S&P 500 up 9.6% for the Year, Unbothered by Rising Inflation
Stock markets are near record highs, and the S&P 500 as gained close to 10 this year so far and could still move much higher.
Quick overview
- The S&P 500 has risen 9.6% in 2026, reaching a record high of 7,520 points, largely driven by strong performance in the tech sector.
- Despite a rise in inflation to 3.8% in April, household spending has increased by 4.8% year over year, particularly in AI infrastructure.
- After a sharp decline in late March due to geopolitical tensions, stock markets have rebounded, with the Nasdaq Composite gaining 28% from early April to late May.
- Analysts express concerns about a potential market bubble, fearing that rising economic pressures may lead to lower revenues and a slowdown in growth.
Since the start of 2026, the S&P 500 climbed 9.6%, rising in large part because of strong tech sector performance, and the index is now at a record high of 7,520 points.
Stocks continued to climb Thursday morning in premarket trading, with the S&P 500 hitting a fresh high and moving closer to 10% gains for 2026 overall. The U.S. inflation level has risen this year as well, climbing to 3.8% in April, which is the highest level for inflation in two years.
Increased inflation has not appreciably slowed household spending, though, which is up 4.8% year over year. Commercial spending is weighted heavily this year toward AI infrastructure, including data centers and cloud storage. These products and services are growing more essential to the market with each month.
Markets Enjoy Sizeable Rebound
Stock markets dipped in late March as the Iran-U.S. conflict heated up. The equity market plunged, with the S&P 500 dropping 3.3% in a few days. This was one of the sharpest drop-offs for the market in months, and it took a week for the S&P 500 index to recover.
Since then, stock indices have been rebounding. The S&P 500 rose broadly from early April and has kept up an upward trend from that time. The Nasdaq Composite has been bullish from then as well, adding 28% between the start of April and late May. The upward surge can be attributed to high performing technology stocks, particularly those in the AI and semiconductor categories.
As the markets enjoy the strong rebound, analysts are worried that stocks may be in a bubble and that the bullish trends may fade out. The worry is less that the bubble will burst quickly and more that those rising revenues and strong quarterly reports will give way to rising economic pressure in the coming months and result in lower numbers. The exponential growth that has taken place in the tech sector in particular is not sustainable.
On Thursday, the U.S. stock market indices dipped slightly, with the Dow and S&P 500 losing their upward momentum ahead of new inflation data. The three major indices closed higher on Wednesday, setting records, but the potential for negative inflating news has slowed them down. With inflation already elevated and well above the Federal Reserve’s target, a higher inflation reading could be disastrous for the stock market’s momentum.
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