The U.S. stock market has arrived at the unofficial start to summer with major benchmarks sitting at record highs. But a few factors could make for a bumpy ride in the months ahead.
Among the risks that Wall Street professionals have flagged to MarketWatch are steadily accelerating inflation that could push up bond yields and strain consumers’ pocketbooks and at least one blockbuster IPO that could draw money away from existing stocks.
The Dow Jones Industrial Average scored a fresh record finish on Friday just before investors headed into a three-day holiday weekend that will see the U.S. market closed Monday for Memorial Day. The S&P 500 also rose Friday, ending just 0.4% below its all-time closing high booked May 14, according to Dow Jones Market Data.
Investors will need to contend with these risks once they return from the Memorial Day weekend.
IPOs
Hefty IPOs in the coming months may “draw capital from the rest of the financial markets,” said Bob Elliott, co-founder and chief executive officer of the asset-management company Unlimited, in a phone interview. “There’s just not been that much supply in the market in a long time, and so it’s another downward pressure on the equity market as a whole.”
Documents to go public that Elon Musk’s SpaceX had filed with the SEC were released publicly on May 20. While no price range was included in the preliminary prospectus, the Wall Street Journal reported that the IPO could raise at least $80 billion and potentially value SpaceX at more than $1.5 trillion.
“I think there’s a big demand for that SpaceX IPO amongst others that will be coming out over the course of the year,” said Joe Mazzola, head trading and derivatives strategist at Charles Schwab, in an interview. Some investors may choose to rotate out of their highest-flying stock-market holdings in order to participate in those IPOs, he suggested.
Investor anticipation also has been building for a big IPO from OpenAI, the company that helped ignite the artificial-intelligence boom with the release of ChatGPT in late 2022. The Wall Street Journal reported that the company is aiming to go public as soon as September.
“With an unprecedented flurry of ginormous IPOs imminent, many clients have asked me whether I believe the massive wave of equity supply will be bearish,” said Brent Donnelly, president of Spectra Markets, in a May 21 note shared with MarketWatch. It’s a “potentially bearish factor, but not a reason to exit longs or get short,” said Donnelly, adding that it’s “not tradable in isolation.”
It’s tough to price in the impact from upcoming IPOs on the market ahead of time, because they tend to “suck up the liquidity” at the time they actually happen, according to Elliott.
Another issue: Elliott cautioned that this wave of big IPOs is expected just as some major companies have been cutting back on their share repurchases. That’s another source of demand that may not materialize.
Hyperscalers have reduced spending on buybacks of their shares and dividends, while increasing capital expenditures on artificial intelligence.
The AI boom has seen chip maker Nvidia surge this year along with fellow Big Tech stocks Alphabet, parent of Google and YouTube; Amazon.com; and Apple. This set of megacap companies have helped propel the S&P 500 higher in 2026.
The S&P 500 ended Friday up 9.2% so far this year.
The U.S. stock market broadly rose over the past week, with the Dow, S&P 500 and the technology-heavy Nasdaq all climbing. The S&P 500 advanced for an eighth straight week, marking its longest weekly winning streak since 2023, according to Dow Jones Market Data.
That’s despite many Americans worrying about higher gasoline prices as the Iran war remains unresolved, with energy-supply disruptions persisting in the Strait of Hormuz while oil inventories fall in the U.S.
Oil inventories
The International Energy Agency chief Fatih Birol recently warned that oil inventories are falling “very fast,” according to Robert Yawger, commodity specialist at Mizuho Securities, in a note emailed May 18. “U.S. crude-oil storage is definitely falling fast but is not going to run out any time soon,” said Yawger, “unlike the threat to other countries, mainly [in] Europe and Asia.”
Meanwhile, the University of Michigan’s consumer-sentiment index fell to a record low of 44.8 this month. Cost-of-living worries due to higher gasoline prices factored in the souring sentiment, particularly among lower-income consumers, José Torres, senior economist at Interactive Brokers, told MarketWatch in a phone interview.
U.S. oil prices remained elevated Friday, with West Texas Intermediate crude trading at $96.60 a barrel, according to Dow Jones Market Data. The average gasoline price nationwide stood at $4.552 on Friday, up from $3.196 a year earlier, data onAAA’s websiteshowed.
But oil futures tumbled Sunday, following reports that an agreement to end the Iran war and reopen the Strait of Hormuz is closer, though President Donald Trump said he’s in no hurry to make a deal.
The U.S. stock market is “reflecting some doubt around how well the consumer can do and how the economy can manage through a prolonged closure of the strait,” said Kevin Gordon, head of macro research and strategy at Charles Schwab, in a phone interview. “It’s just being overshadowed by a lot of this tech outperformance.”
The S&P 500’s consumer-discretionary sector is lagging the broader index this year, while information-technology stocks have surged in 2026. Consumer discretionary is up 2.3% this year through Friday, trailing the S&P 500’s 9.2% climb over the same period. Meanwhile, the index’s tech sector has soared 18.1% in 2026 amid optimism surrounding the AI boom.
Phil Camporeale, chief investment strategist at J.P. Morgan Wealth Management, told MarketWatch that he remains bullish on the U.S. stock market after strong earnings, with a favorable view of the S&P 500’s tech sector. In his view, investors aren’t “euphoric or over their skis” when it comes to valuation multiples for the sector, saying they’re lower than the levels seen heading into 2026.
And while interest rates in the bond market have climbed on inflation worries as traders price in a potential rate hike from the Federal Reserve this year, Camporeale said he expects the Fed is still more likely to remain on hold. The recent rise in Treasury yields and inflation amid higher oil prices may peak in the second quarter, and the stock market is looking through that, he said.
Stock-market investors appear optimistic that the U.S. and Iran both want to work out a peace deal, according to Torres of Interactive Brokers. Still, he said, “we’re going to have higher inflation this summer.”
