TL;DR

• Oil jumped almost 12% after fighting near Iran shut down a key shipping lane, and U.S. crude closed at $105.90 a barrel.
• Prices for shoppers rose to 3.8% over the past year, the hottest reading since May 2023.
• The Senate confirmed Kevin Warsh as the new Federal Reserve Chair by a 54 to 45 vote, replacing Jerome Powell.
• The 10-year Treasury yield jumped to about 4.6%, the highest in over a year, hurting bonds, real estate, and small-company stocks.
• Wix.com crashed 27% in one day after a bad earnings report, while Eli Lilly rose 6.0% on a $50-a-month Medicare obesity drug deal.
• The VAP portfolio fell 2.3% before fees this week. The businesses inside it kept growing. That gap is the opportunity for patient owners.

About the author

By David Berkowitz, portfolio manager of the ValueAligned Portfolio at VAP Wealth Advisors and creator of the Berk on Value channel. David writes about long-term, quality-focused investing for mass-affluent and high-net-worth investors. ValueAligned Partners LLC is a Registered Investment Advisor.

What the indexes did this week

The S&P 500 looked calm because a small group of huge tech stocks held it up. Underneath, smaller stocks took a beating. The S&P 500 ETF (a fund that tracks the 500 biggest U.S. companies, ticker SPY) closed at $739.17, up just 0.2% for the week. The equal-weight version, where every company receives the same weight regardless of size, fell 1.2%. That gap shows leadership was very narrow. The Russell 2000 small-cap fund dropped 2.3%, and the fear gauge, the VIX (Wall Street’s measure of how nervous investors are), shot up about 11% to 19.16.

Narrow breadth describes a market in which four or five giant stocks pull the index higher while the average stock falls. Narrow markets are fragile markets. They crack fast when the leaders stumble.

The oil shock that ran for a week

A fight involving Iran shut down most traffic through the Strait of Hormuz, a narrow waterway between Iran and Oman where about one out of every five barrels of the world’s oil normally passes. Ship traffic fell from about 140 vessels a day to roughly 30. U.S. crude (West Texas Intermediate, or WTI, the main type of oil priced in the United States) rose 11.9% to $105.90 a barrel.

Energy stocks loved this move. The Energy sector fund (XLE) gained 6.7% in five days and is now up 29.9% for the year. Drilling companies like Diamondback Energy and Devon Energy surged because every dollar oil rises drops almost straight into their profits.

High oil hurts almost everyone else. It raises gas, shipping, and chemical costs, which squeeze profits at airlines, retailers, factories, and consumer goods makers. The Consumer Discretionary sector, which holds companies that sell things people want but do not need (clothes, cars, home improvement), fell 3.1% and finished as the worst sector of the week.

Sector scorecard, week ending May 15, 2026

Inflation came back hot

CPI stands for Consumer Price Index. It tracks how much prices change for things shoppers buy. The April reading rose 3.8% over the past year, the hottest pace since May 2023. Energy prices alone accounted for more than 40% of the gain, with gasoline up 28.4% year over year.

PPI stands for Producer Price Index. It tracks how much prices change for the businesses that make the stuff shoppers buy. Wholesale prices jumped 6.0% over the past year, well above the 4.9% economists expected. Hot PPI usually means CPI stays hot a few months later, because companies pass higher input costs through to customers.

Retail sales added more worry. Spending grew just 0.5% in April, down sharply from 1.7% in March. Strip out gasoline (where higher prices fake out the headline), and the slowdown looks even uglier. The American shopper is starting to crack under the weight of higher prices.

A new Fed chair walks in

The Federal Reserve is the U.S. central bank. It sets short-term interest rates, which control how expensive it is to borrow money. This week, the Senate confirmed Kevin Warsh as the 17th Fed Chair in a tight 54 to 45 vote. He officially takes over from Jerome Powell on May 16.

