Weekly Market Note_05.23.25
Global Markets & Economic Data:
The relentless indiscriminate rally in risk assets took a minor pause this week as higher long-term US government bond yields headwinds were catalyzed by Moody's recent US debt downgrade.
US: A weak 20-year government bond auction caused the yield curve to steepen. Manufacturing surveys have been improving over the past 30 days. US consumer health is ailing with subprime auto delinquencies hitting new highs amid forecasts for slowing spending growth in H2 2025. US home prices registered their first monthly decline since 2023.
EU: UK inflation surprised to the upside driven by services CPI. UK home prices gained 6% y/y in March. Eurozone consumer confidence gained in May. Lower pharma sales dragged down Danish Q1 GDP.
Asia: JGB yields continue to move higher and the JPY is strengthening versus the US dollar with economists expecting 20bps of rate hikes this year from the BoJ. Japan's latest manufacturing PMI reading signaled a contraction and services PMI readings are slowing but remain in expansion territory. Singapore's Q1 GDP growth was ahead of expectations. China-USA container bookings spiked in May.
US Exceptionalism
US government bond vigilantes are swarming and the latest “BBB” (Big Beautiful Bill) does little to dispel their worries.
While US retail investors remain dip buyers under all scenarios, greater macro developments could create a tsunami that will quash their insatiable appetite for overvalued stocks.