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July 22, 2026
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Market analysis
June 15, 2026
Markets enter the week supported by resilient growth, rising earnings expectations and solid bond income, while Middle East tensions keep inflation risk in focus.
Number of the week:
4.2%
The increase in the Consumer Price Index in May compared to a year earlier.
Term of the week:
SpaceX
An aerospace, telecommunications and artificial intelligence company founded by Elon Musk in 2002, which had its initial public offering last week.
Quote of the week:
U.S. consumer spending continues to help offset higher prices. Johnson Redbook reported same-store retail sales were up about 9.0% from a year earlier throughout May, supported by steady hiring and low weekly jobless claims. Wage growth did not keep pace with inflation in May, which reduces purchasing power for many households. Even so, savings built in recent years and access to credit can help some consumers manage temporary price increases.
― Bill Merz, CFA, Senior Vice President, Head of Capital Markets Research and Portfolio Construction, U.S. Bank
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: A new U.S.-Iran agreement may ease energy and inflation pressures if the Strait of Hormuz reopens to shipping. U.S. consumers continue to spend, and economists expect global growth to improve later this year.
- U.S.-Iran diplomacy shifted from escalation risk toward potential energy market relief. The agreement calls for an end to U.S.-Iran hostilities, reopening of the Strait of Hormuz and removal of the U.S. naval blockade, with a formal signing ceremony expected Friday in Switzerland. The Strait remains critical because roughly 20% of global oil and gas normally moves through the waterway. If shipping activity normalizes, lower energy costs could support consumers, businesses and central banks seeking slower inflation. However, implementation details remain important, and unresolved issues tied to Iran’s nuclear program and regional security keep markets sensitive to new headlines.
- Inflation accelerated in May as higher energy costs reached consumers and businesses. The U.S. Consumer Price Index, a broad measure of household inflation, rose 4.2% from a year earlier, while the measure excluding food and energy rose 2.9%. Producer prices, which track costs businesses pay, rose faster at 6.5% overall and 4.9% excluding food and energy. Energy drove much of the increase, but inflation remains above the Federal Reserve (Fed)’s comfort zone.
- U.S. consumer spending continues to help offset higher prices. Johnson Redbook reported same-store retail sales were up about 9.0% from a year earlier throughout May, supported by steady hiring and low weekly jobless claims. Wage growth did not keep pace with inflation in May, which reduces purchasing power for many households. Even so, savings built in recent years and access to credit can help some consumers manage temporary price increases.
- Global growth remains uneven but constructive. The United Kingdom reported its first monthly decline in economic output since August 2025, with industrial, manufacturing and services activity slowing in April. Japan’s industrial production also cooled, rising just 2.0% from a year earlier. Economists still expect growth to improve later this year across the United Kingdom, Japan, the eurozone and China, assuming energy pressures gradually ease.
Equity markets
Quick take: Stocks gained modestly last week despite inflation concerns, Middle East risks and swings in technology shares. Strong earnings expectations, stable interest rates and investor interest in innovation continue to support equities.
- Global stocks advanced modestly last week despite elevated day-to-day volatility. Major broad-based indexes gained between 0.7% and 1.0%, while nine of the 11 S&P 500 sectors finished higher. Sector returns ranged from 0.4% to 3.0% among winners. Communication Services fell 1.9% and Energy declined 0.4%, making them the only sectors to lose ground for the week, showing that gains remained fairly broad despite uneven leadership.
- Middle East headlines shaped market direction throughout the week. Early escalation concerns pushed oil prices higher and weighed on stocks as investors worried that higher fuel costs could keep inflation elevated. Sentiment improved later after reports pointed to possible U.S.-Iran progress. Falling crude oil prices helped ease inflation concerns, Treasury yields moved lower, and stocks rallied into Friday’s close. The 10-year Treasury yield ended the week at 4.48%, which remains manageable for equities.
