Super IPOs "siphoning off funds," the midterm election curse, rising yields... U.S. stocks face a summer full of crises.

U.S. stocks welcomed the unofficial "summer prelude" in record-breaking fashion, but this summer is far more complex than it appears on the surface.

Super-sized IPOs draining market liquidity, high oil prices undermining consumer confidence, historical trends of midterm election years weighing on the stock market, and structurally elevated bond yields—four risks are approaching simultaneously, prompting Wall Street professionals to warn about market moves in the coming months.

The S&P 500 closed last Friday just 0.4% below the all-time high set on May 14, marking its eighth consecutive weekly gain—the longest streak since 2023—and is up 9.2% year-to-date. Despite ongoing U.S.-Iran tensions blocking the Strait of Hormuz and sharply rising oil prices pushing up inflation, the strong performance of the technology sector has dominated market sentiment. The S&P 500 information technology sector has soared 18.1% this year, far outpacing the broader market, with tech giants like NVIDIA, Alphabet, Amazon, and Apple serving as the core drivers of the index's rise.

However, the strength of tech stocks is masking a series of cracks. The University of Michigan consumer sentiment index dropped to a historic low of 44.8 this month; the S&P 500 consumer discretionary sector is up only 2.3% this year, well behind the overall index; and even as signs of easing U.S.-Iran tensions sent oil futures tumbling on Sunday, multiple strategists point out that the factors behind the rise in long-term Treasury yields have surpassed mere geopolitical conflict—structural interest rate pressures cannot be reversed by a simple diplomatic statement.

A market consensus is emerging: today's U.S. stock market boom is built on three pillars—profit surges, crowded tech positions, and abundant liquidity—but all three will face tests this summer. Investors are entering a season with an unusually high density of risks.

Super IPO Wave: The Hidden “Liquidity Vacuum”

One of the most watched market risks this year comes from a batch of upcoming super-sized IPOs.

SpaceX officially filed its prospectus with the U.S. SEC on May 20, aiming to raise at least $80 billion, with a possible valuation exceeding $1.5 trillion. Its listing is expected by the second week of June, making it the first of three major tech companies to go public. OpenAI plans to list as early as September, with Anthropic possibly following in October.

"The upcoming batch of super-sized IPOs may siphon off capital from the rest of the financial market," said Bob Elliott, co-founder and CEO of asset management firm Unlimited, in an interview with MarketWatch:

"It’s been a long time since the market has seen supply this big, and that puts extra downside pressure on the overall stock market."

Charles Schwab’s chief trading and derivatives strategist Joe Mazzola pointed out that some investors may choose to sell their biggest winning stocks to free up funds for these IPOs. Spectra Markets President Brent Donnelly wrote in a May 21 report that this is a "potentially bearish factor, but not enough to warrant reducing positions or shorting," emphasizing that "it’s not tradable on its own merits."

Deutsche Bank Securities strategist Parag Thatte’s research sets a quantitative boundary: under a supply-demand framework, putting the largest single IPO into the model individually could drop the market by about 1%; if listings are highly concentrated, or new stocks crowd out other index constituents, the actual pressure could be somewhat higher. However, he also notes that issuance waves historically have been “companions” to bull markets, not bull market enders, as they usually occur during periods of strong demand—three months after issuance waves, the median S&P 500 return is about 8%.

Notably, Elliott also warns that this IPO wave coincides with some major tech companies cutting back on stock buybacks—tech giants are shifting funds from buybacks and dividends to AI capital expenditures, meaning an important demand-side support is weakening concurrently. Positioning data show that large-cap tech is in the 93rd percentile—the most crowded sector in the market—so when IPOs prompt a rebalance, this is likely the first point of loosening.

Oil Prices & Consumption: Undercurrents Beneath the Boom

High oil prices are the most direct consumer-impacting risk this summer.

West Texas Intermediate crude is at $92 a barrel, with the U.S. average gasoline price at $4.552 a gallon—up sharply from $3.196 a year ago. International Energy Agency Director Fatih Birol recently warned that U.S. crude inventories are dropping at a “very fast” rate, and Mizuho Securities commodity expert Robert Yawger confirmed the trend in a May 18 report, noting inventories won't run out in the short term.

Consumer confidence has already been significantly damaged. Interactive Brokers senior economist José Torres told MarketWatch in a phone interview that the University of Michigan confidence index hitting the historic low of 44.8 is driven largely by rising gasoline prices and the resulting cost-of-living pressure, especially among middle- and lower-income groups. "We're facing higher inflation this summer," Torres said.

