Weekly Market Report: May 15th, 2026
Contrasting market forces of robust earnings/capex and inflation waves from the war in Iran war netted a fresh record high for the S&P but only marginally higher as markets took a breather at the end of the week. Equity markets reflected pressure from rising bond yields moving notably higher thanks to persistent inflation and no end in sight to the war. Increasing pipeline (PPI) and headline (CPI) inflation drove 10yr yields 21bps higher to 4.59% while 2yr yields closed up 19bps as probabilities of Fed rate cuts continued to fall. With no breakthroughs on Iran, developed (-1.9%) and emerging (-4.2%) equity markets lost more meaningful ground.
Financial Market Highlights
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The U.S. stock market has bucked historical inflation regime trends thanks to an AI driven surge in earnings and tech capex, instead choosing to look past geopolitical, commodity, and economic stress as temporary. Bond markets have responded more predictably with long UST yields breaching 5% for first time since 2007.
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The clock continued to tick last week on the Iran war and commodity prices as political/fiscal costs mount, world oil inventories draw down, and negotiations remain in stalemate.
Economic Highlights
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Key economic reports on the week saw energy prices drive CPI inflation up to 3.8%, healthy April retail sales, and marginally deteriorating small business sentiment.
Bullish Asset Allocation Narratives
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Robust U.S. corporate fundamentals including strong earnings growth, upward revisions to street estimates, and positive guidance from management.
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AI infrastructure builds, earnings momentum (ROI), and projected productivity gains.
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Growth conducive policies across fiscal (elevated deficit spending) and regulatory landscapes.
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Resilient consumption with low unemployment and under levered consumer balance sheets.
Bearish Asset Allocation Narratives
- Energy price shock and associated risks to inflation (bond yields) and growth (demand destruction).
- AI momentum given current equity market concentration, narrow earnings breadth, a shift toward heavy asset/capex intensive business models, circular investment deals, increased debt financing, and disruptive forces on some business models and pockets of the labor market.
- Tariff (trade) policy uncertainty and impacts on business uncertainty, price levels, and supply chains.