Stock Market Outlook: May 31st = Uptrend
The stock market outlook shows an uptrend in place, with stocks at all time highs to close out the month of May.
Emerging Market Equities, Technology, and High Beta outperformed; Oil, Energy, and Low Beta underperformed. Social media diplomacy continues to wag the markets, but tech earnings and new IPO rules are giving the market something else to discuss.
TREND ANALYSIS
The S&P500 ( $SPX ) rose 1.4% last week. The index is:
- ~7% above the 50-day moving average
- ~11% above the 200-day moving average
The three technical indicators used to identify trends remain bullish:
- Average Directional Index: Bullish
- No change
- Institutional Activity: Bullish
- No change
- On-Balance Volume: Bullish
- No change
SPX Price & Volume Chart – 2026-05-31
PERFORMANCE HIGHLIGHTS & COMPARISONS
Asset Classes
Emerging Market Equities ( $EEM ) led assets higher last week; Oil led to the downside ( $USO ). Bitcoin eased back to neutral bias ( $IBIT), while Developed and Emerging Market Bonds ( $BNDX, $PCY ) rallied back to bullish.
Asset Class Performance – 2026-05-31
S&P500 Sectors
Technology ( $XLK ) led the sectors higher, gaining 7% and now up over 20% in the past 4 weeks! Energy ( $XLE ) led lower, taking a hit from oil prices. Communications and Industrials regained bullish bias, while Consumer Staples and Energy ( $XLP, $XLP ) dropped back to bearish.
S&P Sector Performance – 2026-05-31
S&P500 Investing Styles
High Beta ( $SPHB ) bested all styles last week; Low Beta ( $SPLV ) was the worst performer and dropped back to bearish bias. High Dividend ( $SPHD ) eased to neutral bias, and Defensives ( $POWA ) jumped back to bullish.
Sector Style Performance – 2026-05-31
COMMENTARY
Markets
The Tech sector propelled the S&P500 to is 9th consecutive up week. If that seems like a lot, that’s because it IS a lot. Dell Technologies ( $DELL ) blowout earnings weren’t overlooked like Nvidia’s. This week encompasses more important earnings for the sector, including cyber-security firms Palo Alto Networks ( $PANW ) and Crowdstrike ( $CRWD ), along with Broadcom ( $AVGO ), a member of the recently expanded Magnificent 7 ( the Mag7+ or Mag 10 ).
With an impending IPO in June, SpaceX is sucking up more and more oxygen in financial media. Last week saw a critical mass of headlines finally bring aspects of the listing to light, specifically the unprecedented rules changes being enacted with the filing. And thanks to a couple of those rule changes, you’re going to own it soon via index funds, whether you want to or not.
- Waiting period for Index Funds
- Historically, new IPOs traded for up to a year before being allowed to join an index like the Nasdaq. On May 1, 2026, Nasdaq altered the timeframe, allowing any new listing, ranked in the top 40 by market cap, to enter the Nasdaq-100 after 15 trading days. Other indexes (e.g. Russell 1000) decided to allow mega-caps, like SpaceX, to enter their indexes after 5 trading days.
- Basically, the new rule significantly reduces the price-discovery period, meaning anyone doing fundamental analysis has very little time to audit a company properly. That’s kind of a big deal when said company’s first financial statement showed a ~$5 billion net loss for 2025.
- Share Availability (Spot Gamma)
- Passive indexes required new additions to have ~10% of their shares “free-float” (i.e. freely available to the public vs. locked up among insiders, founders, or private portfolios). Most Large and Mega Cap stocks float around 20%. SpaceX’s S-1 filing indicates that public float will be 3%-5%, so exchanges have eliminated minimum float constraints entirely for “top-tier” listings.
- Because the float is so low, the indexes will apply a float multiplier when determining the weighting SpaceX will have in the index, thereby increasing how much of the free-float indexes will be forced to buy (or sell when the time comes).
So what’s the takeaway? For an index owner, not much, other than the new risks to the index. For sector, style, or individual stocks, the impacts may be more noticeable. Basically, SpaceX stock will have guaranteed demand from index funds when they need to rebalance. And any stock with a large index weighting (i.g. Mag 7) will see selling pressure during that timeframe. A mini-example played out on Friday, when major indexes experienced some forced rebalancing ( e.g. MSCI Equity Indexes ). In the last 15 minutes of the session, Nvidia plunged more than 2%, while Microsoft jumped 1.5%. Even Cramer commented:
Every rebalance for Anthropic, SpaceX and OpenAI will lead to the chaos we saw at 3:50 p.m. unless we take this stuff out of the shadows. The manipulation potential is so fraught and the losses will be so palpable that it has to be discussed ahead of time to stave it off!!! @jimcramer
Macroeconomic Data & Policy
April PCE (y/y) hit +3.8%, higher than March and much higher than last year’s +2.3%. That’s a significant increase in the rate of change! Core PCE told a similar story: +3.3% y/y, higher than March and much higher than April 2025. Given the Strait of Hormuz remains closed, the trend higher likely continues into the summer months.
The second estimate of Q1 GDP came in at +1.6%, which means the U.S. economy likely avoided stagflation in the first part of the year. The GDP comparisons get harder in Q2 and Q3, which both saw growth near 4% in 2025.
Geopolitics
Social media was abuzz with rumors that the U.S. and Iran had reached a 60-day ceasefire agreement. While a framework may be available, the actions speak louder than words and there’s been no change in the military posture or Strait of Hormuz traffic, despite the drop in oil price.
EYES ON THE HORIZON
It’s employment week in macro land, alongside the latest PMI data.
- Monday: ISM Manufacturing PMI
- Tuesday: JOLTS
- Wednesday: ADP Payrolls, ISM Services PMI
- Thursday: —
- Friday: NFP
Best to Your Week!
The Safe Investing Blog 