💰 The Bad Vibes Bull Market

THE MAIN EVENT
The Bad Vibes Bull Market 😤

We all know money doesn’t buy happiness. So I guess it goes without saying that record stock prices don’t either.

Yesterday, all three major U.S. indexes closed at record highs, something they’ve been doing repeatedly in recent weeks. Meanwhile, the University of Michigan’s Consumer Sentiment Index fell to 44.8 in May, the lowest reading in the survey’s history.

To be clear, that means Americans say they feel worse about the economy than they did during:

• The inflation panic of June 2022

• The depths of the pandemic

• The financial crisis

• The post-9/11 slump

According to survey director Joanne Hsu, 57% of consumers spontaneously mentioned high prices hurting their personal finances, up from 50% in April. Her summary was blunt: the “cost of living continues to be a first-order concern.”

Yet, the market’s optimism isn’t coming out of nowhere.

Axios, using FactSet data, noted that S&P 500 companies produced first-quarter earnings per share of $80.75, up 28.4% from a year earlier, the fastest growth since 2021.

AI spending is still surging. Corporate margins are strong. Earnings estimates are rising. Investors are not buying vibes alone. They are buying profits.

So which is it? Is the economy miserable, or is the market right to party?

Annoyingly, the answer may be: both. But the more useful answer for investors is this:

Consumers are saying one thing and doing another.

That distinction matters. The sentiment index is useful because it tells us how people feel. But feelings are not the same thing as economic reality.

Even Paul Krugman recently conceded that the economy is “objectively not bad enough to justify the worst consumer sentiment in history.”

He’s right. Low sentiment does not automatically mean recession. It does not automatically mean consumers stop spending. And it definitely does not automatically mean stocks have to fall.

The better investor question is:

• Are consumers just grumpy?

• Or are they grumpy and changing behavior?

So far, the answer still looks closer to the former.

The National Retail Federation expects retail sales to rise 4.4% in 2026 to $5.6 trillion, and noted that sentiment has been historically disconnected from actual spending.

That is the whole ballgame. If Americans complain about prices but keep swiping the card, the economic impact is limited. Maybe political. Maybe emotional. But not market-breaking.

If the complaining turns into a spending pullback, then we have a different conversation.

The disconnect comes down to three things that explain the “vibe gap.”

1. Stocks and consumers are measuring different realities

Stocks care about profits, margins, AI capex, buybacks, and whether companies can keep squeezing more earnings out of every dollar of revenue.

Consumers care about rent, groceries, gas, insurance, electricity, and whether they can get to the next paycheck without doing financial gymnastics.

Those are not just different readings of the same economy. They are almost entirely different scoreboards.

2. Consumers remember the old prices

Economists tend to focus on the inflation rate, meaning how fast prices are rising. Households focus on the price level, meaning what things actually cost today.

Jared Bernstein and Daniel Posthumus (had to triple-check that last name) made this point in a Stanford SIEPR paper on “price-level shocks.”

Their argument is basically that consumers have long memories after sudden price spikes. People don’t just notice that prices are rising more slowly. They remember what they used to pay.

That is why even an inflation victory, as in “only 2% more expensive than last year,” does not really feel like a win when the grocery bill is still miles above 2019 levels.

3. The market’s good news is not evenly distributed

Wealthier households and stock owners feel the rally directly. The pain at the pump might be offset by another leg higher in the AI trade.

Lower-income Americans and households with less exposure to stocks feel gas, food, rent, and borrowing costs much more directly, with no portfolio gains to soften the blow.

Beyond the vibe gap, there is one real yellow flag here: wages.

The latest BLS real earnings report showed real average hourly earnings fell 0.3% from April 2025 to April 2026, meaning inflation outpaced wage growth. One month does not make a trend. But if real wage growth stays negative, that is no longer just a vibes problem. That is a spending problem waiting to happen.

That being said, this bull market may be even more insulated from consumer moods than usual.

A lot of the AI rally is being driven by business-to-business spending: chips, cloud infrastructure, data centers, software, and enterprise tools. That is not the same as a bull market led by consumers buying more sneakers, phones, or lattes.

But insulated does not mean invincible.

At some point, the companies spending hundreds of billions on AI infrastructure need to prove that customers will pay for it. The path from “massive AI capex” to “durable profits” may be indirect, but it still has to exist.

For investors, the takeaway is simple: don’t ignore consumer gloom, but don’t treat it like a recession siren by itself.

What would actually change the risk picture?

• Retail sales rolling over

• Real wage growth staying negative

• Higher-income consumers starting to pull back

• AI monetization failing to justify the capex boom

• Earnings estimates falling or plateauing

Until then, record-low sentiment is not a stop sign. It is barely even a warning light.

