Week ended May 29, 2026: an "everything better" (almost) week!

Markets were better nearly across the board last week, as the “just around the corner” agreement to reopen the Strait of Hormuz remains………well, just around the corner.  Let’s hope there is truth to this because investors are already pricing it in, demonstrating again that there is no stopping momentum in global risk markets.   Nearly all stock markets were better on the week, led by Japanese and emerging markets stocks.  Global bonds also settled down, a relief to many (including me).   Yields were lower across the entire U.S. Treasury curve, even though prices at the short end remain under a cloud in most developed market economies as central banks face the quandary of what to do next.  I suppose we will know soon enough, with the next series of important central bank meetings slated for the week of June 15^th.  In the U.S., most pundits believe that new Fed Chair Kevin Warsh will have his hands full addressing rising inflation while at the same time handling President Trump, who still rather remarkably (and stupidly) believes that the Fed should cut its policy rate. 

As far as economic news, most focus last week was on Personal Consumer Expenditures for April, which were released on Thursday (see BEA Personal Income and Outlays, April).  The change in headline and core PCE came in more or less as expected, with headline PCE increasing 3.8% YoY, and core (ex-energy, ex-food) increasing 3.3% YoY.  Keep in mind that the Fed target (similar to the target of most developed market central banks) is 2.0%/annum, so inflation remains well elevated.  Economists seemed quite rightly more concerned about some of the other details in the PCE report, including things like: inflation-adjusted consumer spending only rose 0.1% in April, disposable income fell 0.5% (third straight month of declines), and the savings rate fell to a near four-year low of 2.6%. 

This data might be interpreted as mixed/good news as far as inflation, but bad news as far as the consumer and overall affordability crisis that is clearly affecting Mr. Trump’s poll ratings.  1Q2026 GDP was also revised down in the U.S. to 1.6%/annum (from 2.0%/annum), according to the second GDP read from the BEA (here).  

This confluence of stock markets continuing to gap higher even as global economic and geopolitical news remains mixed at best gives me the heebie-jeebies.  I trimmed a number of positions around the edges into strength on Friday, including many of my tech runners.  The reductions in positions were modest, because that’s the way I roll, but it still reflects my uneasiness.  Time will tell if I am a genius or just one more old-timer that is gradually losing his mojo.  Nonetheless, I simply can’t reconcile the one-way march higher day after day in U.S. stock with the clouds gathering around the global economy, a view that many investors have been espousing for months on end (and have been completely wrong).  I simply couldn’t help myself, and I feel slightly better having taken just a touch of risk off the table. 

Markets last week

• Global stocks marched higher yet again last week, led by Japanese stocks (+4.7% WoW) and emerging markets stocks (+3.9% WoW).  Perhaps not surprisingly, these are the two best performing stock market indices so far in 2026, demonstrating that international diversification pays off.  European stocks were flat to lower, and Chinese stocks were lower on the week.  Both remain laggards as their performance trails many international stock markets thanks to the effects of the U.S. – Iran conflict.   

• U.S. stock indices were strong across the board, led by the tech-heavy NASDAQ.  Semi-conductor stocks continue to surge, driven by expected A.I. demand.  The S&P 500, the DJIA and the NASDAQ Composite all closed the week at record highs (again), and the Russell 2000 hit a record high mid-week before giving up some of its weekly gains.  The DJIA closed above 51,000 for the first time.

• U.S. Treasury yields were lower across the maturity curve, as bond investors also had a good week.  Although prediction markets continue to suggest that the next Fed policy move will be an increase in the Federal Funds rate (rather than a decrease), this is now not expected until early 2027.  So much can happen between now and then!  Corporate bonds also improved with lower underlying yields driving prices higher.

  
  

• Oil prices were steadily lower all week as a potential agreement between the U.S. and Iran drew ever closer.    There was good news for American consumers at the pump, with regular gasoline prices declining $0.16/gallon WoW, to $4.39/gallon (source AAA).

• Gold was higher on the week, and Bitcoin was lower.  In the currency markets, the Dollar was a touch weaker.    

See updated tables in the Markets section below.

Private credit article

I published an article on my website last week about private credit, a topic that has moved off the front page as other more relevant things have “seized the moment” (e.g. US and Iran, high oil prices, high inflation, etc).  If you missed this article, you can find it here: “Private Credit: Déjà Vu”.   It’s a rather long read that looks at parallels between the meltdown of the structured finance market (CDOs, CMOs, CLOs) in 2007-08 – which triggered the Great Financial Crisis (“GFC”) – and the private credit market today.  I had a front row seat during the GFC, so I recall it rather vividly from my perspective as a banker. 

MARKET DATA AND TABLES

Below are tables of key indices and asset prices that have been updated for the past week.

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