The S&P 500 (Index: SPX) continued rising during the trading week ending on Friday, 15 May 2026, clocking several new record high closes during the week that was. The index however retreated from those new highs on Friday, but still closed at 7,408.50, up a little over 0.1% above its previous week's close.

Friday was the day inflation fears came roaring back for the U.S. economy, erasing two days worth of gains for the index in the process and taking expectations of rate cuts entirely off the table for 2026.

The CME Group's FedWatch Tool now anticipates no change in the Federal Funds Rate until 9 December (2026-Q4), when it now projects a quarter point rate hike, which is a big change from the previous week. Right now, it's not projecting much more than that increase, but the tool's bias going into 2027 has shifted toward expectations of more rate hikes.

QTR's Fringe Finance captured the Wall Street zeitgeist of the moment:

Lauren Hyslop, investment manager at Mattioli Woods, summarized the situation well in comments to CNBC: “Rising bond yields are once again imposing their will on markets, tightening financial conditions and sapping risk appetite across asset classes,” she said.

She added that investors are confronting the “uncomfortable reality of ‘higher for longer’ rates in the U.S., as stubborn inflation and surprisingly resilient growth push back any meaningful pivot to easing.” She also noted that a stronger dollar, fading expectations for liquidity support, geopolitical uncertainty, and fiscal concerns are all adding pressure simultaneously. That combination is particularly dangerous because it removes the easy narrative markets have relied on for months that rate cuts were inevitable and policymakers would remain quick to intervene.

The fact that the Fed is stuck between a 3.8% CPI and 6% PPI rock and a market-teetering-on-the-brink-of violently-pulling-back hard place was the core of yesterday’s concern. If the bond market starts to get violent, what options does the Fed have to start printing to buy bonds and do yield curve control with inflation already where it is? The central bank’s hands might be tied — and this is a scary (and somewhat unprecedented) thought....

Even so, the latest update of the alternative futures chart shows the trajectory of the S&P 500 remains within the redzone forecast range we forecast for it almost three months ago following the disruption of the Iran war geopolitical event.

The change from being biased to either holding rates steady or cutting rates is a global response to inflation pressures and the disruptions from the Iran war geopolitical event. The market moving headlines of the week indicate they are increasingly expected in the U.S., in Japan, and also in the Eurozone:

Monday, 11 May 2026

• Signs and portents for the U.S. economy:
• US home sales edge up in April but affordability remains a challenge
• Oil prices settle higher after Trump says Iran ceasefire "on life support"
• Inflation reading Tuesday expected to show prices at nearly a three-year high
• Bigger trouble developing in and out of China:
• China's marriages drop to decade low, deepening demographic concerns
• China's car sales drop for seventh month in April; exports roar
• China April exports rebound strongly, trade surplus widens ahead of Trump visit
• ECB minions thinking more about ditching their perfect monetary policy:
• ECB's Kocher sees rate move if inflation outlook does not improve
• ECB's de Guindos urges prudence on rates in parting shot - FT
• Wall Street ends slightly higher as U.S.-Iran resolution talks fizzle
• Wall St inches to higher close, AI fervor edges out Iran impasse

Tuesday, 12 May 2026

• Signs and portents for the U.S. economy:
• US annual consumer inflation accelerates amid broad increase in prices
• Core CPI heats up in April; headline CPI rises in line with consensus
• VIEW April CPI rises more than expected; bond yields climb
• Oil prices jump on latest US-Iran peace process impasse
• Fed minions get closer to having a new chief:
• Senate confirms Warsh to Fed Board, with Fed chair vote likely Wednesday
• Bigger trouble developing in China:
• China's US ethane imports hit record as Iran war cut rival feedstock supply
• China's commodity imports show Hormuz impact as oil slides, metals rise
• BOJ minions discussing plans for next rate hike, working to prop up Japan's currency:
• BOJ debated near term rate hike at April meeting, opening door to June move
• US, Japan agree excess FX volatility undesirable, Bessent says
• S&P 500, Nasdaq end lower as inflation, Iran tensions weigh
• Wall Street ended mostly lower after a hotter CPI print landed

