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July 22, 2026
Market News
Market analysis
May 26, 2026
Global markets remain constructive as resilient growth, strong earnings and income opportunities offset inflation pressure, Middle East risks and uneven real asset performance.
Number of the week:
14%
The Real Estate sector’s 2026 return through May 22.
Term of the week:
Net operating income
The income-generating potential of a real estate investment, calculated by totaling revenue minus operating expenses, excluding taxes and interest.
Quote of the week:
Nine of the eleven S&P 500 sectors remain positive year-to-date, and six sectors have advanced more than 10%. That breadth gives the market a stronger foundation than a rally led by only a small group of companies.
― Terry Sandven, Chief Equity Strategist, U.S. Bank Asset Management Group
U.S. Bank Asset Management Group
William Northey
Head of Asset Management Group
Kaush Amin
Head of Private Market Investing
Chad Burlingame
Head of Impact Investments
Thomas Hainlin
National Investment Strategist
Robert Haworth
Senior Investment Strategy Director
William Merz
Head of Capital Markets Research
Terry Sandven
Chief Equity Strategist
Global economy
Quick take: U.S. growth remains resilient even as the Iran conflict keeps inflation risk in focus. Manufacturing activity improved across major economies, while higher energy costs continue to pressure services activity and consumer confidence.
- U.S.-Iran negotiations are shaping the week ahead after driving last week’s market moves. Oil prices moved sharply as investors reacted to changing odds of a peace agreement and a potential reopening of the Strait of Hormuz. West Texas Intermediate crude oil prices finished the week below $97 per barrel, down 8.4%, as markets assessed signs of diplomatic progress. Over the weekend, CBS News reported that U.S. and Iranian negotiators agreed to broad principles, including possible steps tied to highly enriched uranium and the Strait of Hormuz, while Iran said progress had been made but a signed agreement was not imminent. That mix leaves markets with a clearer diplomatic path than earlier in the month, but not yet a durable resolution.
- Economists still expect the U.S. economy to grow, but inflation forecasts have moved higher. Consensus estimates call for 2.0% annual real Gross Domestic Product, or GDP, growth by year-end and unemployment near 4.4%. Meanwhile, economists now expect inflation to reach 3.5% year-over-year in the fourth quarter as measured by the Personal Consumption Expenditure. Consumers also expect higher prices, with the University of Michigan’s one-year inflation expectation rising to 4.8% from 3.4% before the Iran war. However, consumer spending has held up despite weak sentiment, supported by a steady labor market and low weekly unemployment claims.
- Inflation outside the U.S. surprised to the downside in April, although energy costs remain a risk. Japan’s inflation excluding food and energy fell to 1.9% year-over-year, U.K. core inflation slowed to 2.5%, and Canada’s core inflation dropped to 1.5%. Those readings give global central banks some flexibility, but higher oil prices can still flow through to transportation, production and household costs if they stay elevated.
- Global manufacturing is improving while services activity is losing momentum. Preliminary May business surveys showed manufacturing expanding across the U.S., Japan, the U.K. and the eurozone. Companies appear to be building inventories ahead of possible price increases, while investment in artificial intelligence capabilities continues to support production. Services activity weakened more broadly, especially in Europe, where higher imported energy costs can weigh more directly on businesses and consumers.
Equity markets
Quick take: Strong earnings, broad market participation and artificial intelligence investment continue to support higher trending stock prices. Elevated valuations leave less room for disappointment, but profit growth continues to anchor investor confidence.
- Equity performance remains strong and broad-based, with emerging markets leading major global stock index gains between 8.6% and 20.9% this year. Nine of the eleven S&P 500 sectors remain positive year-to-date, and six sectors have advanced more than 10%. That breadth gives the market a stronger foundation than a rally led by only a small group of companies. Investors still face risks from oil prices, interest rates and geopolitical headlines, but current performance shows that earnings growth remains the dominant driver.