On Sunday, U.S. officials revealed that the U.S. and Iran are close to a deal to reopen the strait, which sent oil futures tumbling and U.S. Treasury futures modestly higher. But Trump said he's in no rush to sign an agreement, leaving some uncertainty about the final outcome. Charles Schwab’s head of macro research and strategy Kevin Gordon believes the stock market "is reflecting doubts about consumer performance and whether the economy can withstand a long-term blockade, but these concerns are being masked by strong tech stock performance."

The S&P 500 consumer discretionary sector is up only 2.3% this year, a stark contrast to tech’s 18.1% rise, already reflecting structural consumer weakness.

Midterm Election Curse: Summer Has Always Been the Weak Season

Another warning line for technical strategists comes from historical patterns.

According to Dow Jones market data, in midterm election years, the S&P 500’s average return from late April to late September is -2.8%. In history, during the same period, 1930 saw a loss of over 25%, 1974 dropped 29.6%, and 2002 fell 24.3%. Even excluding those three extreme years, the remaining sample only barely turned positive, at 0.006%.

Hirsch Holdings CEO and editor of the Stock Trader’s Almanac, Jeffrey Hirsch, explained in a phone interview that in midterm election years, "political conflict at some point outpaces concern for corporate earnings and the economy," as the battle for control of Congress leads to uncertainty and the ruling party often loses seats. This political uncertainty, combined with the typical seasonality weakness of summer, exerts systemic pressure on the stock market during this period. Infrastructure Capital Advisors CEO Jay Hatfield added, "Greed during earnings season, fear after earnings season"—once out of the earnings window, investors turn focus to macro risk, political landscape, and geopolitical tensions.

Nevertheless, Hatfield points out one potential outcome of this midterm election: a divided Congress—Democrats are generally seen as having a clearer path to flipping the House, while Republicans currently control the Senate with a 53–47 majority. He notes, "Divided government is generally good for the stock market" because it makes it harder for either side to push for major tax hikes or policy changes, maintaining relatively stable corporate tax rates.

It's notable that current S&P 500 performance diverges significantly from the historical weakness of midterm election years—the index is up 3.7% since May. Meanwhile, the Cboe Volatility Index (VIX) remains at 16.7, unusually high given the strong market rally. Nomura strategist Charlie McElligott points out that this may signal underlying concerns beneath the surface calm.

Structural Yield Dilemma: Even a U.S.–Iran Truce Won't Save the Bond Market

The bond market’s pressures go much deeper than the "war inflation" narrative.

Research from ING, Goldman Sachs, Barclays, and other strategists points to one conclusion: The recent surge in U.S. long-term Treasury yields is primarily driven by “real yields” that exclude inflation factors, with inflation expectations playing a relatively minor role. The U.S. 10-year Treasury yield approached 4.70% last week; even though it edged lower on Monday with expectations for a U.S.–Iran deal, strategists widely believe the structural pressure of high rates won’t dissipate as a result.

Jonathan Hill, head of U.S. inflation strategy at Barclays, clarifies, "Attributing this global duration selloff to inflation fears doesn’t match with actual market pricing." The true drivers are rising debt levels, potentially higher neutral rates, and the funding demand brought by artificial intelligence. He also notes that the U.S. 10-year breakeven inflation rate is still about 50 basis points below the Fed’s aggressive rate hike period in 2022, and the 5-year, 5-year forward breakeven rate is around 2.2%, virtually unchanged from last December—confirming that inflation expectations are not the main cause.

Fiscal pressures are hard to ignore. Goldman Sachs head of real funding rate sales Phillip Lee says, "Persistent fiscal deficits, more Treasury supply, and concerns over debt sustainability increasingly explain why investors demand higher compensation for holding long-term bonds," and he expressly states, "Rates will continue to rise." In addition, the AI investment boom is part of the analysis: tech companies massively consume semiconductors and build data centers, while issuing their own debt in bulk, exacerbating inflation pressure in the short term—though the long-term productivity gains from AI remain to be realized.

J.P. Morgan Wealth Management chief investment strategist Phil Camporeale maintains optimism for U.S. stocks, believing tech sector valuation multiples are lower than at the start of 2026 and investors are not in an "overheated" state. He expects the Fed will likely keep rates unchanged, with yields and inflation pressures peaking in the second quarter.

But Muriel Siebert & Co. chief investment officer Mark Malek is more cautious: "The bond market is not reacting to any single news item, but is repricing a structural issue that cannot be solved by press releases or diplomatic pauses."

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