Wednesday, 13 May 2026

• Signs and portents for the U.S. economy:
• US producer prices surprise with largest increase in four years
• Trump, Xi to weigh tariff cuts on $30 billion of imports in managed trade push
• Oil settles lower on US rate hike fears; investors watch Trump-Xi meeting
• Fed minions claim they want to get inflation down, perhaps even to their real target:
• Fed is 'dead serious' about getting inflation down, Kashkari says
• Background:
• What Is the Fed's Real Inflation Target?
• ECB minions expected to ditch perfect monetary policy and hike rates in June, starting to worry about AI cyberattacks:
• ECB to hike rates in June and at least once more on war-led inflation spike: Reuters poll
• ECB urges banks to quickly prepare for AI-assisted cyberattacks
• S&P 500, Nasdaq boosted by chips to record closing highs
• Wall Street ended mostly higher despite a hotter than forecasted PPI inflation print

Thursday, 14 May 2026

• Signs and portents for the U.S. economy:
• Trump lands in China for Xi summit with Nvidia CEO in tow
• CEOs join Trump in China where AI will take priority over trade deals
• Trade wars to extended truce: Analysts expect ‘stabilization’ in U.S.-China ties as Trump-Xi meet
• Xi asks Trump if U.S. and China can avoid ‘Thucydides Trap’ at high-stakes summit
• Explained: The ‘Thucydides Trap’ referenced at the Trump-Xi Summit
• Oil prices dip after Iran says dozens of vessels are crossing Hormuz
• Fed minions starting to think inflation may be problem for US economy; job opening for new minions opens up:  
• Inflation is most 'pressing risk' to US economy, Fed's Schmid says
• Fed Governor Miran submits resignation, throws support behind Warsh as new chair
• Deregulation could ease inflation pressures, Fed’s Miran says - CNBC interview
• BOJ minions getting super excited to hike Japan's interest rates:
• https://www.reuters.com/world/asia-pacific/boj-board-member-masu-calls-early-rate-hike-2026-05-14/
• Wall Street finished higher as the S&P 500 tagged 7,500
• Wall Street ends higher on tech rally; investors eye Beijing talks

Friday, 15 May 2026

• Signs and portents for the U.S. economy:
• US And China Agree To Establish Trade And Investment Boards As Trump-Xi Summit Delivers Modest Wins
• Trump Touts ‘Fantastic Trade Deals’ With China, but Details Are Scarce
• Trump says China to buy 200 Boeing jets, order could rise up to 750
• China signals tariff cuts, advances in farm market access after Trump-Xi summit
• Yields surge to one-year high as oil prices and inflation data rattle markets
• Next chief Fed minion's plan to reduce holdings of U.S. government debt to come up against government's need to borrow much more:
• US debt load could undercut Warsh's plan to shrink Fed balance sheet
• Bigger rate hikes developing in Japan:
• BOJ expected to raise rates to 1.0% in June, hike again in October-December
• S&P 500 holds weekly gains despite Friday selloff
• Wall Street ends lower on mounting inflation worries
• How SpaceX stacks up against some of the biggest US IPOs

The Atlanta Fed's GDPNow toolestimate of real GDP growth for the U.S. economy in the current quarter of 2026-Q2 rose to +4.0%, up from the +3.7% it projected a week earlier.

Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a Wall Street bull and bear who are shocked and scared by a news report that says 'INFLATION IS BACK, BABY!'"

Prime numbers are unique. Unlike all other numbers, prime numbers cannot be divided equally by a whole number to get a whole number result except for itself and the number 1.

By contrast, every other number but prime numbers will include other numbers as factors. Also called composite numbers, when you drill down far enough, you'll find each has a unique factorization made up of nothing but prime numbers.

