May 2026 Newsletter

Waterstone May 2026 Newsletter – Lessening Resilience/Reindustrialization!

Uniquely Waterstone for our unique Waterstone clients 

In this Issue: 

• Markets hold despite oil disruption
• Reindustrialization
• Different jobs
• The energy cost of Ai
• The cost of raising a child

Quick view from Assetmark:

Stocks:  The S&P and Nasdaq touch new highes, driven by strong Ai-led earnings (approx. +15%).  However, exclude the Ai 7, the broader market is flat to down.

Bonds:  Yields are a bit jumpy.  Treasury buybacks are supporting market liquidity (means govt is buying back the bonds to hold their price.) Credit markets are stable but sensitive to inflation and policy shifts.

Economic Outlook: Consumer spending continues to hold up despite weakening sentiment. Early signs of strain are emerging with rising delinquencies (missing debt payments) and cost pressures.

Geopolitics & Commodities: Oil surges and gold remains firm, reflecting ongoing demands for hedging.  Disruption of the Strait of Hormuz.

Moving forward -  reindustrialization

The economy is in the early stages of reindustrialization.  The growth is focused on areas including advanced technology, clean energy, components such as batteries and solar, semiconductors and defense related equipment. These will likely continue to advance with artificial intelligence.

These are the desired jobs!  The US is the second largest manufacturer in the world. Current manufacturing workers ration is 1of 12 workers vs 1943 ratio of 1 of 3.

Current manufacturing job growth happens where the US excels: aerospace, batteries, semi-conductors, computer equipment.  These are areas with high profit requiring intellectual strength. 

Low margin manufacturing is mining, auto manufacturing, assembling a drug, making daily use items (broom, clothes, furniture).  These opportunities may be replaced by mechanical systems.

US services with high margins: education, healthcare, banking, insurance, R&D, software development, Ai development.

Is our education system preparing students with skills for these new jobs?

_{CNR.com/insights, Economic perspectives: Domestic Manufacturing Making a comeback?}

The energy cost of Ai:   A standard Google search uses roughly 0.3 watt-hours (Wh) of electricity.  A ChatGPT request requires approximately 2.9 Wh, 10 times more electricity. Hence, giant data centers will need to store.  Electricity generation will need to expand. Add electric vehicles to the mix and power generation will require expanded strategies as well.

_{https://knowledge.wharton.upenn.edu/article/the-hidden-cost-of-ai-energy-consumption}

Assetmark in Rochester –  Josh and Kathy attended the April visit by American Capital and AIM, Algorithmic Investment Models absorbing our strategist, Beaumont.

American Capital’s core message – Strong active process with time outperforms passive index process. Investors impatience is their own worst and expensive enemy!

Algorithmic Investment Models is machine-learning methodology (evolving Ai practices over the past decade) that does best when there are building trends.  They are enthused about current changes.  “This is our kind of market!” 

Thanks to our Assetmark consultant, Matt Liamero for his ongoing commitment to bringing strategists live and in-person to us in Western NY.