Weekly Investment Update (05/15/2026)

The next  Weekly Investment Update will be published on May 29 due to the Memorial Day holiday.

Equity markets extended their recent rally into midweek, buoyed by stronger corporate earnings, resilient retail sales, and optimism around U.S.-China trade talks, which we discuss in more detail below. The S&P 500 and Nasdaq both reached fresh highs on Thursday, while the Dow Jones Industrial Average moved back above 50,000, closing above that level for the first time since mid-February. Leadership remained concentrated in growth and AI-related stocks. Friday’s pullback left markets little changed on the week, but it does underscore investor sensitivity to geopolitical risks over the weekend that can swiftly unsettle even a supportive fundamental backdrop.

Inflation remains a source of caution. April’s data came in slightly hotter than expected though there is, so far, limited evidence that second-order effects are spreading beyond energy into broader goods and services prices. We are monitoring this dynamic closely. Markets can usually look through energy-driven swings in inflation, but signs of wider passthrough would complicate the Federal Reserve’s policy path and would likely put renewed upward pressure on bond yields.

Elevated April CPI Report to Keep the Fed Cautious on Inflation

What is happening: The April Consumer Price Index (CPI) came in slightly above consensus expectations, mainly driven by rising energy prices. Headline CPI rose 0.6% month-over-month and 3.8% year-over-year, while core CPI, which excludes food and energy, increased 0.4% in the month and 2.8% from a year prior. Higher gasoline prices accounted for much of the increase in the headline figure, rising more than 5% in April after rising 21% in March. The spillover effects from elevated energy prices are visible but still relatively narrow, with airfare prices rising for a second consecutive month and up 2.8% month-over-month in April. Similarly, food at home, or grocery prices, also accelerated last month, and could see further pressure if fertilizer prices remain elevated. Positively, core goods inflation came in softer, reflecting continued moderation in tariff passthrough.

Shelter prices, the main source of the upward pressure in the core CPI figure, were higher due to a statistical anomaly related to the 2025 government shutdown. The Bureau of Labor Statistics (BLS) collects rent data on a six-month rolling sample, and the government shutdown prevented the agency from collecting data for the October CPI report. Since the October data were unavailable, the BLS carried forward prior rent values, leaving shelter prices unchanged in October. When the sample was surveyed again in April, the one-month rent change was effectively calculated from a 12-month comparison rather than the usual six-month comparison, creating an outsized impact on the core CPI figure. Forward-looking indicators, such as the Zillow Rent Index, still point to further disinflation ahead. 

Why it matters: Higher energy prices are likely to place upward pressure on inflation again next month, while stabilization would still leave inflation well above the Federal Reserve’s 2% target. The risks of broader reflation still appear limited, in our view, as the April CPI report showed inflation pressures concentrated in energy-sensitive categories, while core goods were tame and shelter disinflation should continue following April’s statistical quirk. That said, we remain cautious about the inflation outlook given rising input costs and the risk that higher energy, transportation, and import prices flow through to consumer prices. 

Currently, the data point to a contained but uncertain inflation backdrop, and one that will keep the Federal Reserve cautious until there is clear evidence of peaking energy prices and completion of tariff passthrough. Combined with signs of the labor market stabilizing, the Fed’s focus will remain on the inflation side of its dual mandate. Importantly, longer-term inflation expectations have ticked up but remain contained, which may give the Fed some comfort in maintaining its current policy stance. We expect that tensions in the Middle East will ease over the coming months, providing some relief to energy-driven price pressures and the broader inflation backdrop, although the timing remains uncertain. As a result, in our view, any rate cuts this year are likely to come toward the back half of the year.

President Trump Travels to Beijing for High-Level Summit

What is happening: President Trump visited China this week for a summit with President Xi Jinping. CEOs of 15 major American companies accompanied Trump on the visit, including those of Nvidia, Apple, Boeing, and Goldman Sachs. Both leaders claimed progress, but there were few substantial or verified deals. For example, Trump announced an agreement to sell 200 Boeing airplanes, but China has not yet confirmed the deal. Similarly, Chinese plans to buy at least $10 billion of agricultural products per year over the next three years lacked specifics.

The more notable developments from the summit were geopolitical. Presidents Trump and Xi agreed that Iran should not be able to restrict or monetize access to global shipping lanes such as the Strait of Hormuz and that Iran must not acquire nuclear weapons. Going into the meeting, there were concerns that Taiwan could be used as a bargaining chip to get other concessions from China. While Xi warned that mishandling of the Taiwan relationship could lead to conflict between the U.S. and China, Secretary of State Marco Rubio clearly stated that America’s foreign policy position on Taiwan has not changed.

Why it matters: Geopolitically, the announcement of an understanding around the Strait of Hormuz was seen as positive since it shows alignment between Washington and Beijing around a shared interest. China is a major importer of Gulf energy, and the U.S. is trying to prevent the Iran conflict from becoming a broader inflationary shock. Even limited Chinese cooperation, such as avoiding military support for Iran or increasing purchases of U.S. energy, could help reduce escalation risk. However, China is unlikely to abandon its leverage with Iran, and the summit language appears closer to crisis-management coordination than a new U.S.-China security compact.

The Taiwan exchange was notable given China’s emphasis on Taiwan being a central red line in the relationship. The U.S. leaving the summit with no change to its foreign policy toward Taiwan is a positive development. This was especially important considering that the summit was held in China, where Xi could have applied maximum pressure. The maintenance of the status quo should at least temporarily reassure Asian allies of America’s commitment to the region, which is particularly relevant for economies focused on the global semiconductor supply chain, such as Taiwan, Japan, and South Korea. While tail risks largely remain the same, we do not believe a U.S.-China military conflict over Taiwan is likely in the near term.

From an investment perspective, the announced agreements are mostly incremental and unlikely to have a major impact on either country’s overall economy. The clearest beneficiaries would be areas tied to increased Chinese demand, such as U.S. agriculture and aircraft exports. A credible de-escalation around Hormuz would also be disinflationary at the margin. However, the bigger picture remains one of managed rivalry, and historically, Chinese follow-through on commitments to buy more U.S. products has been inconsistent at best. The summit also did not result in many details on key issues such as tariffs, semiconductor export restrictions, and rare earths. Overall, this week’s meetings can be seen as more of a setup for future meetings, and the broader macro risk surrounding U.S. China competition remain unresolved. 

The MSCI China index is down more than 3% in 2026, a notable underperformer after an outstanding year in 2025. Recently Chinese equities have struggled due to a combination of slower consumer spending growth, continued property market sluggishness, and negative sentiment related to the Iran conflict. Bessemer’s equity portfolios are maintaining an underweight to China as we continue to take a cautious approach amid the ongoing geopolitical uncertainty.