Weekly Investment Update (06/05/2026)

Markets were little changed heading into Friday before ending the week lower. Technology remains the main market driver, and Broadcom delivered strong results this week driven by rapid growth in AI revenue. However, because the report came near the end of an exceptionally strong first-quarter earnings season, expectations were extremely elevated. The lack of significant earnings beat pressured semiconductors and the broader technology sector. Still, market participation continued to broaden, with healthcare and financials outperforming. 

Geopolitical headlines offered little clarity on progress toward a U.S.-Iran deal, driving volatility in oil prices. Economic data this week, however, continued to point to a resilient backdrop. The ISM manufacturing index came in above expectations and reached its highest level since May 2022, providing a timely signal that underlying economic momentum remains resilient. At the same time, the May nonfarm payrolls report came in well above expectations, signaling improving labor market conditions, while initial jobless claims remained steady. Markets now expect one rate hike this year following the strong payrolls report, though we believe the Fed will remain on hold, which we explain in more detail below. Overall, the data reinforced the view that the economy has solid underlying momentum, even as geopolitical uncertainty persists.

May Payrolls Reinforce Economic Momentum

What is happening: Nonfarm payroll employment blew past expectations for the third month, rising 172,000 in May. On top of hefty positive revisions, that left the three-month average pace of growth at 188,000. Much of the gains in May were government jobs (+52,000) but the breadth across private industries also improved. Leisure and hospitality employment saw the strongest rise (potentially a nod to the World Cup), and outside of the steady gains in education and healthcare, construction and manufacturing both saw modest growth. 

The unemployment rate held steady at 4.3% though details were more mixed. Youth unemployment ticked lower, remaining well below the cycle highs reached in late 2025, but long-term unemployment rose to a new cycle peak. Average hourly earnings slowed as expected to 3.4% year-over-year, a post-pandemic low and consistent with other measures of wage growth. 

Separately, job openings rose significantly in April to multiyear highs, though largely driven by one industry: professional and business services. Quits and hiring rates fell. In addition, the Quarterly Census of Employment and Wages (QCEW) survey for Q4 2025 pointed to a small upward revision to 2025 nonfarm payroll growth following several years of steady downward revisions. 

Why it matters: Private job growth (+120,000 in May) is running well above the breakeven pace needed to keep the unemployment rate from rising, where estimates range from as low as zero to 50,000. The current pace looks unsustainable on the back of more subdued employment surveys and weak immigration. Nonetheless, the May jobs report adds further to the narrative that labor market conditions are improving from last year’s slowdown in hiring. 

The Q4 QCEW data also suggest that the serial downward revisions to job growth in recent years could be coming to an end. This is plausible since the exclusion of unauthorized immigrants drove much of the gap between census and nonfarm payroll data, and immigration has slowed meaningfully. Jobs numbers therefore provide a more accurate picture of job growth going forward, allaying the Fed’s concerns that labor market conditions could be weaker than expected.

While still a mixed picture, the U.S. labor market is on a path of improvement, particularly if energy prices remain capped at current levels or fall further. That could put a floor on wage growth in the coming months. With core inflation likely to run above 3% for most of this year, the data on balance continue to have a hawkish bent for the Fed. Consistent with recent Fed communications, we continue to believe the current backdrop warrants unchanged policy and that the Fed remains far from considering rate hikes. More importantly, a backdrop of solid growth, improving labor market conditions, and sticky inflation should remain supportive for risk assets.

IPOs and M&A Support Selective Recovery in Private Market Exits

What is happening: Private equity continues to work through inventory of companies looking to exit. Over 4,600 U.S. buyout-backed companies (a record 35% of the total) have been held in portfolios for longer than five years. In venture capital, around 45% of companies have been VC-backed for over five years, a third of them for 10 years or longer. The backlog began to build in 2022, when changes in the macroeconomic and financing environment upended assumptions under which many portfolio companies were underwritten and created disconnects between the valuations ascribed by company owners and prospective buyers. The maturation of the outsized 2021 cohort adds to the inventory of companies aged for sale.

While IPOs are a high-profile exit path, they have accounted for fewer than 10% of private equity exits over the past 10 years and have been concentrated in the largest portfolio companies. M&A (merger and acquisition) activity — selling to strategic acquirers or other private equity funds — has accounted for the vast majority of exits.

In buyouts, both IPOs and M&A activity are recovering, aided by a generally constructive macro backdrop and capital markets sentiment. U.S. buyouts saw ~$700 billion of exits in 2025, and a further ~$145 billion in Q1 2026. 

The picture in venture capital is more nuanced. Headline exit activity accelerated over the course of 2025; at ~$290 billion, it was just shy of 2019-2020 levels. Q1 2026 exits, at ~$350 billion, eclipsed previous records. However, a single deal, the acquisition of xAI by SpaceX, accounted for $250 billion (this deal has not yet distributed cash to its backers). Year-to-date, the five largest VC-backed exits account for 85% of all exit value, but several other large, notable deals are on the horizon for the rest of the year. Exits elsewhere in the VC-backed universe remain generally subdued.

Dynamics vary across companies and sectors. For instance, the valuation gap appears particularly pronounced in software, which has accounted for a significant share of PE-backed deal activity over the past several years. Conversely, life sciences M&A has been a notable pocket of strength, as large pharmaceutical companies seek to buy startups working on innovative new medicines to replenish their drug pipelines ahead of significant patent expirations.

Why it matters: Exits are important not only for providing liquidity but also for signaling confidence in valuations and the underlying business model — two key considerations that have been on investors’ minds.

In buyouts, an improving transaction environment implies that some of the disconnect has been closing, but differences between companies are becoming more pronounced. High-quality companies are increasingly finding buyers and commanding attractive valuations. Lower-quality companies continue to face headwinds and will likely have to accept valuation adjustments in order to transact. Small- and middle-market companies tend to have more flexible and multidimensional exit possibilities, with less reliance on the IPO market. Conversely, companies with a more limited buyer universe rely more on IPOs for exits, implying sensitivity to shifting public market sentiment and potentially longer hold times. We believe these dynamics will drive greater performance dispersion across managers, illuminating the outcomes of decisions made in the last deployment cycle and offering insight into managers’ skill in navigating challenging markets.

New vintages present opportunities to deploy capital into attractive themes and at terms reflecting the changed market backdrop. Operational value creation (revenue growth, margin expansion) and well-defined exit strategies will become greater drivers of return, in our view, bringing manager skill into sharper focus.

In venture capital, the exit picture reflects the extent to which investor sentiment is concentrated in a select subset of companies, themes, and ideas. The industry is famously defined by “power-law” outcomes, wherein a small number of companies account for a disproportionate share of value creation. However, recent concentration is higher than longer-term trends. Companies that are tied to the dominant breakthrough technology of today, and that can maintain durable progress and momentum, enjoy strong investor demand. Others will need to reassess valuation expectations and future trajectories.

Bessemer’s private markets portfolios have exposure to several companies benefiting from the current IPO window, including recently listed companies Cerebras Systems and Fervo Energy, as well as 2026 IPO candidates SpaceX and Anthropic.