Strong Q1 earnings, hopes for a Middle East peace deal, and resilient economic data pushed the S&P 500 to its sixth straight weekly gain. Investors took comfort with the AI driven spending boom plus a follow through print on monthly hiring that should help keep consumer spending and economic momentum rolling. Geopolitics, however, remained the swing factor as the U.S and Iran have yet to strike a deal. The lingering uncertainty could keep summer volatility elevated as stocks head into their seasonally weak trading period.
Economic Highlights:
- The labor market maintained its footing in April following a strong increase in new hires in March. Nonfarm payrolls rose 115K, up from the prior month’s 185K print. It also marked the second consecutive month of payroll gains following February’s -156K slide. Meanwhile, the unemployment rate held at 4.30%, suggesting that the job market has reached an inflection point where modest job creation may be all that is needed to keep the jobless rate steady given little growth in the labor force. In a positive sign for the health of the labor market, job gains were broad-based with healthcare, transportation and warehousing, and retail adding new hires.
- The services sector lost a touch of momentum in April as the Middle East conflict dampened demand and kept prices elevated. The ISM Services Index slipped to 53.6 from 54 in March. Numbers above 50 indicate expansion while those below signal contraction. A cooling in new orders alongside subdued employment drove the headline figure lower. For inflation-weary consumers, little price relief appears on the horizon as the prices-paid gauge remained unchanged at 70.70, holding at its highest level since October 2022.
Market Bulls Charge to Sixth Straight Winning Week for S&P 500
The thundering herd stampeded its way to more record highs this week on a blowout Q1 earnings season, reports the U.S. and Iran are nearing a peace deal, and resilient economic data. Friday also saw the S&P 500 record its sixth straight winning week. The bullish sentiment was driven by news this week that Washington and Tehran were close to an agreement that would re-open the Strait of Hormuz, relieving global supply chains. WTI oil traded as low as $89.85/barrel on the news. However, reports of shots fired on Thursday night in the Strait drove prices to $95/barrel on Friday. Following the incident, President Trump downplayed the U.S.-Iran exchange, calling it a “love tap” and the ceasefire remains in effect. On the earnings front, AI continued to leave its mark on the Q1 reporting season with earnings up 50%+ YOY for the tech and communications sectors. However, the earnings season wasn’t all AI driven. Materials, consumer discretionary, and financials also posted strong results, up 41.40%, 39.3%, and 24.6%, respectively. Through May 8 all eleven sectors of the S&P 500 are expected to push earnings up 28.60% YOY. That’s up sharply from analyst forecasts of 13% at the beginning of April. On the economic front, the U.S. economy continued to hold its own despite an uncertain global macro backdrop and elevated prices. The jobs market data was a clear winner, showing that firms continue to add headcount despite inflation, fuel prices, and overall uncertainty.
The strength we saw in April has flowed into May on the same general themes – namely AI spending boom and hopes for a Middle East peace deal. While investors continue to keep a close eye on the U.S.-Iran war, investors are betting that the consumer will remain resilient, supported by a stabilizing jobs market and easing oil prices. The fundamental back drop for markets appears positive overall but on a technical basis, we are entering one of the historically weaker seasons. Traditionally, May-October is the weakest six-month block for the S&P 500. From 1945 through April 2026, the S&P 500 averaged a 2% gain from May-October, compared to an average gain of 7% from the November-April period. While this is not a flashing sell signal, this summer could prove more volatile just simply because of the expectations built in to current valuations while Iran remains a significant wild card.
The Week Ahead
Key reports include CPI, PPI, and home sales.
At 170, Freud’s Legacy Persists
This week marks the 170th birthday of Sigmund Freud, born May 6, 1856 in what is now the Czech Republic. Freud passed away September 23, 1939 at the age of 83. He is perhaps one of the most debated and controversial figures in the history of psychology. Few thinkers have been quoted, criticized, revised, reviled, and reinterpreted more than Freud. Many of his most famous claims have not held up well under modern scientific scrutiny: thankfully, our understanding of psychology has progressed extensively over the past century and a half. Yet some of Freud’s more disputed theories are only part of the story. He remains significant not because his ideas survived intact, but because his beliefs helped create an entirely new way of thinking about the human mind.
Freud’s work attempted to explain personality, mental illness, and emotional conflict. He argued that the conscious mind is like the tip of the iceberg and visible above the water, while the unconscious is the massive portion hidden below that influences choices, moods, and personality. The unconscious is more deeply rooted in early experiences and emotions, and it drives behavior more than reason alone. Freud’s ideas were radical. Critics viewed them as scandalous and cult-like. Others called Freud’s concepts morally dangerous and scientifically unsupported. However, the larger questions he tried to answer still drive modern psychology: Why do people act against their own interests? Why do old experiences continue to influence present behavior? How much of mental life happens outside awareness?
As the founder of psychoanalysis, he helped establish the basic idea that talking carefully and systematically about one’s thoughts, feelings, memories, and relationships can help bring “unconscious conflicts into awareness” which in simpler terms means tracing current feelings back to their roots. By understanding hidden drivers and therefore the “why” behind a person’s behavior, the awareness allows an individual to take control and make more intentional choices. Freud argued that the mind is not fully transparent to itself—that people are influenced by motives, fears, early experiences, and memories they do not completely recognize. His iceberg model influenced the modern understanding of mental processes occurring beneath conscious awareness. Today, researchers routinely study automatic processing, implicit bias, nonconscious perception, emotional conditioning, and habits that operate below conscious awareness. In other words, Freud may have gotten many details wrong, but the basic claim that the mind has hidden layers turned out to be profoundly important.
The term “Freudian slip” survives today and originated in Freud’s work. It refers to seemingly insignificant errors or slips of the tongue that reveal an unconscious thought, belief, or wish. Freud believed these weren’t just random mistakes, but that these accidental slip ups offered a meaningful glimpse into the contents of the unconscious mind.
Another lasting Freudian idea is the concept of defense mechanisms. Freud and later psychoanalytic thinkers described the ways people protect themselves from emotional pain or inner conflict, often without realizing it. These defenses include projection, in which a person attributes their own troubling feelings to someone else; denial, in which a painful reality is minimized or ignored; rationalization, in which behavior is explained in a way that sounds reasonable but misses the real motive; and repression, the attempt to keep distressing thoughts out of awareness. These concepts have become part of everyday language and continue to matter in clinical settings. Therapists still pay attention to how people avoid difficult feelings, reshape uncomfortable truths, or repeat patterns that protect them in the short term while harming them in the long term.
Among Freud’s enduring and influential contributions is his structural map of the human mind which describes how personality is shaped by three distinct competing forces – the id, the ego, and the superego. The ego is the conscious state, the id is the unconscious, and the superego is the moral or ethical framework that regulates how the ego operates. Conflicts and interactions between these parts make up one’s personality.
During Freud’s time, a lot of medicine focused on physical causes and physical treatments. Freud’s idea that simply talking about memories, emotions, dreams, and conflicts could help relieve psychological suffering was unusual and, to many, quite provocative. Modern therapy is far more diverse than classical psychoanalysis, and approaches have evolved to be more structured and evidence-based than Freud’s original method. Still, the central idea that therapy can be healing owes a great deal to his influence. At 170, Freud endures less as an oracle than as an origin point: a thinker who was often wrong in many of the particulars, but who deeply influenced modern psychology.