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July 22, 2026
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Market analysis
July 13, 2026
U.S. growth and corporate profits remain resilient, while renewed Iran conflict, higher inflation and shifting interest rate expectations create near-term market uncertainty.
Number of the week:
21.9%
The year-to-date return of the MSCI Emerging Markets Index, which measures performance in global growth economies.
Term of the week:
Producer Price Index (PPI)
A family of indexes that measures the average change over time in selling prices received by domestic producers of goods and services. PPIs measure price change from the perspective of the seller. This contrasts with the Consumer Price Index, which measures price change from the purchaser's perspective.
Quote of the week:
Consumers continue to spend despite higher prices. Retail sales and restaurant bookings remained strong in June, and a New York Federal Reserve (Fed) survey showed households expect to increase spending 5% over the next year. Lower-income households also reported firmer spending plans and more confidence in making debt payments. Low jobless claims and a stable labor market continue to underpin consumer demand, despite inflation outpacing wage growth and lower savings rates.
― Bill Merz, CFA,Senior Vice President, Head of Capital Markets Research and Portfolio Construction, U.S. Bank
U.S. Bank Asset Management Group
Daniel Farley, CFA
Chief Investment Officer
Kaush Amin, CFA
Head of Private Market Investing
Chad Burlingame, CFA, CAIA
Head of Impact Investments
Thomas Hainlin, CFA
National Investment Strategist
Robert Haworth, CFA
Senior Investment Strategy Director
William Merz, CFA
Head of Capital Markets Research
William Northey, CFA
Senior Investment Director
Terry Sandven
Chief Equity Strategist
Global economy
Quick take: Consumer spending and service sector growth continue to support the U.S. economy, while renewed U.S.-Iran attacks and faster global producer price increases keep energy and inflation risks in focus.
- Renewed U.S.-Iran attacks kept the Strait of Hormuz in focus over the weekend. President Trump said Sunday that the waterway is open to commercial traffic, but the U.S. and Iran continued to exchange attacks. Iran also expanded strikes across Gulf states after new U.S. military action near the strait. The conflicting claims leave shipping uncertain along a route that carries roughly 20% of global oil supply. Brent crude rose more than 6% last week, adding pressure to energy costs, although market pricing still suggests investors expect the inflation effect to fade.
- Consumers continue to spend despite higher prices. Retail sales and restaurant bookings remained strong in June, and a New York Federal Reserve (Fed) survey showed households expect to increase spending 5% over the next year. Lower-income households also reported firmer spending plans and more confidence in making debt payments. Low jobless claims and a stable labor market continue to underpin consumer demand, despite inflation outpacing wage growth and lower savings rates.
- Service businesses reported slower but still positive growth in June. The Institute for Supply Management's services index eased during the month but remained above the level that signals expansion, due to accelerating new orders. Its employment measure improved after two months of contraction, adding another constructive signal for the labor market. Businesses reported higher costs, although price pressures eased from May. Together, the data point to moderate domestic growth rather than a sharp slowdown.
- Producer prices accelerated across several major economies. Japan's Producer Price Index rose 7.1% from a year earlier in June, while eurozone producer prices increased 5.9%. China's producer prices rose 4.1% in May. These increases could lift business and consumer costs, particularly if energy prices remain elevated. At the same time, Japan's machine tool orders jumped 52.8% from a year earlier, the strongest growth in five years. Strong equipment demand suggests many businesses still expect healthy activity and are willing to invest.
Equity markets
Quick take: U.S. large-company stocks advanced last week while international and small-company shares declined. Rising profit forecasts and resilient demand remain constructive, but high expectations make second quarter company guidance especially important.
- Stock markets delivered mixed results amid geopolitical uncertainty last week. The S&P 500 gained 1.3%, while the Russell 2000 Index of smaller U.S. companies fell 0.6%. Developed international stocks declined 1.4%, and emerging-market stocks lost 1.7%. Only five of the S&P 500's 11 sectors advanced. Information Technology rose 3.4%, Energy gained 3.2% and Communication Services added 2.4%; investors favored companies tied to artificial intelligence (AI) and higher energy prices.
- Year-to-date gains remain broad despite last week's uneven trading. Major stock indexes have returned between 10.3% and 21.9% in 2026, supported by continued economic growth and rising corporate profits. The S&P 500 has gained 11.3%, while emerging-market stocks lead with a 21.9% advance. Ten of the S&P 500's 11 sectors remain positive for the year, and five have gained more than 10%. Energy leads with a 23.9% return, followed by Information Technology at 19.8%.