Powell is staying on the Fed Board as a voting governor through January 2028. Outgoing Fed Chairs almost always retire from the Board to clear the path for the new one. President Trump is publicly pushing Warsh for big rate cuts to juice the economy. The hot 3.8% CPI and 6.0% PPI prints make rate cuts very hard to justify under the Fed’s mandate to keep prices stable.

Bond traders reacted fast. The 10-year Treasury yield, which is the interest rate the U.S. government pays to borrow for 10 years, jumped about 9 basis points to roughly 4.6%, the highest in over a year. A higher 10-year yield raises mortgage rates, makes utility dividends look less attractive, and lowers the present value of stocks whose profits are years away. Real Estate, Utilities, and small-cap stocks fell hardest as a direct result.

Stock winners and losers

Winners came from two camps. Oil producers benefited from the supply shock. A few high-margin software names attracted money fleeing rate-sensitive parts of the market. Losers fell into two camps, too. Some were hit by the consumer slowdown. Others were hit by the rate spike.

Eli Lilly (LLY) jumped 6.0% after announcing a deal with the U.S. government to cap Medicare patient costs at $50 a month for Zepbound and a new pill called orforglipron, starting April 2026. The deal opens the door to nearly 40 million Americans on government insurance.

Wix.com (WIX) was the week’s biggest disaster. The website-builder’s stock crashed about 27% in a single day after reporting non-GAAP earnings per share of $0.68 against the $1.24 Wall Street expected. Operating margin (the share of revenue left after running the business) fell from 21% to just 5% as marketing and research costs exploded. Investors also fear that competitors’ AI-powered website tools are eating Wix’s lunch.

Under Armour (UAA) dropped 16.7% after missing earnings and warning about weak fiscal 2027. Higher tariffs and stressed shoppers crushed margins.

S&P 500 top weekly gainers

S&P 500 bottom weekly performers

W hy VAP fell while the index rose

The ValueAligned Portfolio (VAP) fell 2.3% before fees this week. The S&P 500 Total Return index rose 0.2%. For the year, VAP is up 2.1%, compared with 8.7% for the index. That gap is uncomfortable, and the cause matters more than the number.

Capital rushed into a small group of mega-cap tech stocks and energy producers this week. Money rushed out of high-quality compounders, the companies that grow steadily, generate lots of cash, and reinvest at high returns. Famous, quality-focused managers are taking heavy price hits right now. Terry Smith is down 11.3%, Bill Ackman is down 15.4%, Chuck Akre is down 17.2%, and Dev Kantesaria is down 20.5%.

Stock prices for quality businesses fell 6.6% in 2025 and another 17.2% so far in 2026. The underlying business value, the actual cash these companies generate, grew 8.6% last year and is on track for 8.3% growth this year. That gap is what matters. Warren Buffett recently said the market is “behaving more and more like a casino” and parked roughly $400 billion in cash at Berkshire Hathaway to buy when prices fall.

In the short term, the market is a popularity contest. Long-term, it weighs what businesses actually earn. Patient owners get paid for sitting through the popularity-contest stretches.

The Microsoft playbook

VAP has owned Microsoft (MSFT) for more than 20 years. We trim when valuations get expensive, and we buy more when the market panics. Microsoft closed this week at $421.92, up 1.6% and still down about 13% year-to-date.

Hedge fund manager Bill Ackman ran the same play. His firm, Pershing Square, started buying Microsoft in February after the stock fell on fiscal Q2 results. He paid about 21 times forward earnings, well below Microsoft’s normal range of 28 to 32 times. Two big pieces of Microsoft generate roughly 70% of the profits. Office 365 has 450 million daily users paying about $20 a month for a software bundle that would cost much more to buy separately, and Microsoft is adding paid AI features on top, driving 15% revenue growth. Azure, the company’s cloud platform, grew 39% last quarter. Microsoft plans to spend roughly $190 billion on data center and networking equipment this calendar year, and two-thirds of that money flows directly into near-term revenue.

Microsoft also owns 27% of OpenAI, which is currently valued at about $200 billion, or roughly 7% of Microsoft’s total market value. OpenAI does not yet make a profit, so the standard “price-to-earnings” calculation ignores it entirely. That hidden asset makes Microsoft’s real cost appear lower than it is.

