriate.

The Economy Has Stayed Resilient, But Rates Are Still the Anchor

The economy has remained resilient despite where interest rates are. That is one of the bigger takeaways right now.

The 10-year Treasury recently moved above 4.6%, which is high relative to what we had been seeing over the prior several months. For context, the U.S. Treasury showed the 10-year Treasury par yield at 4.61% on May 18, 2026, 4.67% on May 19, and 4.56% on May 22.

That creates an interesting disconnect. The bond market has been reacting to higher rates, while the stock market has, at times, behaved as if rate cuts are coming sooner rather than later. So the stock market and bond market are not exactly singing from the same hymnal.

When rates go up, most people immediately think about the negatives: mortgages, refinancing, borrowing, and debt costs. That is fair. I would love to refinance my own mortgage at a lower rate someday, too. But when rates are higher, there can also be opportunities.

Higher Rates May Be a Reason to Review Annuities and Fixed Income

I always say this: when rates go down, review debt. When rates go up, review what credits you.

That means annuities, fixed income, cash, and other yield-producing assets deserve a fresh look. If you own an annuity and it has been sitting untouched for years, this could be a good time to ask whether it still fits your plan, whether the crediting strategy is competitive, and whether the income or growth features still make sense.

Annuity details matter. The NAIC notes that fixed annuities may earn more than the minimum rate, but only the minimum rate is typically contractual, and the insurance company sets credited rates. The NAIC also cautions investors to understand current rates, minimum rates, bonus rates, surrender terms, and how rates may change over time.

That does not mean everyone should replace an annuity. In many cases, surrender charges, taxes, rider benefits, and income guarantees may make replacing it a poor decision. But it does mean an annuity review may be worthwhile. The goal is not to chase a headline rate. The goal is to make sure the tool still serves the plan.

Consumers Are Still Spending, But They May Be More Selective

Consumer spending is still overall healthy, but I am seeing and hearing signs that people are becoming more selective.

A friend of mine who works in luxury landscape design recently shared that he is seeing consumers pull back in some discretionary areas. That is just one conversation, so I would not treat it as a national statistic. But it does line up with the broader idea that households may still be spending on needs while becoming more thoughtful about wants.

Recent data supports the idea that spending has not fallen off a cliff. April 2026 retail and food services sales were up 0.5% from the prior month and 4.9% from April 2025, while BEA data showed personal consumption expenditures rising 0.5% in April.

That is a resilient consumer, but maybe a more selective one. And that matters, because consumer spending drives a large part of the U.S. economy.

Inflation Has Cooled, But It Is Still Sticky

Inflation is not where it was back in 2022 or 2023, but it is not back to the Fed’s target either.

The Federal Reserve’s longer-run inflation target remains 2%, measured by the annual change in the personal consumption expenditures price index. As of the April 2026 reports available around this market update, CPI was up 3.8% over the prior 12 months, core CPI was up 2.8%, the PCE price index was up 3.8%, and core PCE was up 3.3% from a year earlier.

That is why I keep using the word “sticky.” Inflation has cooled, but it has not fully dropped anchor at 2%.

For investors, that creates a balancing act. If the Fed cuts rates too quickly and inflation reaccelerates, that could become a problem. If the Fed stays too tight for too long, that could create pressure elsewhere in the economy. There are consequences to every decision.

A New Fed Chair Could Shift Market Expectations

On May 22, 2026, Kevin Warsh took office as chairman of the Federal Reserve Board, and the Federal Open Market Committee selected him as FOMC chair.

Markets care about Fed leadership because markets care about the future path of interest rates. If investors believe rate cuts could come sooner, that may get reflected in stock prices, bond yields, and investor sentiment. But that does not mean cuts are guaranteed, and it does not mean markets will like every outcome.

The Fed still has to balance inflation, employment, financial conditions, and market expectations. In other words, nobody gets to ride one horse forever. At some point, the trail turns.

Stocks Rebounded Quickly, Which Can Feel Both Encouraging and Strange

We recently saw a sharp market rebound after a roughly 9% to 10% pullback. The speed of the rebound is what caught my attention.

J.P. Morgan noted that after a nearly 10% S&P 500 drawdown, the full recovery to pre-conflict levels took only 11 trading sessions.

On one hand, that kind of recovery is encouraging. On the other hand, you have to ask: how healthy is it when markets bounce that fast?

There is an old saying that markets climb a wall of worry. I think that applies here. Investors can worry about inflation, rates, geopolitical headlines, AI valuations, election-year volatility, and the Fed. And yet, markets can still move higher.

That does not mean we ignore risk. It means we respect it without letting it drive every decision.

We should expect pullbacks. A 10% decline can happen. A 20% decline can happen. Larger declines can happen, too. The timing, depth, and recovery period are always unknown. No one has a crystal ball.

That is why planning matters more than prediction.

Why Defined Outcome and Buffer ETF Strategies Are Part of the Conversation

For retirees and pre-retirees, volatility can feel different. If you are 35 and adding to your 401(k), a pullback may be frustrating but potentially useful. If you are 62, 68, or 75 and drawing income, the sequence of returns matters more.

