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Midterm Elections and Investment Outlook
July 22, 2026
Market News
Market analysis
June 22, 2026
Markets enter the week supported by consumer spending, earnings growth and bond income, while Middle East diplomacy, energy supply recovery and central bank policy remain key risks.
Number of the week:
$80.57
The increase in the Consumer Price Index in May compared to a year earlier.
Term of the week:
Brent crude
The benchmark used for the light oil market in Europe, Africa and the Middle East, originating from oil fields in the North Sea between the Shetland Islands and Norway.
Quote of the week:
Large companies continue to drive a meaningful share of market performance. The 20 largest companies in the S&P 500 have outperformed the broader index by nearly three-to-one so far this year. These companies represent close to half of the index’s market value and remain important to overall returns. Several large technology and semiconductor companies have posted especially strong gains as investors continue to reward businesses tied to artificial intelligence, data centers and advanced computing.
― Terry Sandven, Portfolio Manager, Chief Equity Strategist, U.S. Bank
U.S. Bank Asset Management Group
Daniel Farley, CFA
Chief Investment Officer
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
William Northey
Senior Investment Director
Terry Sandven
Chief Equity Strategist
Global economy
Quick take: U.S. consumers continue to support economic growth, even as higher gasoline prices pressure household budgets. Middle East diplomacy and improving Gulf shipping activity may ease energy costs if the fragile Strait of Hormuz reopening holds.
- Middle East developments remain central to the inflation outlook. Shipping activity through the Strait of Hormuz improved late last week after reports of a U.S.-Iran understanding, but the reopening remains fragile. Weekend reports indicated that U.S.-Iran talks continued in Switzerland, Iran disputed the Strait’s status and Israel-Hezbollah ceasefire efforts remained unsettled. A meaningful share of global oil and gas moves through the waterway. A durable reopening would help reduce energy costs and inflation pressure, while renewed conflict could quickly reverse last week’s oil price decline.
- Consumer spending accelerated in May despite higher gasoline prices. Retail sales rose 6.9% from a year earlier, supported by steady employment, rising asset values and continued spending by higher-income households. Higher gasoline prices account for some of the increase, but the retail sales control group, which excludes autos, gasoline, building materials and restaurants, also rose. Control group sales suggest consumers absorbed higher fuel costs without broadly pulling back on other purchases. Lower- and middle-income consumers remain more exposed to higher prices, but low jobless claims suggest the labor market continues to provide support.
- Housing activity remains constrained by elevated borrowing costs. Mortgage rates near 6.5% continue to limit homebuyer affordability and builder activity. Housing starts and building permits declined in May, while pending home sales rose modestly from a year earlier but remained well below the pace reached before mortgage rates increased. Housing may contribute less to near-term growth, but limited supply and steady employment should help prevent a deeper pullback.
- Global growth remains uneven but constructive. U.S. consumer and business spending continue to support expansion, while higher energy costs create a larger drag in more import-dependent economies. Eurozone industrial production improved in April but remains modest, China’s retail sales declined from a year earlier in May and Japan reported strong core machine orders. Lower energy prices could ease inflation pressure if sustained. Purchasing manager surveys this week should provide a timely update on global activity.
Equity markets
Quick take: Stocks moved higher last week, with lower oil prices, resilient U.S. data and firm earnings expectations supporting investor confidence. Leadership remains concentrated among the largest companies, but earnings growth continues to provide the market’s main foundation.
- Global equities advanced last week, with stronger gains outside the United States. The S&P 500 gained 1.0% and the Russell 2000 rose 1.2%, while international developed markets gained 1.2% and emerging markets rose 4.4%. Growth-oriented sectors led the advance, including Information Technology, Industrials and Communication Services. Energy, Real Estate, Healthcare and Consumer Staples declined. The sector split shows investors favored areas tied to innovation, business investment and economic expansion, while they reduced exposure to more defensive or rate-sensitive areas.
- Large companies continue to drive a meaningful share of market performance. The 20 largest companies in the S&P 500 have outperformed the broader index by nearly three-to-one so far this year. These companies represent close to half of the index’s market value and remain important to overall returns. Several large technology and semiconductor companies have posted especially strong gains as investors continue to reward businesses tied to artificial intelligence, data centers and advanced computing.
- Interest rates, inflation trends and earnings expectations continue to support equities. Last week’s oil price decline helped reduce near-term inflation concerns and the Federal Reserve (Fed) kept interest rates unchanged, emphasizing price stability. Stocks can continue to advance if inflation eases, borrowing costs remain manageable and corporate profits keep growing. The main risk is that renewed energy pressure or stronger inflation force investors to reconsider how much they are willing to pay for future earnings.