Policy and rules to know

The Senate Banking Committee advanced the Clarity Act 15 to 9. The bill establishes the first comprehensive rulebook for digital assets and stablecoins, cryptocurrencies pegged to the U.S. dollar. Clear rules favor large, regulated U.S. firms over offshore operators. The bill now merges with a companion measure from the Senate Agriculture Committee before a full Senate vote.

The Treasury Department also said it would convene meetings with insurance regulators focused on private credit, the loans made by non-bank firms. With private credit growing fast, regulators are starting to look closely at hidden risks.

What to watch next week

NVIDIA (NVDA) reports fiscal Q1 2027 earnings on Wednesday after the close. The Street expects roughly $78 billion in revenue. CEO Jensen Huang has called the AI rollout the largest infrastructure buildout in human history. This report will set the tone for tech for the next few weeks.

Walmart, Home Depot, and Target also report. Their numbers will show whether the American consumer is bending or breaking. Watch for tariff costs, inventory levels, and any guidance cuts.

The Fed releases minutes from its last meeting on Wednesday. Anything hawkish (meaning leaning toward higher rates) could push the 10-year yield even higher and trigger another wave of selling in real estate and small-caps.

Flash PMI data (a fast read on factory and service-sector activity) drops Thursday. A sharp drop would confirm the slowdown story.

Takeaways for long-term owners

Inflation came back. CPI 3.8%. PPI 6.0%. The “prices are calming down” story is broken, and the 10-year Treasury yield has climbed to roughly 4.6% as a result. The Fed also faces a leadership and policy fight. Kevin Warsh inherits a board with his predecessor still on it and political pressure to cut rates while inflation rises. Forced selling creates bargains in this environment. Index-tracking funds dumped great businesses this week. Microsoft trades near 21 times forward earnings, well below its normal 28 to 32 range, and that is what buying quality on sale looks like.

Investors uncomfortable with this volatility can review their long-term financial plan with an advisor so the portfolio matches their risk tolerance and multi-decade goals.

Endnotes

1. U.S. crude closed at $105.90 a barrel. CNBC. WTI and Brent moves driven by Iran tensions and Strait of Hormuz disruption. https://www.cnbc.com/2026/05/12/oil-prices-today-brent-wti-trump-iran-war-hormuz.html

2. 3.8% over the past year. CNBC. April 2026 CPI report: Headline inflation at 3.8%. https://www.cnbc.com/2026/05/12/cpi-inflation-april-2026-.html

3. confirmed Kevin Warsh as the new Federal Reserve Chair. CNBC. Senate confirms Warsh 54-45. https://www.cnbc.com/2026/05/13/kevin-warsh-wins-senate-confirmation-as-the-next-federal-reserve-chair.html

4. 10-year Treasury yield jumped to about 4.6%. CNBC. Treasury yields surge after inflation prints. https://www.cnbc.com/2026/05/15/treasury-yields-surge-as-inflation-data-points-to-tricky-rates-path.html

5. crashed 27% in one day. The Motley Fool. Wix.com Q1 2026 earnings miss. https://www.fool.com/investing/2026/05/13/why-wixcom-stock-is-plummeting-today/

6. $50-a-month Medicare obesity drug deal. Eli Lilly investor news. Agreement to cap Zepbound and orforglipron Medicare costs at $50 per month. https://investor.lilly.com/news-releases/news-release-details/lilly-and-us-government-agree-expand-access-obesity-medicines

7. Russell 2000 small-cap fund dropped 2.3%. Morningstar. Weekly market update, energy and consumer cyclical performance. https://www.morningstar.com/economy/weekly-market-update-stocks-remain-flat-energy-rises-consumer-cyclical-falls

8. Diamondback Energy and Devon Energy. Investing.com. Diamondback Energy Q1 2026 earnings call transcript. https://www.investing.com/news/transcripts/earnings-call-transcript-diamondback-energy-beats-q1-2026-forecasts-stock-dips-93CH-4679098