- Rising profit forecasts continue to drive stock prices. Analysts raised S&P 500 companies’ profit expectations to $341 per share in 2026 and $399 in 2027, which would represent growth of about 24% and 17%, respectively. Share prices equal roughly 22 times projected 2026 earnings and 19 times projected 2027 earnings. Stronger profit estimates, rather than higher prices for each dollar of earnings, have powered much of the market's advance.
- Second quarter reporting begins with elevated analyst expectations. Analysts project S&P 500 sales growth of 11.9% and earnings growth of 23.1% from a year earlier. About 6% of index companies report this week, including JPMorgan Chase, Bank of America, Wells Fargo, Citigroup and Goldman Sachs. Their results will offer evidence on consumer spending, business activity and credit quality. We expect AI infrastructure spending and consumer demand to remain strong, while company forecasts will help determine whether investors rotate among sectors rather than retreat from stocks.
Bond markets
Quick take: Treasury yields rose last week as investors considered the possibility of Federal Reserve rate increases. High-quality bonds declined, but high-yield bonds and bank loans held up better.
- Federal Reserve officials are keeping their attention on inflation. Minutes from the Fed's June meeting showed that officials unanimously held interest rates steady, although a few saw a case for an increase. Several participants did not consider current policy restrictive enough to slow inflation decisively. That view reduces the likelihood of near-term rate cuts unless employment conditions weaken. By the end of last week, market prices reflected expectations for one or two quarter-point rate increases this year.
- Treasury yields rose as investors prepared for potentially higher policy rates. Short- and long-term Treasury yields increased about 0.05% last week. Longer-term Treasury prices fell most, about 1.2%, because their fixed payments become less attractive when new bonds offer higher income, while U.S. investment-grade bonds declined 0.3%. Treasury yields now range from about 4.0% to 5.0%, depending on maturity, giving investors an opportunity to align bond repayment dates with future spending needs.
- Municipal and high-quality corporate bonds also declined. Investment-grade corporate bonds fell 0.9% last week, while municipal bonds lost 0.5%, largely because Treasury yields moved higher. Both categories retain healthy finances and offer added income. High-quality corporate bonds ended the week with yields about 0.7% above Treasuries. After adjusting for the federal tax exemption on municipal bond income, municipal yields stood about 1.7% above Treasury yields. Investors should weigh that added income against each bond's credit and interest rate risks.
- Lower-quality bonds performed better during the week. High-yield corporate bond prices were roughly unchanged, and bank loans gained 0.5%. These investments react less to Treasury yields, so confidence in companies' ability to repay debt plays a larger role in price changes. The additional income offered by high-yield bonds relative to Treasuries remains near the low end of its historical range. That signals relatively high prices and leaves less room for investor disappointment, even though current pricing also shows investor confidence in corporate finances.
Real assets
Quick take: Higher oil prices lifted commodities and North American energy infrastructure last week, while real estate and utilities declined as rising Treasury yields increased competition from bonds for income-focused investors.
- Publicly traded real estate declined as Treasury yields rose. Real estate investment trusts (REITs) fell 0.7% last week. The properties in broad REIT indexes generate operating income equal to about 5.9% of their value, near the historical average. However, higher Treasury yields offer income-focused investors more alternatives and can raise financing costs for property owners. Expectations that the Fed may increase rates later this year added pressure. Apartment, residential and office REITs recorded the largest declines, while industrial REITs outperformed. Despite last week’s setback, the category maintains positive performance for 2026; demand for income has helped offset changing interest rate expectations.
- Energy infrastructure gained, but utilities pulled the broader category slightly lower. North American energy infrastructure rose 3.0% as higher oil prices benefited pipeline and energy-transportation companies. Global utilities declined 0.8%, because rising bond yields gave investors an alternate source of steady income. The offsetting moves left global infrastructure slightly lower for the week. This mix of energy-sensitive pipelines and interest rate-sensitive utilities has helped smooth returns in recent months. It also limits the category's reliance on a single outcome from the U.S.-Iran conflict, although a prolonged disruption to energy shipping could still create larger price swings.
- Commodities rose as renewed conflict lifted energy prices last week. Broad commodity markets gained 3.9%, led by a 6.1% increase in Brent crude oil. The U.S. revoked waivers that had allowed Iranian oil sales, while Iran attacked ships in the Strait of Hormuz and continued exchanging strikes with the U.S. over the weekend. Gold also rose as investors sought assets that have often held their value during geopolitical stress. Copper gained 1.5%, supported by improving manufacturing activity and demand for industrial 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 Institute of Supply Management Manufacturing Index, also called the Purchasing Manager's Index, measures manufacturing activity based on a monthly survey, conducted by the Institute for Supply Management, of purchasing managers at more than 300 manufacturing firms.
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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