That is where defined outcome or buffer ETF strategies may enter the conversation.

These strategies are designed to provide a defined range of outcomes over a set period, often by using options. Generally, they aim to provide some downside buffer in exchange for giving up some upside beyond a cap or participation level. Morningstar describes defined outcome ETFs as tools that may offer downside protection while capping upside potential, and Goldman Sachs Asset Management describes buffer ETFs as seeking equity exposure with downside protection in exchange for a cap on gains.

Here is a simple example of the type of structure I discussed in the video:

A strategy might offer a 10% downside buffer over a 12-month outcome period and 80% participation in the market’s upside. If the reference index is down 10%, the buffer would aim to offset that first 10%. If the index is down 15%, the investor could be down roughly 5%. On the upside, if the market is up 10%, 80% participation would mean roughly 8%. If the market is up 20%, that would mean roughly 16%, subject to any cap, fees, expenses, timing, and product terms.

That is the risk-reward tradeoff I like to explore in volatile environments: can we reduce some downside while still keeping meaningful upside potential?

I want to be careful with the word “protection.” Buffer ETFs are not magic, and they are not a free lunch. The outcome period, cap, fees, reference index, purchase timing, and fund terms all matter. And when investors hear phrases like “principal protection” in other structured products, Investor.gov cautions that those products are not risk-free and may depend on the creditworthiness of the issuer.

Midterm Election Years Can Bring More Volatility

Midterm election years can be choppy. That does not mean we run for the hills, but it does mean we should not be surprised when the ride gets bumpy.

Capital Group’s review of more than 90 years of S&P 500 data found that midterm years have tended to show distinct market patterns, and LPL notes that volatility has often increased in the six months before midterm elections.

The last midterm election year, 2022, was a painful reminder that markets do not move in straight lines. They can go down, bounce, fall again, and then recover in a way that tests patience.

So my message is not: avoid the market.

My message is: know how much risk your plan can actually handle, and then build around that.

For some people, that may mean more growth exposure. For others, that may mean buffers, income planning, more cash discipline, or more tax-sensitive positioning. The right answer depends on the plan.

AI Is Driving the Market, But Concentration Deserves Attention

What are the two letters everyone is talking about? AI.

Artificial intelligence continues to drive a major part of market leadership. Companies tied to AI, semiconductors, cloud infrastructure, and data centers have been some of the biggest contributors to recent index performance.

But here is the stat that should make investors pause: the top 10 companies in the S&P 500 now represent roughly 40% of the index’s market capitalization. Goldman Sachs Asset Management has noted that the top 10 companies in the S&P 500 account for about 40% of market cap and about 30% of earnings, while RBC Wealth Management reported that the top 10 stocks represented nearly 41% of the index’s total weight by the end of 2025.

That does not automatically mean “bubble.” Some of these companies are profitable, cash-rich, and incredibly important to the economy. Goldman also notes that high concentration does not necessarily have to end in crisis, though earnings disappointment could challenge future returns.

But I do not want to ignore concentration risk either.

When a small number of companies carry a large part of the index, investors may be less diversified than they think. That is especially important for people who assume that owning the S&P 500 means they are evenly spread across 500 companies. It does not. The S&P 500 is market-cap weighted, so the largest companies have the biggest influence.

That is not a reason to shy away from growth. It is a reason to be intentional.

The dot-com era is a useful reminder here. A market can look stretched and still keep going for a while. The timing is never obvious. That is why I do not want planning decisions based on “I like this company” or “I think this theme will keep running.” I want decisions based on what the retirement plan needs.

Bulls, Bears, and the Planning Process

I understand both sides of today’s investor sentiment.

The bull case says the economy is resilient, AI is real, earnings may stay strong, and rate cuts could eventually help markets.

The bear case says inflation is sticky, market concentration is high, valuations may be stretched, and geopolitical or election-year volatility could return.

Both sides have reasonable arguments.

At Tushaus Wealth Management, we bring that back to the planning process. How much risk should you take? How much income do you need? What is your tax situation? What accounts should hold which assets? How much volatility can you tolerate emotionally and financially?

The portfolio should not be built because we like one company, one sector, or one headline. It should be built because the plan says, “This is the level of risk we can take, and this is the amount of upside we need to pursue.”

Planning Considerations for Right Now

A few planning conversations are coming up again and again.

Review Cash That Is Sitting Idle

I continue to meet people with meaningful cash sitting in low-yield savings accounts. I understand the comfort of cash, but cash should still have a job.

In a higher-rate environment, there may be alternatives that offer better yield, but we also have to look at liquidity needs, FDIC coverage, taxes, and risk. The answer is not always “move everything.” The answer is to be intentional.

Watch Taxable Income From Yield-Producing Investments

Higher-yield investments can be helpful, but where you hold them matters.

If a high-yield investment is sitting in a taxable account or trust account, that income may create 1099 income. That could affect taxes, Medicare premiums, deductions, and the overall retirement income plan.

