Weekly Investment Update (05/08/2026)

Markets are ending the week on constructive footing, helped by renewed confidence in the AI compute and capex cycle and a labor market that remains more resilient than many expected. April payrolls rose 115,000, comfortably ahead of consensus, while March’s already strong gain was revised higher. The unemployment rate held at 4.3%, and jobless claims remain subdued, reinforcing the view that the economy is strong enough to support healthy corporate fundamentals.

That resilience is supportive for risk assets, particularly when paired with continued investment in productivity-enhancing AI technology. The main caveat is that strength in the labor market also gives the Federal Reserve (Fed) less urgency to cut rates, especially with inflation expectations edging higher. That said, we believe future market appreciation will be more impacted by a continuation of strong earnings growth rather than any need for materially lower interest rates.

In certain strategies, we continue to favor companies with durable margins, pricing power, and exposure to productivity-enhancing capex, while recognizing that geopolitics and shifting monetary policy expectations could lead to near-term volatility — particularly after the S&P 500 has risen 12% since the beginning of April.

Employment Figures Add to Resilient Tone of Economic Data

What is happening: Nonfarm payrolls rose by 115,000 in April, beating expectations and following a 185,000 gain in March. That left the three-month average pace at 48,000, which in our view is roughly consistent with a stable unemployment rate. Breadth across industries was maintained with continued gains in cyclical sectors. Job growth in trade and transportation was notably strong for the second consecutive month. Temporary help services employment grew for a fourth month, another sign of a cyclical upturn.

The unemployment rate was unchanged at 4.3%. though unrounded figures showed a slight increase. Broader measures of labor slack also increased with a pickup in part-time work for economic reasons. Labor force participation declined further, though much of this reflects aging demographics, as prime-age participation has been more stable. Average hourly earnings were softer than expected, rising 3.6% year-over-year.

Why it matters: The April jobs report added to the positive tone from recent incoming data signaling economic resilience in the face of an energy price shock and geopolitical uncertainty. While it is still likely too early to see signs of deterioration on the back of higher energy costs, we see scope for continued improvement in labor market conditions ahead. Jobless claims remain at historically low  levels, and recent layoff-announcement data do not point to any meaningful pickup in unemployment claims in the coming months. Although the recent pullback in employment surveys keeps us cautious on hiring, survey data could stabilize if geopolitical tensions continue to ease and energy-market disruption remains contained.  

At the same time, there remains limited evidence that labor market conditions are a source of inflationary pressure, as noted by Fed Chair Powell at the April Federal Open Market Committee (FOMC) meeting last week. Other wage measures, such as the employment cost index released last month, are consistent with a continued deceleration in wage growth. Unit labor costs remain subdued on a year-over-year basis, while productivity growth remains solid. Together with resilient business surveys, including the ISM services PMI reported this week, the economic backdrop is setting a more goldilocks tone. While inflationary pressures from various pockets of the economy loom, lack of wage pressure and the ongoing deceleration in shelter costs will provide a powerful anchor. The Fed is likely to continue to view policy as in a good place, keeping interest rates unchanged in the coming months. Elevated inflation alongside economic resilience means rate cuts are not imminent. Even so, cuts are still possible by year-end once the Fed sees the back side of the energy shock and geopolitical uncertainty is lower. Odds are rising, however, that policy stays on hold for longer on the back of recovering labor markets and stronger economic growth in the coming quarters.

The  Case for  Staying Invested Despite the "Sell in May and Go Away" Adage

What is happening: As the summer months approach, the old Wall Street saying “Sell in May and go away” has started to surface once again. The strategy suggests selling stocks in May and staying out of the equity market until November to avoid potential seasonal weakness. The reasoning is that the summer months have historically seen fewer market participants and therefore lower volumes, causing potentially riskier market conditions. Although this may have been true in the past, in an era of increasingly connected and computer-driven markets, it may no longer apply.

Why it matters: While historical patterns and seasonal trends can provide some guidance for the direction of markets, relying solely on such a simplistic approach has not proven to be a successful strategy. Since 1928, the S&P 500 has, on average, returned 2.7% in the period from May to October, while the November to April period has seen an average return of 5.2%, resulting in an overall annual average return of 7.8%. In the past 15 years, only 2022 saw negative returns for the S&P 500 in the May to October period. July has been the third-strongest month for the market, behind April and December.

Equity markets are influenced by many factors beyond seasonal patterns, such as economic indicators, geopolitical events, and company-specific developments. A purely seasonal strategy overlooks crucial market dynamics and can lead to missed appreciation, increased tax burdens, and unnecessary risks. Moreover, historical data have shown that timing the markets may often lead to losses. We believe the most appropriate strategy for reaching long-term investment goals is to stay invested while adjusting portfolio positioning based on a thorough understanding of underlying economic and financial factors. In line with this approach, Bessemer portfolios maintain an overweight position to equities relative to their respective benchmarks, and we expect overall earnings growth for the S&P 500 to support the market this year.