From the Desk - Economic Commentary
Scott Hofer, Member Strategies Manager - 5/22/2026
U.S. stocks opened higher to start the day with the Dow, S&P 500, and Nasdaq pointing to gains after a strong prior session. The main driver behind the positive open is improving investor sentiment regarding geopolitical risk, as the U.S. and Iran have signaled progress in talks aimed at easing Middle East tensions. At the same time, Treasury yields have eased slightly after recent volatility, which is supportive for equities, particularly interest-rate-sensitive sectors. However, gains are being tempered by rising oil prices and ongoing uncertainty around energy supply, as crude continues to climb on supply concerns, and by broader macro risks like inflation and rate expectations.
The University of Michigan’s final May 2026 consumer sentiment index fell sharply to 44.8, down from 49.8 in April and below the preliminary 48.2 reading, marking a third straight monthly decline and a record low. Consumer pessimism was driven largely by rising gasoline prices tied to Middle East supply disruptions, with the cost of living remaining a top concern and a growing share of households reporting financial strain. Both current conditions and expectations deteriorated, with notable weakness among lower-income and non-college households. Importantly, inflation expectations moved higher, with 1 year expectations rising to 4.8% and long-run expectations to 3.9%, reflecting concerns that price pressures will broaden beyond energy. Overall, the report signals deeply negative consumer sentiment alongside rising inflation anxiety, a combination that could weigh on spending and complicate monetary policy.
The Conference Board reported that the U.S. Leading Economic Index (LEI) rose slightly by 0.1% in April 2026 to 97.4, rebounding modestly after a 0.6% decline in March. Overall, the index still fell 0.7% over the past six months, and both its six and twelve month growth rates remain negative, signaling fragile economic conditions ahead. The April increase was driven mainly by higher stock prices and a pickup in building permits, but these gains did not fully offset earlier weakness. The Conference Board noted that consumer-side pressures are likely to weigh on growth, even as business investment in areas like AI and energy provides some support. Overall, the LEI continues to point to modest growth and a slowing economy, with GDP expected to expand around 1.7% in 2026.
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