This is where tax efficiency becomes a big part of the conversation. The goal is not just “earn more yield.” The goal is “keep more of what fits the plan.”

Revisit Risk Tolerance Before Volatility Returns

Risk tolerance is easy to overestimate when markets are going up. It gets tested when markets pull back.

Before the next period of volatility, ask: if my portfolio fell 10%, 15%, or 20%, would I still stay disciplined? Would my income plan still work? Would I be forced to sell assets at the wrong time?

Those are planning questions, not prediction questions.

Review Annuities Before Assuming They Are Fine

Some annuities are still doing their job. Some may not be. Some may have better options available, while others may be worth keeping because of legacy benefits, income riders, surrender schedules, or tax considerations.

Do not make a change without reviewing the contract. But do not ignore it either.

Conclusion

This is a unique economy, and whether you are bullish, bearish, retired, close to retirement, or still building wealth, the key is to keep your financial plan in the saddle. Rates, inflation, AI, market concentration, and volatility all matter, but they matter most in the context of your income needs, tax efficiency, and risk tolerance. If you have questions about your plan, buffer ETFs, annuity review, or how today’s market environment may affect retirement, reach out to Tushaus Wealth Management to book a free 15-minute call or watch the full May market update video.

Frequently Asked Questions

What is the main takeaway from the May 2026 Market Update?

The main takeaway is that the economy has remained resilient, but investors should not ignore higher interest rates, sticky inflation, market concentration, and election-year volatility. I believe this is a time to review the plan rather than react emotionally to headlines.

Why does the 10-year Treasury yield matter?

The 10-year Treasury yield affects borrowing costs, mortgage rates, bond pricing, and investor expectations. When the 10-year yield moves higher, it can create pressure for borrowers, but it may also create opportunities in annuities, fixed income, and cash management.

Should I review my annuity when interest rates rise?

A rising-rate environment may be a good time to review an annuity, especially if it has not been evaluated in several years. That does not mean replacing it is automatically the right move. Surrender charges, taxes, income benefits, crediting rates, and contract guarantees all need to be reviewed first.

What does “sticky inflation” mean?

Sticky inflation means inflation has cooled but remains stubbornly above the Fed’s longer-run target. In practical terms, prices may not be rising as quickly as they were during the worst inflationary period, but they are still rising faster than the Fed would prefer.

Are buffer ETFs safe?

Buffer ETFs may help reduce a defined portion of downside risk over a stated outcome period, but they are not risk-free. They typically involve tradeoffs, including capped upside, fees, timing considerations, and fund-specific terms. They should be reviewed in the context of a broader plan.

Why is AI concentration in the S&P 500 a concern?

AI-related companies have helped drive market performance, but the top 10 stocks now make up a large share of the S&P 500. That means investors who own a broad index may still have significant exposure to a small group of large companies. Concentration does not automatically mean a bubble, but it is a risk worth monitoring.

How should retirees respond to market volatility?

Retirees should focus on income planning, cash reserves, tax efficiency, and the right level of portfolio risk. The goal is not to avoid all volatility. The goal is to make sure volatility does not derail the retirement income plan.

Sources

  • Federal Reserve Board: Kevin Warsh took office as Federal Reserve chair on May 22, 2026.
  • Federal Reserve Board: 2025 Statement on Longer-Run Goals and Monetary Policy Strategy.
  • U.S. Department of the Treasury: Daily Treasury Par Yield Curve Rates, 2026.
  • U.S. Census Bureau: Advance Monthly Retail Trade and Food Services, April 2026.
  • U.S. Bureau of Economic Analysis: Personal Income and Outlays, April 2026.
  • U.S. Bureau of Labor Statistics: Consumer Price Index, April 2026.
  • J.P. Morgan: Market commentary on the 2026 S&P 500 rebound.
  • Goldman Sachs Asset Management: 2026 public markets outlook and market concentration commentary.
  • RBC Wealth Management: “The Great Narrowing” S&P 500 concentration analysis.
  • Capital Group and LPL Financial: Midterm election year market history and volatility.
  • Morningstar and Goldman Sachs Asset Management: Defined outcome and buffer ETF explanations.
  • Investor.gov Structured notes with principal protection investor bulletin.
  • NAIC: Fixed deferred annuity buyer’s guide and annuity disclosure materials.

The information presented in this piece is the opinion of Tushaus Group, LLC and does not reflect the view of any other person or entity. The information provided is believed to be from reliable sources but no liability is accepted for any inaccuracies. This is for information purposes and should not be construed as an investment recommendation. Past performance is no guarantee of future performance. Tushaus Group, LLC is a Registered Investment Advisor.

Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment management fee, the incurrence of which would have the effect of decreasing historical performance results. The S&P 500 is not the only index used as a benchmark for measuring the performance of a portfolio. Depending upon the holdings in your portfolio, your investment objectives, and your risk tolerance, it may be more appropriate to measure performance against a different benchmark. Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark.
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