Markets spent last week trading as if geopolitics had briefly decided to cooperate. Improving optimism around a potential U.S.–Iran détente set the tone, catalyzing a broad risk-on move: equities extended their rally, oil prices broke meaningfully lower, and bond yields retraced recent inflation-driven highs. The collective message across asset classes was clear - reduced tail risk is enough to re-rate everything.
That said, it would be premature to declare a definitive turning point has been reached. While the latest progress has been treated as credible, the past several months have shown that the path to any durable agreement is neither linear nor dependable. A cautious optimism - rather than outright conviction - still feels like the appropriate posture.
Nowhere was the shift in sentiment more visible than in energy markets. Brent crude decisively moved below the psychologically important $100/bbl threshold, settling closer to ~$92/bbl, easing concerns about sustained disruptions to global supply. At the same time, the Brent-to–WTI spread compressed toward ~$5/bbl, a reversion to historical norms that reinforces the market’s growing belief that dislocations tied to the conflict may be normalizing.
In practical terms, lower oil prices act as an immediate relief valve for macro conditions. The easing of energy-driven inflation pressures has begun to flow through to rates, with Treasury yields declining in parallel. By week’s end, the curve reflected this repricing: 2-year yields hovered just above 4.00%, 10-year notes settled near 4.43%, and the long bond approached 4.97%.
Importantly, this move should not be interpreted as inflation risks having dissipated entirely. Rather, the market appears to be recalibrating from a scenario of accelerating inflation to one of stabilization. That distinction is subtle but significant - markets don’t require “good” inflation data, just data that is no longer deteriorating.
Against this backdrop, equities continued their seemingly relentless climb. The S&P 500 closed at another all-time high of 7,580, underscoring the market’s willingness to look through both geopolitical volatility and lingering macro uncertainties. The working thesis remains intact: economic growth is holding, corporate earnings are resilient, and technology-led secular drivers (particularly within AI) continue to justify elevated multiples.
The Fed’s posture, while still tilted toward inflation vigilance, has not meaningfully disrupted this narrative. Policymakers appear more concerned about upside inflation risks than labor market fragility, but the latter’s continued stability has provided an important anchor for investor confidence.
Looking ahead, markets remain acutely sensitive to developments in the Strait of Hormuz, which will serve as the most immediate barometer for whether last week’s optimism proves durable or fleeting.
On the data front, attention shifts to the upcoming nonfarm payrolls release. Expectations center on a ~+93k increase in headline job creation, with the unemployment rate holding steady at 4.3%. To the extent these outcomes are realized, they would reinforce the prevailing narrative of a stable labor market. However, given the degree to which this scenario is already embedded in market pricing, the hurdle for a meaningful positive surprise appears relatively high.
In short, last week’s rally was less about new information and more about a reduction in perceived risk. Whether that reduction proves structural or transient will define the next leg for markets.
From the Municipal Desk (with contributions from Ryan Riffe):
With summer quickly approaching, a group of young daredevil friends heads to their favorite bridge-jumping spot with much anticipation after a long winter. One by one, they look over the railing; each quietly weighing the fear of the unknown. For a moment, the wind fades, the sun finds a seam through the clouds, and for the first time in what feels like forever, the water looks inviting. The first of the group to jump is immediately bombarded with questions from above. Is it cold? Did you touch the bottom? Did you see any fish? A quick shake of the head sends the next leaping off, followed by another, then another.
The same dynamic carried through the municipal market last week. As a result, municipals had one of their best weeks in quite some time as increased participation by many investors who had been waiting on the sidelines came to fruition. Despite inflows rising week after week, market participants had been reluctant to engage for most of May; ultimately waiting for signs of a good-news trigger. With supply light ($8 Billion), June reinvestment cash lurking, and positive talks out of Iran, the market took its first real step forward. One by one, market participation increased as the tone felt firmer day by day.
Geopolitical and economic uncertainties will continue to drive the market one way or another. Because of this, we don't believe we are fully out of the woods, but it is nice to see more buyers back in the water.
Calendar week of 06/01/26 @ $16 billion
Muni-Ratios Week Prior
2-YR Ratio @ 61% 2-YR Ratio @ 64%
3-YR Ratio @ 62% 3-YR Ratio @ 64%
5-YR Ratio @ 64% 5-YR Ratio @ 66%
10-YR Ratio @ 68% 10-YR Ratio @ 69%
30-YR Ratio @ 88% 30-YR Ratio @ 89%
An index is unmanaged and not available for direct investment. Definitions sourced from Bloomberg.
The Bloomberg Barclays Global Aggregate Negative Yielding Debt Market Value Index represents the portion of the Bloomberg Barclays Global Aggregate Index that measures the aggregate value of global debt with a negative yield. • The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization. • The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.• The Cboe Volatility Index® (VIX) is a calculation designed to produce a measure of constant, 30-day expected volatility of the US stock market, derived from real-time, mid-quote prices of weekly S&P 500® Index (SPX) call and put options with a range of 23 to 37 days to expiration.• The ICE BofA MOVE Index is a yield curve weighted index of the normalized implied volatility on 1-month Treasury options. It is the weighted average of implied volatilities on the CT2 (Current 2 Year Government Note), CT5 (Current 5 Year Government Note), CT10 (Current 10 Year Government Note), and CT30 (Current 30 Year Government Note), with weights 0.2/0.2/0.4/0.2 respectively.• The Markit CDX North America Investment Grade Index is composed of 125 equally weighted credit default swaps on investment grade entities, distributed among 6 sub-indices: High Volatility, Consumer, Energy, Financial, Industrial, and Technology, Media & Tele-communications. Markit CDX indices roll every 6 months in March & September. • The Markit CDX North America High Yield Index is composed of 100 non-investment grade entities, distributed among 2 sub-indices: B, BB. All entities are domiciled in North America. Markit CDX indices roll every 6 months in March & September. • The U.S. Dollar Index (USDX) indicates the general international value of the USD. The USDX does this by averaging the exchange rates between the USD and major world currencies. Intercontinental Exchange (ICE) US computes this by using the rates supplied by some 500 banks.
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