Asset Management Weekly Market Commentary

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Tame inflation data and falling Treasury yields pushed large cap U.S. stocks to a series of new closing highs over the balance of the week but falling yields could be signaling economic troubles on the horizon. Fears of an imminent economic slowdown appear overblown, but concerns surrounding a slow-growth backdrop materializing will likely continue to benefit large cap stocks (S&P 500) relative to small and mid-cap (SMid) for the foreseeable future.
Euro area equity indices sold off as investors moved to the sidelines and sovereign bond yields rose across the pond due to heightened political risk in the lead-up to snap elections in France later this month. Less restrictive monetary policy in the euro area is a positive development, but political dysfunction/uncertainty will likely act as a powerful near-term headwind for economic growth and corporate profits across the pond.
Treasuries had a good week as inflation data cooled in May and Treasury auctions were very well received with buyers from abroad eager to snap up 10- and 30-year bonds, which pushed yields sharply lower. The drop in yields on long-dated Treasuries is welcome news for bond investors, but the magnitude of the move appears to be due to rising fears that policymakers (FOMC) are behind the rate-cutting curve and that an economic slowdown is on the horizon.

May retail sales are released Tuesday and are expected to have risen 0.3% month over month after a flat reading in April relative to March.
U.S. Purchasing Managers Index (PMI) for June is released Friday. Manufacturing PMI is expected to fall to 50.7 from 51.3 in May, while Services PMI is expected to be unchanged month over month at 54.8. A reading above 50 indicates expansion or growth, below 50 contraction.