The mounting consequences and pressure of the war in Iran... Europe's dirty little energy secret… AI, tech, and everything else… The disconnect that's defined 2026… A contrarian signal from Wall Street... The risks and opportunities...
The Iran war is making strange bedfellows...
We saw this report today from global news service Reuters...
Britain said on Wednesday it will continue to allow imports of diesel and jet fuel refined from Russian crude in third countries, deferring a ban first announced in October, to help the country cope with supply issues caused by the Iran war.
The decision was criticised by lawmakers in Britain and Ukraine who accused the government of easing pressure on Russia and backtracking on promises to stop Moscow profiting from oil production to fund its war with Ukraine.
What's that tell us? Well, energy supply sure is important... At least for some U.K. leaders, easing a growing global supply crunch outweighs the risks of indirectly supporting demand for Russian crude oil.
That's the big story... As the conflict in Iran stretches to almost three months, and 20% of global oil supply remains choked out of the market, the consequences of a Persian Gulf blockade keep building... And economic and political pressure keeps mounting.
Here in the U.S., the Energy Information Administration just shared that crude-oil inventories, including the Strategic Petroleum Reserve, fell by nearly 18 million barrels last week. That's the largest decline since we began keeping records in 1982.
And Federal Reserve minutes published today from the central bank's last meeting showed an inclination for officials to hike rates sooner than cut them.
You wouldn't know it by looking at the market today, though...
Oil futures were down more than 5% over the past 24 hours. Bond yields pulled back some – with the 30-year Treasury yield back below a key 5.15% level we're monitoring. And the major U.S. stock indexes were higher across the board ahead of Nvidia's (NVDA) earnings report.
(Nvidia reported earnings after the markets closed this afternoon, just as we were finalizing today's Digest. The company reported record quarterly earnings of $81.6 billion, beating Wall Street consensus expectations. We'll have a full report in tomorrow's edition.)
It looked like a strongly bullish day on the surface. Headlines from the Oval Office today were President Donald Trump telling reporters that negotiations with Iran to end the war are in their "final stages."
If that's really the case, stocks would have reason to zoom higher as oil prices come down...
In any case, though, I (Corey McLaughlin) am hesitant to completely toss our concern about the risks we've been talking about lately.
That is, we're seeing a massive "divergence" between tech stocks – powered by the AI boom – and everything else. This divergence has obscured weakness in most of the rest of the stock market this year. And now, we face the risk of higher inflation and higher interest rates.
When putting new money to work, know what you're getting into...
Stansberry Research senior analyst Mike Barrett published his weekly Select Value Opportunities update this morning. Mike noted that fewer than 6% of the S&P 500 Index's stocks have accounted for half of the index's returns over the previous month...
And most of them are associated with a single sector: artificial intelligence ("AI").
Historically, when the market depends on a small number of stocks (like those in the AI sector) to keep pushing it higher, the market becomes increasingly unstable...
In the late 1990s, for instance, the dot-com boom was in full swing as technology stocks like networking-gear leader Cisco Systems (CSCO) and semiconductor giant Intel (INTC) pushed the S&P 500 relentlessly higher year after year.
By 1999, only 15 stocks accounted for about 70% of the S&P 500's total gain. A few months later, in early 2000, the index peaked. It then tumbled almost 50% into early 2003. Cisco and Intel fared even worse, declining about 80%. Ironically, both stocks surpassed their dot-com highs earlier this month for the first time in 26 years.
Now, our case study shows that the same thing is happening all over again...
Mike also discussed the curated database of 100 stocks he tracks in Select Value Opportunities. Some of these names have seen spectacular gains so far this year. But even more were down... many of which by double digits. And the group was up a measly collective 2.3%. As Mike wrote...
To be clear, those returns do not reflect the performance of our official track record, which is up 12.1% as of last Friday (since inception). And each of our open positions is in the black. But the case study shows that, as a whole, the universe of stocks we track has split into two completely opposite ends of the spectrum.
'Everyone' is buying tech stocks...
The broad market, again, on the surface, has rebounded this spring since its initial sell-off after the U.S. attacked Iran at the end of February. But overall market health is not great. First, it looks like "everyone" is buying the same general bucket of stocks. Here's more from Mike...
Momentum investors are aggressively buying AI stocks with little regard for the fundamentals, like valuation. The net buying activity of individual investors, who traditionally chase hyped-up stocks, recently approached its highest level in seven years.
Hedge funds are also piling into tech stocks... Investment-banking giant Morgan Stanley (MS) estimates that funds haven't been this overweight semiconductor stocks in at least a decade. Research firm PivotalPath adds that tech-focused funds were up 10.3% in April alone. That was their best monthly performance in nearly three decades.
