Between May 8 – 20, 2026, the 20+ year treasury bond (TLT) sold off. That sent the long-term yield up by over 5%. Although the yield eased, Fed members at the central bank expressed a willingness to raise interest rates. If inflation rates did not ease, Fed Governor Lisa Cook said, rates could go up.
Cook said that the Fed, for now, should keep rates at current levels. However, she cited tariffs, a steep rise in AI-related investments, and the Iran war as catalysts to inflation. If those factors continued to raise the consumer price index, the FOMC would need to hike rates.
Stock markets are ignoring the risk of a rate hike. Consumer goods stocks like Procter & Gamble (PG) rallied, while Coke (KO) traded near its all-time high. Bank stocks, however, resumed their downtrend. JPMorgan Chase (JPM) rallied to around $320 last month but closed at $298.58 on Wednesday. Bank of America (BAC) and Citigroup (C) also traded lower.
Watch the Strait of Hormuz
Markets are justifiably fixated on peace discussions between the U.S. and Iran. The Strait of Hormuz is still shut, causing alarming inflationary pressures for oil, fertilizers, and other oil-based goods. The good news is that U.S. strikes on Iran are limited, causing no long-lasting damage to Iran’s energy infrastructure. Once the Strait re-opens, it would speed up the recovery of an oil supply rebound.