- Earnings expectations continue to support stock prices. Analysts now project S&P 500 earnings growth of 22% in 2026 and 16% in 2027, and the index trades near 22 times expected 2026 earnings and 19 times expected 2027 earnings. Those valuations are above long-term averages but below prior cycle peaks, which suggests investors are paying a premium for growth without yet reaching relative to past cycles. The trade-off is clear: stocks can hold up if earnings keep rising, but disappointment could create more volatility.
- First quarter results exceeded consensus analyst expectations by a wide margin. With 95% of S&P 500 companies reporting, revenues have increased 11.1%, ahead of the 9.6% estimate. Earnings have risen 27.5%, more than double the 13.0% growth analysts expected at the start of reporting season. Results point to durable corporate profitability, continued U.S. economic resilience and strong demand tied to artificial intelligence.
- Large technology companies continue to lead, but consumer trends remain mixed. Demand remains strong for specialized chips, cloud computing capacity, data centers, networking equipment and digital advertising. Companies continue to invest heavily in artificial intelligence tools and infrastructure. At the same time, retailers describe a more selective consumer. Shoppers are still spending, but they are prioritizing essentials, value and convenience over larger discretionary purchases. Higher gasoline prices, elevated borrowing costs, housing affordability challenges and persistent inflation continue to pressure confidence. Best Buy, Costco and Dollar Tree report results this week, giving investors another read on household behavior.
Bond markets
Quick take: Bond markets are adjusting to higher inflation risk and a more cautious Federal Reserve. Income remains attractive across high-quality taxable and municipal bonds, while strong demand continues to support corporate credit.
- Federal Reserve officials are placing more emphasis on inflation risk. Minutes from the Fed’s April meeting showed that many officials would consider additional rate increases if inflation stays above target. Policymakers also described the labor market as stable, even though hiring has slowed. That combination gives the Fed room to focus on price stability rather than moving quickly to support growth. Higher energy costs add uncertainty, but officials still view current policy as somewhat restrictive. Fed Governor Christopher Waller summarized the current stance by saying it is time to watch how the conflict and the data evolve. Markets now expect the Fed to hold rates steady for at least the next couple of meetings, with one 0.25% increase possible later this year.
- High-quality bond prices steadied last week. Energy-driven inflation concerns have pushed government borrowing costs higher this year, hurting bond prices. Last week, however, lower-than-expected inflation reports in several countries helped stabilize global bond markets. U.S. Treasuries also continue to attract demand from foreign investors, whose holdings rose by nearly $300 billion in the 12 months through March. That demand can help support the market even as investors debate the next move from the Fed.
- Corporate bonds performed well as investors continued to seek income. Investment grade bonds returned 0.5% last week, while high yield bonds returned 0.6%. Corporate bond valuations look elevated because investors receive less income than they have historically received for taking corporate credit risk, relative to U.S. Treasuries. Even so, demand remains strong, company balance sheets are generally healthy, default rates have been stable and current income levels remain meaningful for diversified portfolios.
- Municipal bonds remain attractive for many taxable investors. Municipal bond prices were steady last week, and valuations are near historical norms. For investors in the top federal tax bracket, tax-equivalent yields range from 6.5% to 9.5%, depending on credit quality. Strong investor demand has absorbed heavy new issuance so far this year, and defaults have been rare historically. Municipal bonds remain a core source of tax-aware income within fixed income portfolios.
Real assets
Quick take: Real assets delivered mixed results as real estate gained, infrastructure declined and commodities diverged. Energy prices, metals demand and artificial intelligence-related property investment remain the key drivers.
- Real estate investment trusts (REITs) gained last week, led by hotels, offices and industrial properties. Hotel REITs rose 4.6%, office REITs gained 3.8% and industrial REITs advanced 2.3%. Meanwhile, data center REITs declined 1.9% for the week, but they remain up 34.3% year to date. Demand tied to artificial intelligence still supports long-term data center growth because large technology companies need computing capacity, power access and specialized facilities. These companies are expected to spend roughly $710 billion by the end of 2026, a 72% increase from last year.