9. rose 3.8% over the past year (BLS). Bureau of Labor Statistics. Official April 2026 CPI release. https://www.bls.gov/news.release/pdf/cpi.pdf

10. jumped 6.0% over the past year (PPI). Trading Economics. U.S. Producer Prices Change data. https://tradingeconomics.com/united-states/producer-prices-change

11. down sharply from 1.7% in March. AIMS. U.S. retail sales slowdown and jobless claims April 2026. https://aimsfx.com/2026/05/14/us-economic-data-reveals-rise-in-unemployment-claims-and-slowdown-in-retail-sales-growth/

12. confirmed Kevin Warsh as the 17th Fed Chair (NPR). NPR. Senate confirms Warsh as Fed Chair, replacing Powell. https://www.npr.org/2026/05/13/nx-s1-5816235/kevin-warsh-federal-reserve-chair-jerome-powell

13. jumped about nine basis points to roughly 4.6%. Advisor Perspectives. Treasury yields snapshot May 15, 2026. https://www.advisorperspectives.com/dshort/updates/2026/05/15/treasury-yields-snapshot-may-15-2026

14. missing earnings and warning about weak fiscal 2027. Investing.com. Under Armour shares plunge on earnings miss and weak outlook. https://www.investing.com/news/earnings/under-armour-shares-tumble-on-earnings-miss-weak-outlook-4679919

15. started buying Microsoft in February. CNBC. Bill Ackman built Microsoft position in Q1 during sell-off. https://www.cnbc.com/2026/05/15/bill-ackman-says-he-built-microsoft-position-in-first-quarter.html

16. largest infrastructure buildout in human history. NVIDIA blog. Jensen Huang at Davos 2026 on AI’s five-layer cake. https://blogs.nvidia.com/blog/davos-wef-blackrock-ceo-larry-fink-jensen-huang/

17. advanced the Clarity Act 15 to 9. ABA Banking Journal. Senate Banking Committee releases Clarity Act text. https://bankingjournal.aba.com/2026/05/senate-banking-committee-releases-text-of-crypto-bill-ahead-of-vote/

18. convene meetings with insurance regulators. U.S. Treasury press release. FIO to convene meetings on private credit. https://home.treasury.gov/news/press-releases/sb0430

19. S&P 500 weekly recap. Seeking Alpha. S&P 500 holds weekly gain despite Friday selloff. https://seekingalpha.com/news/4594078-s-and-p-500-holds-weekly-gain-despite-friday-selloff

20. Home Depot Pro segment. Quartz. Home Depot’s Pro business as a key growth lever. https://qz.com/home-depot-s-pro-business-key-growth-lever-amid-slow-demand

Disclosure

This article is for educational and entertainment purposes only. Nothing here is investment advice, tax advice, legal advice, or accounting advice. I am not your CPA, accountant, attorney, or tax professional, and I am not acting as your financial advisor in this article.

Investing involves risk, including loss of principal. Past performance does not predict future results. Markets, tax law, and individual circumstances change. Before acting on anything you read here, consult a qualified professional who knows your full situation.

Position disclosure: I, members of my family, and clients of VAP Wealth Advisors may own positions in the security or securities discussed in this article. I may buy, sell, add to, or trim those positions at any time, without prior notice or updating this article. Nothing said here should be taken as a recommendation to buy, sell, or hold any specific security.

Views expressed are my own and do not necessarily reflect the views of VAP Wealth Advisors.

Regulatory Information

ValueAligned Partners LLC is a Registered Investment Advisor. For additional information, please refer to our Form ADV, available on the SEC’s website at www.adviserinfo.sec.gov.

David Berkowitz CIO

I’m Berk — Investor, Educator, and Owner. For 40 years I’ve helped families think like owners and invest in great companies. Earlier in my career I was head trader for a $250 million hedge fund, advised Fortune 500 boards and C-level executives and taught 10,000 of their employees at multi-billion-dollar companies, and trained non-financial employees in value-based management.

See Full Bio