Can Investors Have the Best of Both Worlds?

Scott Poore, AIF^®, AWMA^®, APMA^®

May 15, 2026

Equity markets have continued to push higher this week, but headlines on the Middle East continue to cause daily swings opening the door for doubt among investors. Concentrations in just a few equities within the broader market indices should be cause for concern. The President's summit with China's President Xi appears to have produced some positives, but details on actual outcomes from the meeting are murky. This week's musings are inspired by the 1986 song "Best Of Both Worlds" by Van Halen. Here is some trivia about the song:

The song appeared on the band's "5150" album. The name of the album was an homage to Eddie Van Halen's home recording studio of the same name. He chose that name as a tongue-in-cheek reference to California Welfare Code Section 5150, which deems a person with mental health issues a danger to themselves and others around them. The band felt there was a high-energy, chaotic creative vibe at Eddie's studio and recorded the "5150" album there.
This song made it all the way to #12 on the Billboard charts. The album was certified 6x-platinum - selling more than 6 million copies. It was the first album with new lead singer Sammy Hagar.
According to the band, the song "Best Of Both Worlds" was written about embracing life's possibilities and enjoying the moment.
Van Halen had a rider in their concert contract that demanded a bowl of M&Ms be available backstage for the band with all of the brown ones removed. It wasn't a "diva" demand. The band just wanted to see if the promoters actually read the contract.
Eddie Van Halen couldn't read music despite classical piano lessons as a child. He learned how to play the guitar by watching and copying his teacher's finger movements.

Click here to view the song's lyrics.

Here's what we've seen so far this week...

We Need More Than Just Words Can Say. In the first several verses of "Best of Both Worlds," the singer expresses he needs more than just words to satisfy his meaning in life. Investors are probably feeling the same after stocks make new all-time-highs despite no real resolution in the Middle East and higher oil prices. It's not all good news as market concentrations have increased since equity markets made lows in late March of this year. While the S&P 500 Index is up more than 17% since the March 30th low, it's been the concentration in the top 10 names - especially the Mag 7 names - that has driven equities higher so quickly. Over that same time period, the equally-weighted version of the S&P 500 Index is up less than half as much, while the Mag 7 are up more than 27%. While concentrations in benchmarks should be monitored, the condition can exist for quite some time before markets correct. Currently, approximately 39% of the S&P is comprised of its top ten holdings.¹ It's the largest amount of concentration in the top 10 in the last 3 decades.¹ However, periods such as 1990-2000 and 2018-2021 saw steadily increasing concentration.² What is noticeable is that warning signs, such as the spread between high yield bonds and government bonds has not moved considerably higher in other concentration periods. Unlike the Dot.com crash where spreads blew out by more than 95% and COVID when spreads increased more than 200%, spreads are very low today and have been relatively low for the past year.

Do Consumers Know What Things Are Worth? While Sammy Hagar sings that he knows that things are worth in "Best of Both Worlds" it's uncertain that consumers know, or producers for that matter. Earlier this week the Consumer Price Index came in as expected at +0.6% for April.³ That's less than the +0.9% reading in March, but still an unwelcome reading. As it was in March, the leading contributor to the CPI increase was oil-related. The year-over-year reading for inflation (+3.8%) is not higher than the historical average of 3.5% for the first time since October of 2023.⁴ So far, higher oil is not pushing the majority of consumers to stop spending. Retail Sales for April were released this week at the expected rate of +0.5%, along with Redbook Sales which soared to +9.6% on a year-over-year basis.^{5 6} The lower income group is likely feeling the pinch at that gas pump, but middle-to-higher income groups are continuing to spend at solid rates. Producers are also feeling the sting of higher oil prices. The reading on April's Producer Price Index was higher than expected. The market was looking for +0.5%, but the index was up +1.4% instead.⁷ The year-over-year reading on PPI moved from 4.3% last month to 6%.⁸ Energy and Services were the largest contributors to the increase. For the time being, it would appear that producers are willing to pass along higher prices to consumers. According to reporting from the summit, it would appear that China has expressed interest in helping solve the issue of the Strait of Hormuz being blocked.⁹ A resolution in the Middle East would help with inflationary pressures, but the clock is ticking as a slowdown in consumer spending would limit economic growth. So far, the Atlanta Fed continues to expect higher growth as their GDPNow metric has moved higher to +4.0% for the 2nd quarter.¹⁰ Investors would be wise to monitor their asset allocations to insure that their risk tolerance is accurate as markets still face some headwinds.

Click here to view a great live version of "Best of Both Worlds"...

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Disclosures

The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.

Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.

Any market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.

Past Performance does not guarantee future results.