- Technology and semiconductor shares continued to drive market swings. Investors reduced exposure to some of the strongest artificial intelligence (AI) companies early in the week, with prices looking stretched and bond yields rising. Shares of Nvidia, Broadcom, Micron and other chipmakers pulled back before buyers returned later in the week. Investors still see durable demand from data centers and AI infrastructure, but the week showed that expectations leave less room for disappointment.
- The SpaceX initial public offering strengthened investor appetite for innovation-oriented companies. The offering became the largest public listing in history and supported demand for disruptive technology, aerospace and AI-related growth themes. Analysts also continue to raise S&P 500 earnings forecasts, with expected growth of 23% in 2026 and 16% in 2027. Stock prices remain modestly elevated compared with expected profits, so continued earnings growth remains essential.
Bond markets
Quick take: Bonds delivered steady returns last week; Treasury yields declined slightly and many corporate and municipal bonds held firm. Investors expect the Fed to keep rates steady while monitoring inflation and growth.
- The Fed meeting will be the main focus for bond investors this week. Markets broadly expect policymakers to leave short-term interest rates unchanged, so Fed Chair Kevin Warsh’s first press conference will carry added weight. Investors will listen for comments on growth, inflation and future policy choices. Stronger hiring and faster inflation give the Fed room to wait, but they also keep the possibility of higher rates later this year on the table and raise questions about how quickly policy could respond if price pressures persist.
- Other major central banks face similar inflation tradeoffs. The European Central Bank raised rates last week, prioritizing price stability. Investors expect the Bank of Japan to raise rates 0.25% this week and possibly again later in 2026. The Bank of England also meets this week, but weaker growth may lead policymakers to hold steady for now while keeping future rate increases under consideration.
- Most bond categories produced modest price gains and steady income last week as Treasury yields moved lower. High-quality bonds benefited most directly from the decline in yields. Lower-rated corporate bonds delivered returns similar to investment-grade bonds, showing investors remain comfortable with borrowers’ ability to repay debt. Municipal bonds now trade closer to historical norms and can offer meaningful after-tax income for investors in higher tax brackets.
- Select mortgage-related bonds can add income for diversified portfolios. Non-agency mortgages, which are home loans not backed by the government, offer attractive yields and benefit from stronger lending standards than those seen before the global financial crisis. Larger down payments and more disciplined underwriting improve the backdrop. Investors still need selectivity, but these bonds can broaden income sources beyond traditional government and corporate bonds.
Real assets
Quick take: Real estate and infrastructure posted gains last week, with lower Treasury yields helping income-oriented assets. Copper rose on growth and AI demand, while oil and precious metals declined.
- Publicly traded real estate continued to build on strong year-to-date gains. Retail, industrial and health care properties, which together make up nearly half of the U.S. real estate investment trust (REIT) market, returned 4.4%, 3.0% and 3.0% last week, respectively. Lower Treasury yields reduced borrowing-cost pressure and made real estate income more competitive with bonds for investors comparing income opportunities across portfolios and changing market conditions.
- Property fundamentals still favor areas with steady demand and growing cash flow. Industrial REIT net operating income rose 5.6% from a year earlier in the first quarter, healthcare increased 5.4% and retail gained 3.9%. These measures track property-level income after operating expenses. Steady tenant demand, disciplined new supply and rising rents can help support long-term returns even when short-term market performance varies.
- Global infrastructure gained 1.7% last week, helped by broad strength across utilities, industrial companies and energy infrastructure. Many infrastructure businesses provide essential services, which can support durable revenues across economic cycles. Utilities benefit from rising electricity demand and regulated price increases, while pipelines continue to gain from North American energy production. Improving manufacturing surveys could also help industrial infrastructure companies linked to broader economic activity.
- Commodity prices moved in different directions. Brent crude oil fell 6.7% last week as investors responded to progress in U.S.-Iran negotiations and the possibility of improved shipping through the Strait of Hormuz. Gold and silver also declined, suggesting demand for defensive assets cooled after a strong multi-year rally. Copper rose, supported by its role in electronics, construction and the data centers needed to run AI systems.
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 Consumer Price Index is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. It is one of the most frequently used statistics for identifying periods of inflation or deflation.
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).
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