Markets Weekly May 16, 2026

Summary

Joseph Wang discusses the global surge in yields driven by a hawkish Fed repricing and energy shocks, warning of headwinds for risk assets and specifically home builders. He then draws parallels from the agricultural revolution to argue that AI will deflate service prices, making semiconductor/chip providers the main winners while most service providers struggle.

• Yields are rising globally, with the US 10-year nearing 4.6% after a hot CPI print.
• Market expectations flipped from rate cuts to two hikes within a year.
• Energy shock and Middle East tensions are exacerbating inflation and yield increases.
• Higher mortgage rates are a negative for home builders.
• Historical farm productivity shows that early adopters benefit but widespread adoption leads to price deflation and bankruptcies.
• AI is compared to the agricultural revolution: infinite knowledge-work productivity will deflate service prices.
• Chip and semiconductor providers are positioned as the picks-and-shovels winners.
• AI model providers and most service firms are expected to face margin compression.