If you start counting up from 1, you'll frequently run into prime numbers at the beginning. But as you count higher and higher, you'll find prime numbers become fewer and farther apart. At first glance, it seems like they're randomly distributed among all the numbers you're counting. But that appearance is deceptive, because when you tease the numbers just right, a non-random pattern emerges.

The following video by Physics Explained's Rhett Allain is one of the best we've seen in establishing the foundation of just how the numbers have to be teased to reveal the pattern that the prime numbers are following.

In the video, New Scientist's Jacklin Kwan focuses on the Riemann Hypothesis, which describes the pattern that prime numbers appear to follow into infinity, which is the biggest unproven conjecture in math:

Previously on Political Calculations

• An Introduction to the Riemann Hypothesis

The affordability of new homes in the U.S. improved in March 2026 as builder incentives to reduce the sale prices of new homes combined with relatively low mortgage rates and a rising income for the typical American household.

The first two of these factors directly reduced the typical mortgage payment for U.S. households, while the third makes the lower cost for owning a new home more affordable by definition for the nation's median income-earning household. Here are the applicable numbers:

• Median new home sale price: $387,400
• Median household income: $87,164
• Average 30-year conventional fixed mortgage rate: 6.18%

For that household at the exact middle of the U.S. income spectrum, the average mortgage payment for a new home purchased at the national median sale price with zero-percent down would consume 32.6% of the household's monthly income in March 2026.

This value falls in between the two major affordability thresholds mortgage lenders have traditionally used in the form of the 28/36 rule to determine whether to extend a mortgage to new home buyers. The following chart shows how March 2026's level of relative affordability for new homes compares with the affordability for every month from January 2000 through March 2026:

In March 2026, buying a new home was the most affordable it has been in the U.S. for a typical American household at any time in the last four years.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 5 May 2026.

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 5 May 2026.

Freddie Mac. 30-Year Fixed Rate Mortgages Since 1971. [Online Database]. Accessed 11 May 2026. Note: Starting from December 2022, the estimated monthly mortgage rate is taken as the average of weekly 30-year conventional mortgage rates recorded during the calendar month.

Image Credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a new home buyer speaking with a real estate agent in front of a 'NEW HOME FOR SALE' sign that says 'MEDIAN PRICE MARKED DOWN TO $387,400!'"

How has the Iran war geopolitical conflict affected how much carbon dioxide is being added to the Earth's air?

Thanks to its unique timing, atmospheric carbon dioxide concentration data collected by the remote Mauna Loa Observatory may provide a unique, almost real-time window into how a large-scale military and economic conflict can affect the environment.

What makes the timing unique is the conflict's major military actions began on 28 February 2026. That gives us the potential of a clear break in the monthly atmospheric CO₂ data, with a well defined before and after.

What makes that possible is the disruption of oil and gas shipments from the energy resource-rich nations of the region, which before the conflict, accounted for about 20% of the world's oil supply. The bulk of these oil shipments are bound for the nations of south and east Asia. Or would be, if the oil tankers carrying the supply were not at high risk of being attacked by Iranian drones, while Iran's own oil shipments are blocked by a naval blockade.

That much oil and gas powers a large share of the advanced economies that rely on the supply from this region. If those shipments stop, that's a lot of economic activity that can be shut down unless the supplies can be offset through strategic reserves or alternate sources. That reduced activity would reduce the net amount of CO₂ these economies emit into the Earth's atmosphere.

This assumes any fires resulting from military actions or from the increased flaring of excess gas production that cannot be captured and shipped to other countries because of the geopolitical event's disruption of shipping produce substantially less CO₂ emissions than these more productive activities.

With these assumptions, what we would look for in the data for the months after February 2026 is a reduction in the rate at which carbon dioxide accumulates in the Earth's atmosphere. Given the time it takes for carbon dioxide emissions to diffuse into the air from the affected economies and reach the remote Mauna Loa Observatory where it is measured, that reduction should start very slowly before falling off more sharply as the disruption continues.