- Earnings remain the next major test for the market. Analysts currently expect S&P 500 earnings to grow 23% in 2026 and 16% in 2027. This week, key off-cycle earnings releases include FedEx, Micron, and Darden Restaurants. The second quarter reporting season begins in mid-July, with early results from large banks and capital markets firms. Investors will watch whether companies confirm the themes that supported first-quarter results: Resilient consumer spending, stabilizing industrial demand, ongoing artificial intelligence investment and durable profit margins.
Bond markets
Quick take: Bonds produced modest gains last week as Treasury yields stayed relatively stable. The Federal Reserve held its target interest rate steady, while investors focused on inflation risks, future policy choices and attractive income opportunities.
- The Federal Reserve kept the federal funds rate range unchanged at 3.50% to 3.75% but reinforced its inflation focus. Investors focused less on the decision than on communication from the first meeting led by Chair Kevin Warsh. The Fed shortened its policy statement, removed some forward-looking guidance and emphasized the need to return inflation toward its long-term target. Markets interpreted the message as a sign that policymakers may raise rates later this year if inflation remains elevated.
- Other major central banks face similar tradeoffs. The European Central Bank raised rates earlier this month, and the Bank of Japan followed with a 0.25% increase last week. The Bank of England held rates steady but stressed its focus on preventing inflation from becoming persistent. These decisions show that policymakers are still balancing slower growth against inflation risk. If energy prices continue to decline, central banks may gain more flexibility. If energy prices rise again, they may have less room to support growth.
- Corporate bond conditions remain stable, although valuations leave less cushion. Moody’s reported that nine rated companies defaulted in May, down from 11 in April and 16 in March. The trailing 12-month default rate for lower-rated corporate debt remains near long-term norms. Investor demand has helped contain corporate borrowing costs, supporting financial conditions and giving companies access to capital. However, investor compensation for taking corporate credit risk remains low by historical standards, so careful security selection remains important.
- Bonds continue to offer meaningful income for diversified investors. Treasury, corporate and municipal bonds, bank loans and other income-producing bond categories generated modest returns last week. Current yields remain more attractive than they were for much of the past decade, giving investors more potential income even when price gains are limited. Diversified fixed income exposure can help balance portfolios if equity volatility rises, while still providing steady cash flow.
Real assets
Quick take: Real assets declined last week as energy prices fell and rate-sensitive property shares weakened. Faster Gulf supply recovery could reduce energy inflation if shipping conditions continue to normalize.
- Publicly traded real estate investment trusts (REITs) declined 3.3% last week after the Fed reinforced its commitment to price stability and markets increased the odds of a rate hike later this year. Higher borrowing costs can pressure property values and financing activity, especially for real estate categories that rely heavily on debt. Data center REITs held up better, with demand for computing capacity tied to artificial intelligence remaining strong. REITs have still performed well this year, supported by income potential and the ability of some property types to grow cash flow.
- Global infrastructure was steady; industrial strength offset energy-related weakness. Gains among industrial infrastructure companies helped balance declines in energy infrastructure after oil prices fell. Energy infrastructure includes pipelines, storage facilities and processing assets that often earn fees based on volumes rather than daily oil price moves. North American oil production has continued to rise, and depleted inventories may need to be rebuilt if shipping conditions improve. These assets can provide differentiated returns because they connect to essential services such as energy transportation, utilities, communications and transportation networks.
- Commodity prices fell as oil markets reacted to improving supply expectations. Broad commodity exposures declined 2.2%, led by an 8.7% drop in Brent crude oil. Kuwait signaled a faster recovery path, targeting 2 million barrels per day of production within a week after completing key repairs sooner than expected. Other Gulf producers are also preparing to rebuild output as shipping conditions improve. Faster supply recovery could lower fuel costs and reduce inflation pressure, although renewed conflict would keep prices vulnerable.
- Metals performance remained mixed. Gold was steady while silver fell 3.0% and copper declined 1.0%. Silver can move with both industrial demand and investor demand for defensive assets, which can create uneven short-term performance. Copper remains up 12.3% this year, supported by global growth, power grid investment, construction and data center demand. Long-term demand tied to electrification and digital infrastructure remains supportive, even when weekly price moves reflect changing investor sentiment.
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 Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index and is representative of the U.S. small capitalization securities market.
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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