Markets Navigating Geopolitics, Rates, and a Narrow Leadership

1. Markets Holding Up Despite Ongoing Geopolitical Uncertainty Markets continue to navigate a challenging geopolitical backdrop, with the conflict in Iran remaining unresolved and headline-driven volatility persisting. Despite this uncertainty, equities remained relatively resilient last week, with the S&P 500 and Nasdaq gaining 0.9% and 0.5%,¹ respectively, supported largely by continued earnings strength. Corporate results this quarter have remained better than expected, with earnings growth tracking near 27.5%,² helping offset concerns surrounding the war, inflation, and interest rates.

Consumer earnings also provided a relatively constructive read on spending trends. Companies such as Target, Walmart, TJX Companies, Ross Stores, and Deckers Brands generally delivered solid same-store sales results, though guidance commentary remained somewhat cautious given the uncertain macro backdrop. Going forward, investors will continue to closely monitor oil prices and interest rates, as sustained increases in either could begin to pressure the consumer more meaningfully.

On the technology side, Nvidia once again delivered standout results, with revenue growing 85% year-over-year.³ Importantly, management continued to speak positively about demand trends across the broader AI ecosystem, including cloud, industrial, enterprise, and physical AI applications, reinforcing confidence in the long-term AI infrastructure theme. Separately, the U.S. government also announced roughly $2 billion of investment support for the quantum computing industry, further highlighting the increasing strategic importance of next-generation computing technologies.

2. Rates and Market Breadth Remain Key Areas to Watch Toll Brothers delivered a solid quarter, particularly against relatively lowered expectations, offering another indication that the housing market remains stable despite ongoing affordability pressures. However, the broader challenge for housing continues to be interest rates. Mortgage rates near 6.5% remain restrictive,⁴ and it will likely require rates moving back into the 5% range to drive a more meaningful improvement in housing activity and larger discretionary projects.

While much of the market’s attention remains focused on oil prices and geopolitical developments, interest rates have become equally important to monitor. The 30-year Treasury yield moved up to roughly 5.2% last week, its highest level since 2007,⁵ reflecting continued concerns around inflation, fiscal dynamics, and elevated capital spending tied to the ongoing AI investment cycle. At the same time, Kevin Warsh was officially sworn in last week, adding another layer of uncertainty around the future path of monetary policy.

Against this backdrop, market leadership has remained relatively narrow during the conflict, with performance concentrated in select areas of technology and AI-related beneficiaries. Going forward, investors will be looking for broader market participation to reemerge, which likely requires either a clearer resolution to the geopolitical backdrop or some moderation in the current concentration within large-cap technology leadership.

3. Select Opportunities Emerging Within Technology While the broader market environment remains challenging, particularly amid ongoing geopolitical uncertainty and elevated rates, there continue to be selective opportunities developing within technology. Software has experienced a significant repricing over the past year as investors reassess which business models may ultimately be disrupted by AI. While some companies likely face real long-term pressure, the broad-based selloff has also created opportunities in higher-quality businesses that remain critical to enterprise infrastructure and workflows.

One area that continues to stand out is cybersecurity. Despite improving performance off recent lows, many cybersecurity companies still have not meaningfully participated in the broader technology rally over the past year. Given the increasing importance of digital security, enterprise resiliency, and AI-related infrastructure protection, the group appears relatively well-positioned from both a fundamental and valuation standpoint.

At the same time, interest around quantum computing continues to build following recent government support for the industry and increased investment surrounding IBM’s quantum roadmap. Conversely, parts of the semiconductor space appear more difficult after substantial rallies. Overall, the technology sector still offers opportunities, though investors may need to become increasingly selective as leadership evolves.

4. Upcoming Looking ahead, investor focus will shift toward next week’s inflation data, particularly the core PCE deflator, which is expected to come in around 3.2% year-over-year. Following firmer CPI and PPI readings, markets will be closely watching whether inflation pressures remain sticky, as the outcome could influence both interest rate expectations and broader market sentiment in the near term.

5. Fixed Income U.S. Treasury yields were mixed across the curve last week, with modest net changes driven by geopolitical tensions involving Iran. By Friday’s close, the 2-year Treasury was 3 basis points higher, while the 10-year & 30-year Treasury fell by 4 and 8 basis points, respectively.⁶

Credit markets proved resilient with tightening evident across both the investment-grade and high-yield sectors. Investment-grade spreads moved 3 basis points tighter to +106, while high-yield spreads narrowed 9 basis points to +313. In the municipal market, tax-exempt yields were higher by 4-6 basis points across the curve.⁷

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Return for Selected Indices⁸

Sources:

1. Bloomberg: As of May 24, 2026 ↩︎
2. Bloomberg: As of May 24, 2026 ↩︎
3. Bloomberg: As of May 24, 2026 ↩︎
4. Bloomberg: As of May 24, 2026 ↩︎
5. Bloomberg: As of May 22, 2026 ↩︎
6. Bloomberg: As of May 25, 2026 ↩︎
7. Bloomberg: As of May 25, 2026 ↩︎
8. Bloomberg. As of May 24, 2026 ↩︎

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