At least that's our working hypothesis. Since the NOAA just got around to publishing the monthly CO₂ data measured at the Mauna Loa Observatory for both March and April 2026 last week, we can look to see how much of an effect there may be already in the two months since the conflict began. The following chart shows the data for the trailing year average of the year-over-year change in atmospheric CO₂ concentration from January 2000 through April 2026:

What we see is that since December 2024, the rate at which carbon dioxide is being added to the Earth's air has been falling, with the rate affected by developments in global trade.

At least, up through February 2026, which has been generally falling at a steady rate. After February 2026, there are indications the pace at which CO₂ is emitted into the atmosphere has started declining at a faster pace. But that's based on a sample size of two months. We'll need more months of data to sort out the Iran war's impact, but at these early days, it appears to be following our hypothesis.

When we get that data and compare it against where the established trend for the data, we'll be able to put a dollar value on its impact to the world's GDP and compare it with other geopolitical events.

References

National Oceanographic and Atmospheric Administration. Earth System Research Laboratory. Mauna Loa Observatory CO2 Data. [Online Data]. 5 May 2026. Accessed 8 May 2026.

Image credit: Tankers at the Iraqi Al Basra Oil Terminal in the Northern Arabian Gulf photo by Samuel W. Shavers on Wikimedia Commons. Public domain image.

The employment situation for U.S. teens held fairly steady in April 2026. The seasonally adjusted number of employed Americans Age 16-19 was 5,379,000. This total falls within the range of 5,357,000 and 5,425,000 recorded for each month in 2026.

The same pattern holds when looking at the data for younger teens (Age 16-17) and older teens (Age 18-19). Older teens have seen their numbers range between 3,418,000 and 3,496,000 since January 2026, with the higher figure applying for April 2026. That puts a little under 42% of the Age 18-19 population into the employed category.

Younger teens have seen their numbers within the working portion of the U.S. civilian labor force range between 1,926,000 and 2,000,000, with the U.S. Bureau of Labor Statistics reporting a seasonally adjusted total of 1,929,000 for April 2026, with a little under 21% of this age demographic's population counted as having jobs.

For the combined Age 16-19 population, 30.6% were counted as employed after the BLS' seasonal adjustments. The following pair of charts presents these figures and shows the trends for teen employment since January 2021.

That's a good sign since the U.S. is going into the summer hiring season, which large numbers of teens enter into the U.S. labor force each year as their school year ends. The following video gives an idea of what kind of work many teens will be able to find during Summer 2026:

Similar initiatives for local governments to create jobs for teens to support publicly-funded summer programs work is being made in large U.S. cities. These programs are in addition to the regular seasonal employment spikes that take place in the private sector.

Looking at longer term trends, fewer teens can be expected to find work in 2026 than in the first two years following 2020's coronavirus pandemic. In those years, teens benefited for several reasons, including:

• They were much less likely to have health problems than older Americans related to COVID infections, giving them an advantage in the job market.
• Large portions of the teen population had never previously been employed, so were not eligible for COVID stimulus unemployment benefits, which gave many older, but lower income-earning Americans an incentive to stay unemployed until the benefit checks ran out. The effect of this policy was to reduce competition for lower-paying jobs, which opened the door for many teens to enter the labor force.
• The introduction of remote schooling as many schools were sluggish in returning to in-person schooling, which gave many teens more time during the day to pursue gainful employment while attending school "virtually".

There's more to the post-pandemic teen employment boom story than these examples. Regardless, these reasons behind it are still not fully appreciated.

References

U.S. Bureau of Labor Statistics. Labor Force Statistics (Current Population Survey - CPS). [Online Database]. Accessed: 8 May 2026.

Image credit: Summer jobs sign posted on tree by Andy Oakley on Flickr. Creative Commons Creative Commons - CC BY-NC-SA 2.0.