May Investment Perspectives
When Will Buyers Return to the Housing Market?
Mark Luschini, Chief Investment Strategist
Housing affordability is a problem for Americans striving to purchase a home. A monthly University of Michigan survey asking prospective buyers if now might be a good time to buy a home shows that fewer than 20% believe it is. The housing sector has been hampered by the pandemic-induced surge in prices as people scrambled for homes better suited for remote work, and by the boost in mortgage rates driven by the rapid shift from recessionary conditions to explosive economic growth.
The Mortgage Bankers Association’s weekly report on home purchase applications has been moving mostly sideways recently, following a slight upward bias since 2024. Part of the problem is the lack of available housing stock. Inventories are especially lean for existing homes due to “lock-ins”—homeowners with low mortgage rate loans that are unwilling to sell, and while new home inventories are elevated, homebuilder incentives have induced sufficient buying to draw inventories down in recent months.
A Change of Leadership at the Fed
Guy LeBas, Chief Fixed Income Strategist
The Federal Open Market Committee, or FOMC, is the part of the Federal Reserve that most directly drives interest rate policy. In popular usage, “the Fed” is often treated as one institution with one voice, but the system is more complicated. It includes the Board of Governors in Washington, D.C.; twelve regional Federal Reserve Banks spread across the country; and the FOMC, which brings these two sides together to set national monetary policy. The FOMC’s voting membership consists of the seven Fed governors, the president of the New York Fed, and four of the remaining eleven regional Fed presidents on a rotating basis. The Chair of the Federal Reserve Board also leads the FOMC. Assuming the Senate confirms Kevin Warsh soon, he will take over as Fed and FOMC Chair when outgoing Chair Jay Powell’s term ends on May 15.
The Board of Governors is a federal agency with leaders, including the Chair, nominated by the President, confirmed by the Senate, and set up to serve long staggered terms that cross over two or more Presidential terms. That structure is deliberately awkward and designed to insulate monetary policy from political pressure, which might skew policy towards short-term benefits at the cost of longer-term inflation risks. One need not look any further than Türkiye in the 2010s, in which President Erdogan installed his son-in-law as head of the central bank and spurred a decade-long inflation crisis, to realize the risks of policy skew. Decades of academic and real-world evidence have demonstrated that politically independent central banks deliver better long-term outcomes for growth and inflation than do “captured” central banks. In the U.S., the staggered terms as well as the mixed federal and regional geographies of the Fed help to insulate the institution from political pressures. The system is not perfect, but it has historically been effective.
Sell in May? We Think Not
Gregory M. Drahuschak, Market Strategist
The stock market closed in April 2026 with the S&P 500 posting its second-best result for the month in the previous 77 years. However, with the major equity market indices near recently set historic highs, the market faces four key issues. How it deals with the practical and hopefully profitable application of artificial intelligence (AI), the potential resetting of global energy conditions, the developing concern that inflation may be more persistent than presently thought, and the direction of intermediate-term interest rates will shape stock market performance for May and possibly months longer.
For many investors, the evolution or perhaps revolution of AI tops everything else. The AI explosion has been dominated by major semiconductors and other technology stocks, which have been the drivers of stock market performance. Since April 2025, these firms, which have the largest representation in the S&P 500 (the Technology Sector is 35% of the S&P), have helped the capitalization-weighted S&P 500 outperform an equal-weighted version of the index by 36%. In the last two years, this outperformance has been 45%.
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