MARKET MOOD
Nasdaq Leads As Tech Outruns Crypto And Crude 📈

Winners

Snowflake ($SNOW) - Market Cap: $82.9B (Week-to-Date: +38.9%)

Snowflake gave the market the clean “show me” quarter it had been waiting for. Revenue rose 33% to $1.4 billion, and its future contracted business grew even faster, with remaining performance obligations up 38% to $9.2 billion. The $6 billion AWS deal helped, too. Yes, it means spending, but it also signals Snowflake sees enough AI demand coming to lock in serious cloud capacity.

Micron ($MU) - Market Cap: $1.04T (Week-to-Date: +23.0%)

Micron ripped higher without an earnings report. The spark was UBS more than tripling its price target to $1,625. The argument is simple: memory companies usually trade at a discount due to their boom-bust cycles. But as AI customers increasingly sign long-term contracts, Micron’s earnings look a whole lot less volatile — and less deserving of a discount.

Ford ($F) - Market Cap: $66.3B (Week-to-Date: +11.5%)

Ford’s rally wasn’t about cars. Investors got excited about Ford Energy, its new battery storage business targeting at least 20 GWh of annual output. It is a page from Tesla’s playbook: use battery manufacturing know-how to sell grid-scale storage into a market getting pulled higher by rising electricity demand.

Losers

Pinduoduo ($PDD) – Market Cap: $118.2B (Week-to-Date: -12.2%)

PDD, the Chinese e-commerce company behind Temu, got hit after growth came with much less profit. Revenue rose 11% to 106.2 billion yuan, but adjusted profit fell 17% as the company kept spending to support merchants and supply chains. This was the trifecta investors did not want: weaker China consumer signals, continued trade friction, and management not rushing to protect margins.

AutoZone ($AZO) – Market Cap: $50.3B (Week-to-Date: -11.7%)

AutoZone beat on earnings, but the market focused on the parts that looked less bulletproof. Sales rose 8% to $4.8 billion and earnings beat expectations, but higher inventory costs weighed on profitability and international sales weakened. The concern is that tariffs may raise costs faster than AutoZone can raise prices, squeezing margins even further.

British Petroleum ($BP) – Market Cap: $108.4B (Week-to-Date: -6.2%)

BP sold off after abruptly removing Chairman Albert Manifold over unspecified governance and conduct concerns. For investors, the worry is less about one board seat and more about distraction at the top while BP is trying to rebuild credibility after years of underperformance.

CHART OF THE WEEK
Three Rate Fires Are Burning At Once 🔥

This Apollo chart shows why borrowing costs are staying stubborn across nearly every time frame. Short-term, medium-term, and long-term debt each have their own reason to move higher.

• Front end: Short-term yields mostly follow the Fed. With April PCE up 3.8%, inflation gives the Fed less room to cut. Fewer expected cuts keep 1-month to 2-year yields higher.
  

• Belly: Middle maturities are feeling pressure from AI borrowing. Hyperscalers need to raise cash for data centers, chips, and power. Because all that bond supply gives buyers more choices, borrowers have to offer higher yields to attract investors.
  

• Long end: Long-term bonds reflect fiscal risk. A 1-month bill gets repaid quickly. A 30-year bond asks investors to absorb decades of deficits, debt, inflation, and Treasury supply. As long as the government keeps deficit spending, investors may demand a bigger reward to lend for that long.

The takeaway: higher-for-longer rates aren’t a hypothetical anymore.

This dynamic can pressure pricey stocks, make high-yield savings accounts more attractive, and make bonds worth considering for income. But investors still need to be careful. If yields keep rising, even longer-term bonds can fall in price.

FAST FACTS
Agents, Drones, And Grocery Groans 🤖

📱 Robinhood Lets AI Trade: Robinhood is launching stock trading for AI agents, with dedicated wallets, trade notifications, and approval previews. [Read]

🚁 Drones Enter The Front-Run Zone: The Pentagon is reportedly weighing funding for drone names like Neros, Performance Drone Works, and Unusual Machines. [Read]

🥩 Food Prices Keep Biting: USDA sees groceries rising 3.2% in 2026 as bad weather, tariffs, fuel costs, fertilizer, and a thin cattle herd keep pressure on shelves. [Read]

🤖 Anthropic Leapfrogs OpenAI: Anthropic raised $65 billion at a reported $965 billion valuation, topping OpenAI’s most recent $852 billion mark. [Read]

🧠 AGI Timeline Gets Shorter: Nobel Prize winner Demis Hassabis now says AGI could arrive by 2029 or 2030, moving up his prior 2030 to 2035 estimate. [Read]

🤠 Exxon Picks Y’all Street: Exxon shareholders approved moving its legal home from New Jersey to Texas, despite ISS and Glass Lewis warnings. [Read]

🛡️ Cyber Stocks Steal Chips’ Thunder: Cybersecurity is suddenly the hot AI trade, as AI agents expand the enterprise attack surface. Since I pushed back on the February selloff, PANW has climbed nearly 70%. Nailed it. [Read]

WORDS TO REMEMBER
Hype Moves First, Value Follows Later 🧠