- Commercial real estate still faces pressure, but conditions are better than many headlines suggest. Delinquencies were flat across property types last month, although they remain somewhat elevated compared with the past three years. Broad REIT exposures have still generated 3.7% growth in net operating income over the past year. Property income compared with market value sits near 6.0%, close to historical norms. That level offers income support, but it looks less attractive than some current bond opportunities. The result favors selective real estate exposure rather than broad buying across the entire market.
- Infrastructure pulled back as energy-related assets weakened with lower oil prices. Global infrastructure fell 1.7% last week, but it remains up 9.2% this year. Utilities and pipelines represent a large share of the asset class. Many benefit from regulated revenue, long-term contracts and pricing that can adjust with inflation. Those features can support stable income over time, although short-term returns can still move with energy prices, interest rates and investor sentiment.
- Commodity prices moved in different directions. Brent crude oil fell 6.9% last week, but prices remain elevated and sensitive to U.S.-Iran developments. Gold rose 1.8%, silver gained 6.4% and copper reached new highs after increasing 5.2%. Precious metals benefited from investor demand for perceived safety, while copper continued to reflect demand from power grids, data centers and broader infrastructure investment.
This information represents the opinion of U.S. Bank. The views are subject to change at any time based on market or other conditions and are current as of the date indicated on the materials. This is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific advice or to be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation. The factual information provided has been obtained from sources believed to be reliable but is not guaranteed as to accuracy or completeness. U.S. Bank is not affiliated or associated with any organizations mentioned.
Based on our strategic approach to creating diversified portfolios, guidelines are in place concerning the construction of portfolios and how investments should be allocated to specific asset classes based on client goals, objectives and tolerance for risk. Not all recommended asset classes will be suitable for every portfolio. Diversification and asset allocation do not guarantee returns or protect against losses.
Past performance is no guarantee of future results. All performance data, while obtained from sources deemed to be reliable, are not guaranteed for accuracy. Indexes shown are unmanaged and are not available for direct investment. The S&P 500 Index consists of 500 widely traded stocks that are considered to represent the performance of the U.S. stock market in general. The Personal Consumption Expenditures (PCE) Price Index is a measure of the prices that people living in the United States, or those buying on their behalf, pay for goods and services. It is known for capturing inflation (or deflation) across a wide range of consumer expenses and reflecting changes in consumer behavior. The Michigan Consumer Sentiment Index is a monthly survey of consumer confidence levels in the United States conducted by the University of Michigan. The survey is based on telephone interviews that gather information on consumer expectations for the economy. The Conference Board is a nonprofit research organization that distributes vital economic information to its peer-to-peer business members.
Equity securities are subject to stock market fluctuations that occur in response to economic and business developments. International investing involves special risks, including foreign taxation, currency risks, risks associated with possible differences in financial standards and other risks associated with future political and economic developments. Investing in emerging markets may involve greater risks than investing in more developed countries. In addition, concentration of investments in a single region may result in greater volatility. Investing in fixed income securities is subject to various risks, including changes in interest rates, credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors. Investment in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investments in lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities. Investments in high yield bonds offer the potential for high current income and attractive total return but involve certain risks. Changes in economic conditions or other circumstances may adversely affect a bond issuer's ability to make principal and interest payments. The municipal bond market is volatile and can be significantly affected by adverse tax, legislative or political changes and the financial condition of the issues of municipal securities. Interest rate increases can cause the price of a bond to decrease. Income on municipal bonds is free from federal taxes but may be subject to the federal alternative minimum tax (AMT), state and local taxes. There are special risks associated with investments in real assets such as commodities and real estate securities. For commodities, risks may include market price fluctuations, regulatory changes, interest rate changes, credit risk, economic changes and the impact of adverse political or financial factors. Investments in real estate securities can be subject to fluctuations in the value of the underlying properties, the effect of economic conditions on real estate values, changes in interest rates and risks related to renting properties (such as rental defaults).
©2026 U.S. Bank
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