In the last two weeks, inflation pressures intensified as the Consumer Price Index rose notably, driven by higher shelter and gasoline costs, while the 30-year Treasury yield reached levels not seen in nearly two decades. Geopolitical tensions and trade developments, including U.S.-China tariff adjustments and concerns about oil supply disruptions, also shaped market sentiment. Let’s dive in!
CPI Inflation Update: The Consumer Price Index (CPI) rose 0.6% in April 2026, with a 12-month increase of 3.8%. Energy prices rose 3.8% in April, driving much of the monthly increase, while food and shelter costs also showed notable gains. Core inflation (excluding food and energy) increased 0.4% for April and 2.8% annually.
Treasury Yields Surge: The 30-year Treasury yield hit 5.13%, reaching almost 20-year highs since June 2007, while the 10-year yield rose to 4.59%, the highest since May 2025. Rising yields reflect inflation concerns and hawkish Fed policies, tightening financial conditions globally.
Factory Production Growth: U.S. factory production rose 0.6% in April, driven by motor vehicles and technology amid an AI spending boom, marking the largest increase in 14 months. However, supply chain disruptions related to the U.S.-Iran conflict pose risks to near-term manufacturing and pricing outlooks.
Fed Policy Shift: Markets now see near-zero odds of a 2026 rate cut, with rising chances of hikes by early 2027. This reflects concerns over potential stagflation in the U.S., where inflation remains elevated amid slowing growth and weakening labor conditions.
Inflation Outlook: Inflation is projected to rise to 6% in Q2 2026, driven by geopolitical tensions and energy prices, with elevated levels persisting through midyear before easing by year-end. Growth forecasts were lowered, with GDP expected at 2.2% for 2026 and unemployment estimated near 4.5%.
U.S.-China Trade: China and the U.S. agreed in principle to reduce tariffs on select goods and to establish trade and investment councils. They also plan to ease agricultural trade barriers and confirmed agreements on American aircraft sales and related parts supply.
Historical Market Comparison: The Nasdaq 100’s 140% gain since ChatGPT’s launch in 2022 is modest compared to the dot-com bubble’s 1,090% surge. Unlike the dot-com era’s ultra-high valuations and speculative capital raising, today’s AI leaders grow through internal cash flow with more stable valuations and diversified business models.
New Fed Chair: Kevin Warsh has been approved by the Senate as the new Federal Reserve Chair, succeeding Jerome Powell. Warsh faces challenges with a divided FOMC and a tough economy, making near-term interest rate cuts unlikely.
Global Oil Concerns:Global oil inventories are rapidly falling due to Middle East supply disruptions, nearing critical lows that could lead to price spikes and economic impacts if the Strait of Hormuz remains closed, according to the IEA, UBS, JPMorgan, and Rapidan Energy forecasts.
Over the next two weeks, markets will focus on upcoming GDP, corporate profits, consumer spending, and trade data as investors continue evaluating the strength of the economy and the path of future Fed rate decisions. U.S. markets will be closed Monday for Memorial Day, and investors will continue monitoring tensions with Iran and disruptions in the Strait of Hormuz for their impact on oil prices and energy costs. Have a safe holiday weekend!
SFM Market Commentary: 5/22/26
In the last two weeks, inflation pressures intensified as the Consumer Price Index rose notably, driven by higher shelter and gasoline costs, while the 30-year Treasury yield reached levels not seen in nearly two decades. Geopolitical tensions and trade developments, including U.S.-China tariff adjustments and concerns about oil supply disruptions, also shaped market sentiment. Let’s dive in!
Over the next two weeks, markets will focus on upcoming GDP, corporate profits, consumer spending, and trade data as investors continue evaluating the strength of the economy and the path of future Fed rate decisions. U.S. markets will be closed Monday for Memorial Day, and investors will continue monitoring tensions with Iran and disruptions in the Strait of Hormuz for their impact on oil prices and energy costs. Have a safe holiday weekend!
Footnotes