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Market analysis
May 11, 2026
Global markets remain constructive as resilient earnings, steady consumer spending and income opportunities offset energy market stress from the Iran war.
Number of the week:
4.3%
The U.S. unemployment rate in April.
Term of the week:
Treasury Borrowing Advisory Committee
An advisory committee composed of representatives from institutions such as banks, asset managers and insurance companies that presents observations and recommendations on the overall strength of the U.S. economy and debt management issues to the Treasury Department.
Quote of the week:
First quarter results reinforce investor confidence. With 89% of S&P 500 companies reporting, revenues have risen 10.4% compared to a year ago, modestly above expectations for 9.6% growth. Earnings have increased 25.3%, well ahead of the 13.0% growth analysts expected at the start of the reporting season. Technology spending tied to artificial intelligence remains a major driver, with semiconductor, networking, memory and data center companies still benefiting from large investment plans.
― Terry Sandven, Portfolio Manager, Chief Equity Strategist, 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: The U.S. economy continues to expand despite energy market stress from the Iran war. Steady hiring, solid consumer spending and strong business investment support growth, although higher oil prices and weak sentiment keep inflation risks in focus.
- The Iran war remains the main near-term macroeconomic risk through energy prices and inflation expectations. Reuters reported that Iran sent a response to a U.S. proposal through Pakistan, with the current phase of talks focused on ending hostilities and improving shipping safety through the Strait of Hormuz. Two vessels passed through the waterway last week, but renewed Iranian drone activity targeting Persian Gulf countries demonstrated an ongoing the threat to regional shipping. The Strait of Hormuz normally carries about one-fifth of the world’s oil supply, so even partial disruption can raise fuel costs, pressure household budgets and complicate central bank decisions.
- The U.S. economy entered the Iran war with enough strength to absorb some of higher energy cost pressure. Employers added 115,000 jobs in April, and monthly job gains have averaged 76,000 so far this year, a clear improvement from the roughly 10,000 per month pace in 2025. Unemployment held steady at 4.3%, while average hourly earnings rose 3.6% from a year earlier. Economists expect this week’s Consumer Price Index report to show April inflation of 3.7%, with higher energy prices playing an important role.
- Consumer data show a split between broad spending trends and household confidence. High-frequency retail measures suggest consumers are still spending, especially higher-income households, even as the University of Michigan Consumer Sentiment Index fell to its lowest reading on record in its preliminary May survey. Global business surveys show a similar divide. Activity expanded in the United States, Japan, the United Kingdom, China and India, while France, Germany and Spain weakened as elevated energy costs weighed on Europe. Global purchasing manager surveys suggest large investments to build out artificial intelligence are boosting activity in the U.S. and Asia, helping offset growth headwinds from the Iran war.
Equity markets
Quick take: Stocks continue to benefit from strong earnings, broader market participation and durable technology investment. Elevated valuations, higher energy costs and geopolitical headlines may increase volatility, but corporate profit growth still supports equity markets.
- Stocks advanced again last week, with investors focusing on earnings strength rather than geopolitical uncertainty. Major global equity markets moved higher, led by a 6.9% gain in emerging markets and a 2.4% increase in the S&P 500. Fast-growing sectors such as Information Technology, Communication Services and Consumer Discretionary led the market, while Energy, Financials, Healthcare, Consumer Staples and Utilities lagged. Year-to-date, the S&P 500 has gained 8.5%, showing that investors continue to reward companies with strong sales, improving profits and clear growth plans.
- Earnings remain the strongest support for stocks. Analysts expect S&P 500 earnings to grow 21% in 2026 and 15% in 2027. The index trades near 22 times expected 2026 earnings and 19 times expected 2027 earnings, which sits above long-term averages but below prior market peaks. Those valuations leave little room for error, but they can remain supported if companies continue to deliver strong profit growth and inflation does not move sharply higher.
- First quarter results reinforce investor confidence. With 89% of S&P 500 companies reporting, revenues have risen 10.4% compared to a year ago, modestly above expectations for 9.6% growth. Earnings have increased 25.3%, well ahead of the 13.0% growth analysts expected at the start of the reporting season. Technology spending tied to artificial intelligence remains a major driver, with semiconductor, networking, memory and data center companies still benefiting from large investment plans. Investors are watching whether that spending can translate into durable revenue growth over time.
