Market Insights Recap — Week of May 11, 2026

Hi, I’m Steve Orr, Chief Investment Officer for Texas Capital’s Private Bank.

Just a brief overview today: Moderate economic growth: think second gear for the economy. The tailwinds of policy and jobless recovery, they’re tempered by tariffs, wars and inflation. So, first up, let’s check on rates. The Fed is on hold. The two-year Treasury note suggests next move might be a hike in early 2027. Now, Treasury Secretary Bessent is trying to hold down rates by buying back longer bonds. Essentially the 10- and- 30-year rates, they’re capped at these levels. Incoming Fed Chair Warsh may make his best use of political capital by kind of laying low for a while, building consensus and focusing on shrinking the balance sheet. 

Inflation continues to increase. Consumer Price Index comes out on Tuesday, estimated 3.7% for April; that’s the second month above 3.3%. Producer price index is running at a 4.1% rate; now that leads CPI by about one year. M2, the growth in money supply, that’s growing at a 4.6% rate, and that leads two years. Commodity supply shocks from the Strait of Hormuz, they've not really hit here yet. In summary, the monetary impulse will continue to pull inflation higher regardless of what happens with commodities.

Now how about DC drama? On the policy front, Trump and Xi are meeting the 13th of the 15th — ignore the China upper hand narrative. China needs our market and they need discounted Iranian crude that they're not getting right now. The administration would like the Iran versus everybody war over for summer driving season — lower gas prices. More sections of the One Big Beautiful Bill are kicking in over the next year. Think opportunity zones in July, full expensing of big ticket items as companies plan capital expenditures. The tax refunds that we got though, those are already spent on gas price hikes. So, consumers they’re kind of getting stretched. 

Canada, Mexico and the U.S. are gearing up for the USMCA negotiation that starts on July 1st. So, steady interest rates, the headwind of inflation and the tailwind of fiscal policy mean that data centers are still your main growth driver; and not in my backyard fights, they’re getting worse. Other data centers have internal problems — see Fermi Matador as an example. The unemployment rate: holding steady at 4.3%. April’s job report of 115,000 net new jobs marks the first back-to-back gains in a year. The New York Fed Labor Market index suggests little wage inflation ahead. So, the main issue is declining workforce size as boomers retire. 

Finally, a slowly improving economy — fighting inflation, fighting supply strains down the road from shipping shutdowns — is still posting terrific earnings growth. The S&P 500’s first quarter earnings: they’re impressive — 27% year-over-year growth with the Magnificent Seven. Take the Magnificent Seven out of that, the other 493 securities: they're only growing at a 16% rate. That’s fantastic. Six-week rebound off the Iran low, stable interest rates, strong earnings suggest that the bull is still in control. Now, there is the usual late-May/June weakness — we should not let that sway us too much.

We do think markets, especially the software sector, have come very far, very fast — think melt-up off that Iran war low. When the melt-up corrects is anyone’s guess. We could very well end up looking like the banks recently; trending sideways post-earnings, drifting lower in the summer. So, keep your chart periscope handy; ‘til next time.