Summer Lull or Summer Pullback? Why the Next Dip is a Buying Opportunity

The Week Ahead - May 31, 2026

Over the past nine weeks, the S&P 500 has soared nearly 20% from its correction low in late March. The primary fuel for the surge has been tremendous corporate profit growth for the first quarter, but more importantly, improving guidance for the current quarter and remainder of the year. I still think that a bubble is emerging in everything related to artificial intelligence (AI), but it could continue to expand for another year or two before a pin comes along that pops it. Alan Greenspan was spot on when he raised concerns about “irrational exuberance” during the internet boom of the late 1990s, but he said that in December 1996. The bull market had three more years of phenomenal gains ahead of it. No one can time the market precisely. Therefore, I think the best way to manage this risk is by maintaining exposure to stocks but hedge or gradually decrease that exposure over time as valuations get stretched and risks build.

What has made the rally of the past two months even more impressive is that the market has advanced in the face of geopolitical and economic headwinds that continue to gain strength. The Trump administration continues to over-promise and under-deliver on a deal to end the war with Iran, but investors seem more concerned about missing out on a rally that may ensue when the conflict ultimately ends. That has kept a constant bid for stocks. Still, the rate of inflation is at a three-year high, and interest rates have risen sharply across the curve. If it were not for the AI investment narrative, I think these developments would have resulted in another steep correction. Instead, investors are looking past them as temporary speed bumps.