🌟 AI Strength Meets Inflation Nerves
It was a week where markets tried to look through the noise. Shares rose as investors took comfort from signs of progress in US-Iran talks, while strong AI-related earnings kept the technology story alive. But the rally was not worry-free: higher oil prices, weak consumer confidence and still-elevated bond yields reminded investors that inflation risk has not gone away.
📈 Weekly Scoreboard
| Index | Weekly Change (%) | Current Level |
|---|---|---|
| S&P 500 | +0.9% | 7,473.47 |
| Nasdaq Composite | +0.5% | 26,343.97 |
| EURO STOXX 50 | +3.3% | 6,019.15 |
| FTSE 100 | +2.7% | 10,466.26 |
| Nikkei 225 | +3.1% | 63,339.07 |
| MSCI Emerging Markets | +1.1% | 1,686.05 |
| China SSE Composite | -0.5% | 4,112.90 |
Market data based on Friday 22 May closing levels and week-on-week moves.
🌍 Global Drivers & Macro
- AI remains the engine of the rally. Nvidia’s results again showed huge demand for AI chips, helping investors believe the technology spending boom still has legs.
- Oil is the fly in the ointment. Brent crude ended around $103.54, keeping pressure on inflation expectations and household budgets.
- Bond yields still matter. Earlier pressure from long-term US yields made investors nervous, because higher yields can make shares look less attractive.
- Geopolitics helped sentiment late in the week. Markets reacted positively to signs of progress in US-Iran talks, even though uncertainty remains.
🇬🇧 UK Corner
- The FTSE 100 bounced back strongly, rising 2.66% for the week and ending a four-week losing run. The FTSE 250 also finished Friday up 0.96%, with mid-caps helped by easing rate fears.
- UK inflation softened to 2.8%, which gave markets some relief. But the oil price means investors should not assume the inflation battle is over.
- Retail sales disappointed, falling 1.3% in April, the sharpest monthly drop since May 2025. For DIY investors, this is a reminder that UK consumer-facing shares remain sensitive to household pressure.
🏦 Asset Movers
- GBP/USD: Sterling finished the week stronger, with the pound up around 0.7% against the dollar, despite a softer Friday after weak retail sales data. A stronger pound can slightly reduce overseas returns when converted back into GBP.
- Oil: Brent above $100 supports energy companies, but it also raises inflation worries. That matters because sticky inflation can delay rate cuts or even revive rate-rise fears.
- Gold and bonds attracted money. Fund flow data showed investors still wanted some safety, even as share prices rose.
📰 Key Headlines
Nvidia smashes earnings (Guardian, 20 May) — Revenue up 85% year-on-year to $81.6bn, cementing AI infrastructure spending as one of the most powerful investment themes of our era.
FTSE 100 hits one-month high (Sharecast/HL, 22 May) — The index climbed to 10,466, its strongest close since April, supported by global risk-on sentiment and peace-talk optimism.
UK retail sales drop 1.3% in April (ONS/Trading Economics, 22 May) — A bigger-than-expected fall signals that UK consumers remain cautious amid high borrowing costs and elevated inflation.
US-Iran peace talks progress (Reuters/Schwab, 22 May) — Positive signals from negotiations reduced geopolitical risk premiums across markets and oil prices, supporting equities globally.
S&P 500 records eighth straight weekly gain (WSJ, 22 May) — The longest winning streak since December 2023, driven by blowout corporate earnings and AI enthusiasm.
UK factory orders slump (Trading Economics, 20 May) — UK manufacturing orders contracted at the fastest pace since September 2020, as surging selling prices linked to Middle East tensions weigh on industrial activity.
Kevin Warsh sworn in as new Fed Chair (BBN Times, 22 May) — The new Federal Reserve Chair takes the helm, with markets watching closely for signals on the pace and direction of US interest rate policy.
📑 Companies Reporting
| Company | Result Summary |
|---|---|
| Nvidia | Revenue jumped 85% to $81.62bn, beating expectations, but shares dipped slightly after-hours because expectations were already sky-high. |
| Walmart | Sales rose, but the company kept cautious full-year targets, and shares fell as investors worried about fuel costs and consumer pressure. |
| Home Depot | Results beat expectations, but management warned that large home-improvement projects remain under pressure. |
| Ross Stores | Shares rose after the value retailer lifted guidance, showing bargain-focused shoppers are still spending. |
⚖️ Investor Sentiment
Sentiment indicators this week paint a broadly Risk-On picture. The VIX (the market’s “fear gauge”) has remained subdued, consistent with a market in a sustained uptrend rather than one gripped by anxiety. The AAII bull-bear spread has been trending more bullish in recent weeks alongside the S&P’s winning streak.
The CNN Fear & Greed Index has shifted meaningfully away from the “Fear” zone seen earlier in the year — pointing toward Greed territory as AI earnings enthusiasm lifts conviction. The overall posture is Risk-On: investors are deploying capital into equities, particularly tech and AI-adjacent names.
On fund flows, a theme that has built throughout early 2026 continues: investors have been rotating into international equities and bond funds, while US domestic equity funds have seen more muted flows — suggesting some diversification away from pure US exposure.
📅 Next Week’s Radar
- Monday 25 May: UK and US markets are closed for the Spring Bank Holiday and Memorial Day. Expect thinner global trading.
- Tuesday 26 May, 15:00 UK: US Consumer Confidence. A key read on whether households are coping with higher fuel and borrowing costs.
- Friday 29 May, 13:30 UK: US GDP second estimate and personal spending/inflation data. This could shape rate-cut expectations.
- Earnings to watch: Costco, Dell, HP, Best Buy, Salesforce and Snowflake — useful signals for consumer spending and AI infrastructure demand.
⚡ The Final Take
This was a positive week, but not a carefree one. AI is still pulling markets higher, while oil and inflation are keeping investors alert. For UK DIY investors, the key lesson is simple: stay diversified, keep costs low, and don’t let one strong week tempt you into chasing yesterday’s winners.
© Clearly Investments Ltd. Educational information only. This is not investment advice.
