Week Ahead: Geopolitics Continues to Dominate

While investors watch Iran’s response to the US peace proposal, markets are in a fascinating phase right now with many questioning the gap between stock market record highs and oil prices which remain elevated above $100 and well above pre-war levels. It seems we have now moved from early panic when the conflict kicked off, through some sort of stabilisation and acceptance of risk, to now an earnings‑led and data resilience, especially in the US. Rates and FX remain in that middle phase, while equities have moved into that final phase. Put differently, rates have taken their cues from inflation, stocks much more so from the earnings and growth outlook.

What has also grabbed the headlines have been some of the tech moves. Memory shortages and AI capex stacked with broader silicon enthusiasm have taken chipmakers parabolic – Micron was up more than 37% last week alone – and this saw the Nasdaq print more record highs. (as a side note, Alphabet could become the biggest company in the world by market cap.) History tells us price action of this type will mean revert at some point, with momentum funds and Asian retail buying all adding to the bullish mix and prone to correction. It also presumes the Trump/Xi meeting will likely lead to some agreement on current tech curbs, so those talks could be key for markets at the end of the week.

In macro, April non-farm payrolls hit +115K, the second straight beat. Wall Street took it as proof the labour market is fine without rate cuts, which the Fed seems to be increasingly happy to oblige. But the real news is that policymakers are looking down the barrel at new leadership, and little reason to cut rates any time soon. We note Jerome Powell’s final day as Federal Reserve Chair on Friday, with Kevin Warsh taking over. The push and pull for the dollar is ongoing as interest rate differentials and China and Japan FX policy are hurting USD but US tech/AI and economic exceptionalism are bullish USD. US Treasury Secretary Bessent is in Japan on Tuesday before he leaves for China on Wednesday, so we will be watching for any headlines Tuesday p.m Japan time regarding FX and USDJPY.

In Brief: Major Data Releases of the Week

Tuesday, 12 May 2026

US CPI: April headline inflation is forecast to rise 0.6% m/m and 3.7% y/y from 0.9% and 3.3% respectively. Core, which strips out volatile food and energy prices will print modestly higher than prior at 0.3% and 2.7%. The March annual headline reading was the highest since May 2024, lifted by the war-driven energy shock. The Fed will focus on secondary passthrough, which may take some time to show up.

Thursday, 14 May 2026

President Trump/Xi Beijing Summit: This is the first of four planned meetings between the two Presidents in the next 12 months, a historic frequency. Easing tensions are key with geopolitical and trade issues to the fore. Agricultural purchases, tech and rare earth curbs will also be in focus with both sides wanting to be seen as ‘winners’.

US Retail Sales: The headline figure is forecast to print at 10k, marginally lower than the prior 14.1k, and the jobless rate is seen steady at 6.7%. The economy is being hit from higher energy prices and US tariffs. The recent BoC meeting left options open with rates at the lower end of neutral.

Disclaimer: The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our client. No representation or warranty is given as to the accuracy or completeness of this information and therefore it shouldn’t be relied upon as such. Any research provided does not have regard to specific financial situations, needs or investment objectives. Vantage accepts no responsibility for any use that may be made of these comments and for any consequences that result. Consequently, any person acting on it does so entirely at their own risk. We advise any readers of this material to seek professional advice where necessary. Without the approval of Vantage, reproduction or redistribution of this information isn’t permitted.