Week:
S&P500: 2.36% FTSE100: -1.01% Gold: +2.46% Bitcoin: -0.92%
YTD:
S&P500: 7.88% FTSE100: 3.11% Gold: +8.21% Bitcoin: -7.92%
Equities Are Defying Gravity. The Question Is For How Long.
Source: MarketPulse (OANDA) | Week ending 8 May 2026
US stock markets pushed to fresh highs last week. Oil stayed elevated. Rate expectations moved higher. And equities climbed anyway.
What drove markets last week
The early part of May delivered a striking display of resilience from US equities, with indices surging despite the uncomfortable backdrop of oil prices that refused to retreat to pre-conflict levels and interest rate expectations being revised higher across the board. The disconnect between asset prices and the macro reality has been the defining tension of the past two weeks.
Geopolitics kept traders on edge throughout. Tit-for-tat strikes between the US and Iran on Thursday and Friday added a fresh layer of uncertainty heading into the weekend. Markets did not panic, but the risk premium is clearly not going away. Then, late on Friday, President Trump announced a 3-day Russia-Ukraine ceasefire covering May 9, 10, and 11, framed as a Victory Day gesture and a step toward ending what he called the biggest conflict since World War II. Markets will take the weekend to decide how much that matters.
On the data side, April non-farm payrolls came in ahead of expectations but Consumer Sentiment missed, a split that captures the current confusion well. Jobs look fine on the surface, but the explanation may be less flattering: with net migration projected near zero this year, the tight labour numbers could be reflecting supply constraint rather than genuine demand strength.
UK inflation hit a 3-month high, driven by energy and food pressures. That print reinforced the view that the energy channel is working its way through consumer prices more broadly, not just in the US.
The setup entering this week
The core question for markets is whether equities can keep climbing while the cost of capital and energy both stay elevated. The current rally is pricing in a near-perfect landing: growth holds firm, inflation cools just enough, and central banks find a reason not to tighten further. That is a narrow path.
The US Dollar Index has broken below its ascending channel and is trading under both its 50-day and 200-day moving averages, which have converged into a ceiling around 98.5. A weak dollar is supportive for risk assets in the short term, but it also signals that the market is beginning to lose confidence in US rate stability. Watch the 97.7 support level: a daily close below it would confirm a double top and open the door toward 96.9.
Looking ahead
This is one of the more loaded weeks of the year.
Tuesday's US CPI print is the headline event. A second consecutive 0.9% MoM reading is expected at the headline level, driven by gasoline and diesel. Core is forecast at 0.4% MoM, with the annual rate potentially pushing to 3.4%. If the number comes in cooler, equities get more room to run and the dollar likely breaks lower. If it surprises to the upside, rate expectations reprice sharply and the fragility in the equity rally becomes visible fast.
Also on Tuesday: the last inflation report under Jerome Powell as Fed Chair. Kevin Warsh takes over on Friday, May 15. Markets will be listening closely to any language from the transition that signals how the new regime views the rate path.
Thursday brings UK Q1 GDP (preliminary). The consensus is 0.6% QoQ, but the composition matters more than the headline. Any sign that growth is softening while inflation stays sticky puts the Bank of England in an awkward spot.
China CPI lands today (Monday). Exports are expected up around 6.5% but the PPI reading is the one to watch: accelerating producer prices would confirm that higher energy costs are working through Chinese industry, with downstream implications for global goods inflation.
The Russia-Ukraine ceasefire covers this weekend and today. Any breakdown or extension will set the tone for early-week positioning alongside the Middle East situation.
Stay close to the CPI print Tuesday. Everything else follows from it.
