HOTLINE
Hotline Archive
May 15, 2026
This is John Bonnanzio with a Fidelity Monitor & Insight Hotline update for Friday evening, May 15.
There are no model portfolio trades advised.
Stock trading was messy this week as investors struggled to keep pace with the four developments warranting up-close scrutiny.
The first was President Trump’s state visit to Beijing. The second was the Strait of Hormuz. The third was the latest inflation data, and the fourth was Cerebras System’s oversubscribed IPO, whose closing-day price was 68% above its offering.
The latter briefly fanned AI optimism, though both the geopolitical and macroeconomic backdrops for U.S. (and global) markets were sobering.
While President Trump and China’s Xi Jinping agreed that the Strait of Hormuz is not for Iran to unilaterally control, President Xi appears unwilling to exert influence even though 40% of China’s crude imports (90% of Iran’s oil exports) move through the Strait. (China is attempting to make up for its shortfall by tapping reserves and increasing Russian imports, while also getting the U.S. to overlook some Chinese tankers passing through.)
With the U.S. and Iran seemingly at a stalemate, oil prices resumed their ascent: a barrel of West Texas Intermediate spiked nearly 12% this week to $105.66 a barrel.
As for inflation, it came as no surprise that consumer and wholesale prices rose. What was a surprise is the degree to which oil prices fanned inflation. The CPI accelerated to a year-over-year rate of 3.8% in April, up from 3.3% in March. (The forecast was for 3.7%.)
Inflation at the producer level (PPI) was even further above economists’ expectations. “Final demand” soared 1.4% in April, which was double the March read of 0.7%. April’s read translated into a year-over-year rate of 6%. If that figure holds (and much of that depends on the war), it does not bode well in coming months for consumer-level inflation.
For the week through Friday’s close, the three U.S. large-cap stock gauges were essentially unchanged: The Dow Industrials and Nasdaq Composite were fractionally lower while the S&P 500 rose 0.2%. On the other hand, the interest-rate-sensitive small-cap Russell 2000 fell 2.4%, whereas the Russell Midcap was off 1.5%.
Europe’s Stoxx 600 was off 0.9%, and higher oil prices also weighed on Japan’s Nikkei (down 2.1%). China’s Shanghai Composite was off a more modest 1.1%. As for the developing markets, they were less affected by oil but reacted to the prospect of higher U.S. interest rates: the dollar-denominated MSCI Emerging Markets Index slipped 0.4%. It would likely have fared far worse if not for the greenback’s strength this week.
Speaking of the dollar, on a trade-weighted basis, it rose 1.3% this week. While a stronger greenback is often viewed as a positive, its move this week resulted from several interconnected factors: 1. Higher oil prices, which increase the value of U.S. exports; 2. The connection between inflation and interest rates. Financial markets are now pricing a 50% chance (vs. 14% a week ago) that the Fed will tighten by a quarter percentage point at its December meeting; and 3. This week’s appointment of Kevin Warsh to Fed Chair. While his candidacy was initially seen as a move to undermine Fed independence, his embrace of a “strictly independent” and more responsive Fed during his Senate confirmation hearing solidified his support and helped to firm the dollar’s value.
Turning to the bond market, the week’s inflation news triggered a jump in Treasury yields. With prices moving inversely to their yields, bonds across most of the maturity spectrum (from four months to 30 years) were impacted. Yields on the 5-year and 10-year notes fared worst, having risen 24 and 21 basis points to 4.26% and 4.59%, respectively. As for the long bond, which has a 30-year maturity and is therefore the most inflation-sensitive, its yield briefly reached 5.127% on Friday – its highest level since mid-2007.
| Our model performance as of Friday's close is listed below: | ||
|---|---|---|
| Week | YTD | |
| S&P 500 | + 0.2% | + 8.7% |
| Barclays US Aggregate Bond | - 1.2% | - 0.6% |
| Income Model | - 0.6% | + 3.1% |
| G&I Model | - 0.5% | + 6.0% |
| Growth Model | - 0.1% | + 10.7% |
| Select System | + 0.3% | + 11.6% |
| Unique Opportunities Model | - 0.3% | + 9.5% |
Finally, our next regularly scheduled Hotline is Friday evening May 22.
Fidelity Monitor & Insight's Hotline is updated on Friday evenings or whenever the Dow moves 1,000 points or more in either direction.