The State of Markets: “Equities: Consolidating – or Rolling Over?”
US Treasury yields have continued to back up sharply this week, with the US 10 year yield up 37bps over the past month (by yesterday’s close). Japanese JGB yields have also moved rapidly (somewhat parabolic) this month, with the 30 year yield up 80bps since early April. That global bond yield back-up has started to pressurise equity markets this week, with US indices giving back some of their recent gains (after their strong rally from the 7th April lows). In particular, the S&P500 is now hovering around its 200 day moving average (see key chart below), while other indices have rolled over more convincingly (e.g. the Philly SOX & DJ Transportation index).
The key question, therefore, is as laid out in our ‘Daily Risk Appetite’ publications this week: Are US equities consolidating their recent gains? Or, having lost upward momentum, are they now rolling over? And, linked to that: Is a short-term asset allocation switch now likely, i.e. out of equities and back into bonds (which are now oversold)? We outline our views on those questions in recent research (see both recent ‘Daily Risk Appetite’ publications, and Monday’s ‘Tactical Equity Asset Allocation’ Alert).
Next week’s US macro data is relatively light but includes Conference Board consumer confidence data for May (on Tuesday) and April’s personal income, spending and PCE inflation data (on Friday). The Fed minutes from the April meeting will be released on Wednesday evening, and several Fed members are scheduled to speak next week (including Kashkari, Williams, Barkin, Goolsbee and Daly). Key earnings reports include Nvidia on Wednesday.
In Europe it’s ‘inflation week’ with the first estimates of May CPI due from Germany, France, Italy, and Spain. US and UK markets are closed on Monday for the Spring Bank Holiday. Please see below for a full list of upcoming data and events.
Key chart: S&P500 futures candlestick chart, shown with 200 day moving average
Upcoming important data/events this week:
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Events: |
Speeches by the ECB’s Lagarde in Berlin (Mon, 3:30pm); market holidays in the US & UK (Mon); Fed minutes from May meeting (Wed, 7pm). |
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Monday: |
N/A |
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Tuesday: |
US durable goods orders (April first estimate, 1:30pm); US Conference Board consumer confidence (May, 3pm). |
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Wednesday: |
N/A |
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Thursday: |
US GDP (Q1 second estimate, 1:30pm); Pending home sales (Apr, 3pm). |
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Friday: |
US personal income & spending including headline & core PCE (Apr, 1:30pm). |
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Key earnings: |
Nvidia, Salesforce Inc (Wed); Costco (Fri). |
Key Research
Global Macro Report, 22nd May 2025:
According to the ONS, after a difficult 2nd half of 2024, growth returned to the UK economy in the first quarter (+0.7% q-o-q, real).
Our assessment of the outlook, for the rest of 2025 and into 2026, suggests that growth can continue, even accelerate from those levels. The updated household cashflow model is estimating above average growth rates for discretionary cashflow in 2025 and 2026. The cost of essential items is now largely under control; the BoE is in rate cutting mode; while, reflecting that, house prices are trending higher. All of that should (government notwithstanding) engender wealth effects and confidence.
Furthermore, if household confidence does return, then the unusually high savings ratio should start to fall (adding more strength to consumption growth).
