The Profit Margin: May 26, 2026
Statistic of the Week
Beyond the energy markets, the conflict between the U.S. and Iran has also contributed to volatility in global debt markets. This volatility, coupled with rising geopolitical uncertainty, has prompted some countries to reduce their holdings of U.S. Treasuries. China has lowered its Treasury holdings to the lowest level since September 2008. Japan, the largest foreign holder of U.S. debt, also reduced its holdings by approximately $47 billion to $1.19 trillion.
Global Perspective
In an effort to assist countries disproportionately impacted by the closure of the Strait of Hormuz, the U.S. has extended a waiver on sanctions related to purchases of Russian crude oil for another 30 days. The United Kingdom also eased sanctions, specifically on Russian diesel and jet fuel imports, allowing the U.K. to increase purchases of refined fuel products from India.
Market Moving Events
Tuesday: Consumer Confidence
Thursday: Jobless Claims, Durable Goods Orders, New Home Sales
Friday: GDP (revision), Personal Income and Spending, PCE Index
Commentary
The consumer is feeling worse than ever and domestic equity markets are near or at all-time highs. The Iran conflict is causing inflation to accelerate and bond yields have reacted – with the 30-year Treasury hitting levels not seen since before the Great Financial Crisis.1 This is the environment investors are grappling with as they move past the “unofficial start to summer.”
Last week, all three major U.S. equity averages advanced. The DJIA was the week’s leader, helped by the announcement that the U.S. government would direct funding toward companies positioned in the quantum computing space.2 IBM, a Dow component, is a significant beneficiary.3 The DJIA reached a record high during the week and finished up 2.13%.4 The S&P 500, which has now gained approximately 3.7% in May alone, rallied 0.88% and is currently on its longest winning streak since 2023, at eight consecutive weeks.5 The Nasdaq, the year-to-date performance leader, brought up the rear, but still posted a gain of 0.45% for the week.6
This week, investors will receive the PCE Index for April. Analysts expect the Fed’s preferred inflation gauge to rise 0.3% for the month and 3.4% on a year-over-year basis.7 Persistently elevated inflation has contributed to higher bond yields globally and continues to weigh heavily on consumer sentiment. Historically, during midterm election years, the S&P 500 has declined an average of 2.8% in the period of April through September.8 With equities trading near record highs, investors are increasingly questioning whether inflation, sentiment, and seasonal market trends will pressure markets in the months ahead.
Chart of the Week
Consumer sentiment fell to an all-time low in May, marking the third consecutive monthly decline. The index dropped to 44.8 from 49.8 in April, with the deterioration largely attributed to inflation concerns and elevated energy prices.
Source Materials
Market Moving Events:
MarketWatch.com
Chart of the Week:
Clearnomics,
University of Michigan, CNBC.com
Statistic of the Week:
CNBC.com
Global Perspective:
The Economist
Commentary:
1. Barron’s
2. Investor’s Business Daily
3. Investor’s Business Daily
4. Bloomberg
5. MarketWatch.com, Bloomberg
6. Bloomberg
7. Investor’s Business Daily
8. MarketWatch.com