- Stock markets across the globe finished the month sharply lower, their worst monthly return since the December 2018 sell-off. Monthly stock returns globally: (US Tech -9%, Japan -8%, EM -8%, US S&P 500: -6%, Europe -6%, China -6%).
- US/China trade rhetoric continues, but the most recent downturn is related to the surprise announcement that the US plans to impose tariffs on Mexico in the coming weeks.
- Commodity prices fell last week, led by oil which dropped 8% on the week and a cumulative 15% in May.
- 3m/10y curve is the most negative it’s been since the financial crisis at -20bps. Interestingly, the 2y/10y curve actually steepened last week, despite falling yields, as the probability of a Fed rate cut this year skyrocketed to nearly 100%.
- The December forward rate in the US is 1.75% signaling the market expects 2-3 rate cuts this year (Probability of a cut: 50% by July and 80% by September). The German 10y yield appears to be at an all-time low of -20bps.
Fed Rate cut probabilities