🚀 Inflation rising ahead of midterms

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Market Overview
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Year To Date Performances:

1. Congressional Republicans are facing a severe political liability heading into the 2026 midterm elections as a newly resurgent inflation crisis complicates their razor-thin five-seat House majority and reverses the economic promises that propelled them into power. With the national consumer price index ticking up to 3.8% in April, driven primarily by a 51% surge in retail gasoline prices following President Donald Trump's military campaign in Iran and the subsequent closure of the Strait of Hormuz, voters are registering widespread discontent, leaving Democrats with a distinct 7.1% lead in generic congressional polling. The economic strain has fractured internal party unity, prompting rare public rebukes from moderate lawmakers like Representative Brian Fitzpatrick over the White House’s prioritization of multi-billion-dollar taxpayer-funded legal defence funds and executive ballroom expansions while half of the domestic population lives paycheck to paycheck. While some vulnerable lawmakers are attempting to center their reelection campaigns around the sweeping tax cuts passed in the 2025 budget reconciliation package, senior legislative leaders increasingly acknowledge that domestic affordability and kitchen-table energy costs are unlikely to stabilize without a definitive resolution to the Middle Eastern conflict, which market analysts warn could otherwise send crude oil soaring toward $200 per barrel by the end of the year.

2. Domestic mortgage application volume plummeted 8.5% last week as the average contract interest rate for a benchmark 30-year fixed-rate conforming loan climbed to 6.65%, marking its highest level since August 2025. According to data from the Mortgage Bankers Association, the 30-basis-point surge over the past five weeks severely choked off refinancing activity, causing refinance applications to drop 18% week-over-week and dragging their share of total mortgage volume down to a multi-month low of 38%. The contraction was felt acutely across government-backed borrowing sectors, with Federal Housing Administration and Veterans Affairs refinancing requests diving 18% and 34% respectively, while purchase applications edged down 0.4% as rising borrowing costs squeezed smaller buyers out of the market and pushed the average purchase loan size to a record survey high of $473,600. Despite the weekly retrenchment, initial trading at the start of the week offered minor relief to prospective borrowers, as tentative diplomatic progress in the Middle Eastern conflict pulled down sovereign bond yields and allowed retail mortgage rates to ease slightly off their recent peaks.

3. Athletic apparel giant Lululemon has finalized a settlement agreement with its founder and largest individual shareholder, Chip Wilson, effectively dissolving a contentious multi-month proxy battle initiated late last year. Under the terms of the corporate compromise, the Vancouver-founded retailer will expand its boardroom by appointing two of Wilson’s preferred nominees—former On Running co-CEO Marc Maurer and former ESPN Chief Marketing Officer Laura Gentile—alongside a third independent apparel brand expert slated to join by October. In exchange, Wilson has agreed to a rolling 18-month non-disparagement covenant and abandoned demands for direct reimbursement of proxy expenses, redirecting those funds to a community sports and arts donation for Vancouver's Kitsilano Beach. The strategic resolution clears an operational runway for incoming Chief Executive Officer Heidi O'Neill as the company battles an historic 39% year-to-date equity decline, severe margin pressures from international tariffs, and aggressive market-share encroachment from premium athleisure upstarts like Alo Yoga and Vuori.

   Headlines

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   2. Goldman has raised its S&P 500 forecast for 2026.