Key North American macro data & events:
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Events: |
Market holiday in the United States on account of Memorial Day (Mon); Fed minutes from May meeting (Wed, 7pm); speeches by the Fed’s Kashkari at BoJ event (Tues, 9am), Williams in Tokyo (Wed, 1am), Kashkari in a Q&A (Wed, 9am), Barkin in a fireside chat (Thurs, 1:30am), Goolsbee in a moderated Q&A (Thurs, 3:40pm), Daly in a fireside chat (Thurs, 9pm) & Logan in a Q&A (Friday, 1:25am). |
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Monday: |
N/A |
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Tuesday: |
US durable goods orders (April first estimate, 1:30pm); US FHFA house price index (Mar, 2pm); US Conference Board consumer confidence (May, 3pm). |
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Wednesday: |
US Richmond Fed manufacturing index (May, 3pm); US Dallas Fed service sector activity (May, 3:30m). |
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Thursday: |
US GDP (Q1 second estimate, 1:30pm); US weekly jobless claims (1:30pm); pending home sales (Apr, 3pm). |
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Friday: |
US personal income & spending including headline & core PCE (Apr, 1:30pm); Canadian GDP (Mar, 12:30pm); US wholesale sales & inventories (Apr, 1:30pm); US Chicago PMI (May, 2:45pm); US Michigan Sentiment (May final estimate, 3pm). |
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Key earnings: |
PDD Holdings (Tues); Nvidia, Salesforce Inc (Wed); Dell Tech, Marvell (Thurs); Costco (Fri). |
Fig B: US Conference Board consumer confidence (index)
ey European macro data & events
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Events: |
Speeches by the ECB’s Nagel & Lagarde in Berlin (Mon, 2:30 & 3:30pm), Villeroy in Paris (Tues, 8am), Nagel in Mannheim (Tues, 5pm), Panetta in Rome (Fri, 9:30) & Vujcic in Dubrovnik (Fri). |
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Monday: |
Spanish PPI (Apr, 8am). |
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Tuesday: |
Eurozone new car sales (Apr, 5am); German GfK consumer confidence (June, 7am); French headline CPI (May first estimate, 7:45am); Eurozone consumer confidence (May final estimate, 10am). |
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Wednesday: |
French GDP & consumer spending (Q1 final estimate, 7:45am); French PPI (Apr, 7:45am); German unemployment (May, 8:55am); ECB 1 & 3 year CPI expectations (Apr, 9am). |
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Thursday: |
Spanish retail sales (Apr, 8am); Italian ISTAT consumer & manufacturing confidence (May, 9am); Italian industrial sales (Mar, 11am). |
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Friday: |
Eurozone M3 money supply (Apr, 9am); Italian GDP (Q1 final estimate, 9am); Spanish CPI (May first estimate, 9am); Italian headline CPI (May first estimate, 10am); Italian PPI (Apr, 11am); German headline CPI (May first estimate, 1pm). |
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Key earnings: |
N/A |
Fig C: Eurozone M3 money supply (Y-o-Y %)
Key UK macro data & events
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Events: |
Market holiday in the United Kingdom for Spring Bank Holiday (Mon). |
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Monday: |
N/A |
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Tuesday: |
BRC shop price index (May, 12:01am); CBI distributive trade survey (May, 11am). |
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Wednesday: |
N/A |
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Thursday: |
N/A |
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Friday: |
Lloyds business barometer (May, 12:01am). |
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Key earnings: |
N/A |
Fig D: Lloyds business barometer employment outlook shown with recession bands
Key Asia-Pacific macro data & events
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Events: |
RBNZ policy decision (Wed, 3am). |
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Monday: |
Japanese ESRI leading index (March final estimate, 6am). |
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Tuesday: |
Japanese PPI services (Feb, 12:50am); Chinese industrial profits (Apr, 2:30am). |
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Wednesday: |
Australian CPI (Apr, 2:30am). |
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Thursday: |
Japanese ESRI consumer confidence (May, 6am). |
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Friday: |
Japanese jobless rate (Apr, 12:30am); Japanese retail sales (Apr, 12:50am); Japanese industrial production (April first estimate, 12:50am); Australian private sector credit (Apr, 2:30am); Australian building approvals & private sector houses (Apr, 2:30am); Japanese housing starts (Apr, 6am); Japanese housing starts (Apr, 6am). |
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Key earnings: |
N/A |
Fig E: Japanese industrial production shown with recession bands
This week:
Longview on Friday, 23rd May 2025:
“Bond Shenanigans & the 'Gold-Silver' Ratio - What Does it all Mean?'”
Global Macro Report, 22nd May 2025:
“UK Economy: Poised to Accelerate”
Monthly Global Asset Allocation No. 64, 20th May 2025:
“China: Mini-Cycles in a Balance Sheet Recession”
Longview ‘Tactical’ Alert No. 91, 19th May 2025:
“Move Tactically NEUTRAL Equities (from OW) a.k.a. Pullback, or Consolidation Phase, Expected. Retest Debate Ambiguous”
Prior week:
Longview on Friday, 16th May 2025:
“To Retest or Not to Retest?'”
Recommended Global Macro Trade 15th May 2025:
“Play Lower US Rates & Treasury Yields”
Global Macro Report, 14th May 2025:
“Fed’s Dual Mandate (Inflation & Growth): Which Part Matters the Most? a.k.a More Cuts Need to be Priced into the Curve”