May 29, 2019 Headlines

Treasuries continue to rally, pushing yields lower and sparking concerns in other markets as to what bond investors are signaling.  Most major equity indices are down more than 1% on the day (Nikkei -1.2%, Euro Stoxx -1.7%), and S&P 500 futures are down -0.7% ahead of the U.S. market open. The primary headline overnight affecting markets was China’s threat to use rare earth minerals as a weapon in the current trade/tech war. China commands much of the market for these minerals used for products ranging from iPhones to missiles because they have been more willing than others to refine those minerals from ore, which can be expensive and polluting. This threat is not new. China has been considering this threat for some time, and as a New York Times article pointed out last week, using these minerals as a trade weapon is likely more bark than bite. Nevertheless, the negative sentiment in the global markets grows deeper, and the bond market continues to price for a greater probability of a Fed rate cut. However, the official stance from the Fed in recent weeks has been a desire to allow the transitory factors weighing on inflation to abate.

Fixed income investors obviously aren’t as optimistic, and breakeven yields in the TIPS market, which are a popular measure of market inflation expectations have fallen 20-25 bps this month. While U.S. economic data have been more mixed in recent weeks/months, it has not been bad enough to fuel such a bearish tone in the markets. However, markets are creatures of momentum, and as the old saying goes, don’t catch a falling knife.

Jason Haley
Managing Director, Investment Management Group

5/29/2019MBA Mortgage Applications-3.30%2.40%
5/29/2019Richmond Fed Manufact. Index73
5/30/2019GDP Annualized QoQ3.00%3.20%
5/30/2019Personal Consumption1.20%1.20%
5/30/2019GDP Price Index0.90%0.90%
5/30/2019Core PCE QoQ1.30%1.30%
5/30/2019Initial Jobless Claims215k211k
5/30/2019Continuing Claims1667k1676k
5/30/2019Advance Goods Trade Balance-$72.7b-$71.4b
5/30/2019Retail Inventories MoM0.20%-0.30%
5/30/2019Wholesale Inventories MoM0.10%-0.10%
5/30/2019Bloomberg Consumer Comfort60.3
5/30/2019Pending Home Sales MoM0.50%3.80%
5/30/2019Pending Home Sales NSA YoY0.10%-3.20%
5/31/2019Personal Income0.30%0.10%
5/31/2019Personal Spending0.20%0.90%
5/31/2019Real Personal Spending0.00%0.70%
5/31/2019PCE Deflator MoM0.30%0.20%
5/31/2019PCE Deflator YoY1.60%1.50%
5/31/2019PCE Core Deflator MoM0.20%0.00%
5/31/2019PCE Core Deflator YoY1.60%1.60%
5/31/2019MNI Chicago PMI5452.6
5/31/2019U. of Mich. Sentiment101.2102.4
5/31/2019U. of Mich. Current Conditions112.4
5/31/2019U. of Mich. Expectations96
5/31/2019U. of Mich. 1 Yr Inflation2.80%
5/31/2019U. of Mich. 5-10 Yr Inflation2.60%










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