- Consumer-related company earnings will help clarify the market outlook. Higher-income households continue to spend on travel, services and premium goods, while value-focused behavior has pressured some discretionary categories. Home Depot, Lowe’s, Walmart and Target report next week, giving investors a fresh read on whether consumer strength remains broad enough to support earnings growth through the summer.
Bond markets
Quick take: Treasury yields were stable last week after the U.S. Treasury reaffirmed its plans to maintain recent bond issuance levels. Most fixed income asset classes generated modest positive returns and provide yields that can generate meaningful regular income for investors.
- Bond markets stayed relatively calm last week. Treasury yields moved little and income supported positive returns across many fixed income categories. Treasury officials also reaffirmed plans to maintain medium- and long-term government bond issuance levels for the next several quarters. That decision helps reduce near-term supply pressure in the bond market, although longer-term deficit concerns remain an important issue for investors. The Congressional Budget Office expects federal deficits to remain around 5% to 6% of the gross domestic product over the next decade, keeping government borrowing needs in focus.
- Inflation remains the main reason the Federal Reserve (Fed) may keep interest rates steady. Several Fed officials highlighted that price pressures remain above the central bank’s 2% target, and some noted that inflation may come from more than higher energy prices alone. Services inflation, which includes areas such as housing, insurance, travel and health care, remains higher than policymakers would prefer. The Iran war adds another layer of uncertainty, because energy shocks can lift headline inflation even when broader demand is slowing.
- Most bond categories still delivered favorable returns last week. Broad bond exposures that include Treasuries, government-backed mortgages and high-quality corporate bonds gained 0.3%. Lower-rated corporate bonds gained 0.1%, while investment-grade and high yield municipal bonds rose 0.2% and 0.4%, respectively, before considering tax benefits. Those returns were modest, but they reinforce the role bonds can play in generating income and helping balance portfolios when equity markets face periodic volatility.
- Several non-traditional income categories performed well last week. Bank loans, which often pay interest that adjusts with short-term rates, gained 0.3%, suggesting investors still have appetite for income-producing assets with more credit risk. Non-government mortgage bonds and certain loan-backed securities also gained. These areas can provide additional income and diversification, although they require careful selection because their risks differ from traditional high-quality bonds. Overall, fixed income remains attractive for investors seeking steady income, portfolio balance and a more reliable return source than cash over a multi-year period.
Real assets
Quick take: Real assets produced mixed results last week; real estate gained, infrastructure declined and commodity returns varied by category. Elevated energy prices, strong metal demand and artificial intelligence-related property investment continue to shape real asset returns.
- Real estate investment trusts (REITs) gained, led by hotels, offices and industrial properties. Hotel REITs rose 4.6%, offices gained 3.8% and industrial properties advanced 2.3%. Data center REITs declined 1.9% for the week, but they remain up 34.3% year-to-date as companies continue to invest heavily in artificial intelligence infrastructure. Large technology companies are expected to spend roughly $710 billion by the end of 2026, a 72% increase from last year, which supports demand for data centers, power access and related real estate.
- Commercial real estate still faces challenges, but fundamentals remain healthier than headlines often suggest. Delinquencies were flat across property types last month, although they remain somewhat elevated relative to the past three years. Broad REIT exposures have still generated 3.7% net operating income growth over the past year. Property income compared with market value sits near 6.0%, which is close to historical norms but less compelling than some current bond income opportunities. That mix supports selective real estate exposure rather than a broad, one-size-fits-all approach.
- Global infrastructure fell 1.7% last week, with energy infrastructure weakening alongside lower oil prices. Even after that pullback, global infrastructure remains up 9.2% this year, outperforming U.S. large-company stocks. Utilities and pipelines make up a large portion of the asset class, and many benefit from regulated revenue, long-term contracts and inflation-linked pricing. Those features can support stable income over time, even when short-term market returns vary.
- Commodity prices also diverged. Brent crude oil fell 6.9% last week, but prices remain elevated and sensitive to Iran war 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 tied to 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 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. 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.
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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