Meanwhile, the rest of the market is getting hit by inflation that's soaring well above the Federal Reserve's target rate of 2%...
Money managers are excited about stocks...
Stansberry Research senior analyst Alan Gula shared the following chart with a group of our editors yesterday. As you'll see below, the latest Bank of America survey of professional money managers shows a record monthly increase in equity allocation...
This gets our attention – as a contrarian signal worth noting...
When Wall Street money managers get "overweight equities" in the portfolios they manage, it signals that bullish sentiment is prevailing. But a record pace like this suggests sentiment has shifted to downright frothy...
The other instances of money managers getting this bullish this quickly were in March 2002 during what was a late "relief rally" during the dot-com bust, ahead of an ultimate bottom in October 2002... August 2009, during the very early stages of the financial-crisis rebound... and in the summer of 2019... when folks all began to get excited about the Federal Reserve possibly cutting rates for the first time in a decade.
It's hard to argue with the idea of buying during the latter two times (setting aside our hindsight that the COVID-19 crash hit less than a year after the last of those cases).
The point is, though, similar periods of extreme bullishness weren't always followed by straight shots higher for the overall market. At the very least, these were all pivotal moments in the market over the long term.
Let's put all this in context...
The AI boom has been running more or less full speed ahead for almost four years now... Lately, a lot of folks in the market have been piling into leading AI stocks and the same tech names, while the rest of the market has underperformed them.
And now, greed is in the air for tech and AI stocks and not much else. Both Wall Street and retail investors are behaving like it.
Starting in the middle of April, the headline indexes have moved higher powered by tech and AI names. And steadily fewer stocks have risen rather than fallen.
The advance/decline lines for the S&P 500, Dow Jones Industrial Average, and Nasdaq-100 are all moving lower.
What's next? Well, eventually, fear follows greed. And with most of the returns this year being in one part of the market, if sentiment turns there, look out.
That's why it's not a bad idea to take some profits in "parabolic winners" whose share prices may be extremely detached from their fundamentals. I'm not "crying wolf" for the fun of it, but because we've seen how short-term moves like this frequently turn out.
As we mentioned earlier this week, that's what Stansberry Innovations Report editor John Engel did, alerting subscribers to book gains of 1,183% and 851% in partial positions in AI-infrastructure businesses – Ciena (CIEN) and Lumentum (LITE), respectively.
But there are two sides to this story, too. We'll leave you with Mike's summation in his Select Value Opportunities issue today...
It's impossible to know how this split will resolve...
If the Strait of Hormuz remains closed in the months ahead, oil prices could move much higher. They could hit $150 per barrel or more. (They're at $110.88 per barrel right now.) And that could stoke inflation even further.
Kraft Heinz CEO Steve Cahillane recently told Bloomberg that consumers are "literally running out of money at the end of the month." If gas prices move higher, it could crimp the economy and stocks even more.
Eventually, surging energy prices could also begin curtailing the AI building boom that so many momentum investors are counting on. We expect their exit from AI's winners to be swift at some point...
On the other hand, if the situation in Iran is amicably resolved, stocks could soar on expectations that energy prices (and inflation) will ease. In that scenario, we'd start buying undervalued stocks as they trigger momentum "buy" signals.
And while overvalued stocks are making headlines, the market's divergence leaves a lot of undervalued stocks beneath the surface.
Stay tuned to our editors and analysts as they continue to recommend these overlooked opportunities.
New 52-week highs (as of 5/19/26): Alpha Architect 1-3 Month Box Fund (BOXX), Chord Energy (CHRD), Costco Wholesale (COST), Datadog (DDOG), Dorchester Minerals (DMLP), Enterprise Products Partners (EPD), Kinder Morgan (KMI), Coca-Cola (KO), Marathon Petroleum (MPC), Omega Healthcare Investors (OHI), ONEOK (OKE), Plains All American Pipeline (PAA), Pembina Pipeline (PBA), and Valero Energy (VLO).
In today's mailbag, feedback on yesterday's Digest, which in part discussed housing affordability... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"Hi Nick, I would respectfully take issue with your statement that 'It simply isn't true that no one is able to afford a house'. Technically, you are correct. There are certainly a few who are able to buy a house, often with cash. But for younger people trying to break into home ownership, it is an unmitigated disaster. Here in Vermont where I live, the average house is just far out of reach for a shockingly high percentage of young people. A 32 year old friend was finally able to buy a house, but only because it needed major renovation. She received a large loan/gift from her parents, and by working two jobs she was just barely able to qualify for a mortgage. And she is one of the lucky few. I would guess about 75% of people in their 30's are unable to buy a home here, given the current housing market." – Subscriber Charlie L.
All the best,
Corey McLaughlin
Baltimore, Maryland
May 20, 2026
