MFH Financial Services, Inc.

Market Commentary

Monthly Financial Markets Commentary — May 1, 2026

Stocks defied gravity in the month of April, rocketing upward in the face of what should have been disquieting news (Iran, oil spikes, inflation). Investors celebrated any positive news while ignoring negatives.

By all measures, such as price-earnings, price-to-sales, market-cap-to-GDP, Schiller CAPE Ratio, stocks are at historic highs. Retail investors have bought every dip in the market since 2010. Speculation in the market remains significant, with margin balances and stock ownership percentages being in record territory. Notwithstanding recent geopolitical concerns, such as the Iran standoff and increasing oil prices, investors remain "all in" and have noticably stepped up their buying. Retail investors are now supposedly the smart money, as institutions have been much less enthusiastic about equities. Historically this has not been a good setup for further advances in the market.

For 2026 the S&P 500 Index, the capitalization-weighted broadest measure of U.S. stock market performance, has returned 5.70%. The Nasdaq Composite Index, another capitalization-weighted index, but more reflective of growth stocks, has returned 7.18%. Finally, the Dow Jones Industrial Average, a price-weighted index, has returned 3.93%. These represent monthly increases of 10.53%, 7.18% and 3.93%, respectively, historic by most measures. All returns are on a total return basis that includes dividends.

The Morningstar U.S. Aggregate Bond Index, a broad measure of the U.S. bond market, has returned 0.07% for the year, a modest increase over the prior month. Historically the price of bonds rises on the outbreak of hostilities, as investors seek the safety of the world's currency. and this has been the case, although not as much as some would have expected. Credit spreads remain at very low levels, meaning that investors are demanding very little premium over so-called risk-free 10-year treasuries.

The sectors in the equity market that have performed the best so far in 2026 are Energy, Materials and Industrials at 33.6%, 12.1% and 13.0%, respectively. Financials, Healthcare, and Consumer discretionary have fared the worst at -4.2%, -5.5% and 1.3%, respectively. The rise in energy stocks is not surprising given the run-up in oil; but the jump in industrial and material stocks appears to be non-sensical, given that oil is such a large input.

The comparison of current price/earnings ratios and dividend yields as of May 1, 2026 to those of the prior year is as follows.

* based on 12-month trailing data

The dividend yield, which is at historic lows, is a reliable metric of valuation, since it cannot be manipulated as earnings frequently are. Dividend yields continue to fall in 2026.

Gold and crude oil most recently traded at $4,578.50 and $103.75, respectively, compared to $4,310.75 and $59.65 one year earlier. Gold has fallen significantly after a spectacular rise at the beginning of the year. Veteran observers of gold were not surprised by the sell-off in gold, given it's historic run. In addition, it is likely that Middle East countries, who hold large reserves, were forced to sell some gold in the face of rapidly declining economies. Notwithstanding the developingg view that gold is moving into the role of an alternate currency, it has reccently shown characteristics of a classic risk asset. Nevertheless, the long-term fundamentals of gold remain very positive given the appetite for gold by central banks and the complete lack of fiscal discipline by nearly all developed nations.