SAA Monthly Investment Update: May 2024

Global shares rose in May with developed markets outperforming emerging markets. Investors continued to anticipate interest rate cuts, albeit with US cuts likely to come later than in some other regions. Oil prices retreated in the month.

Treasury yields declined 15 to 20bps across the yield curve in May, a reprieve from the upward YTD trend. Yields on 2yr and 10yr maturities fell in near-lockstep manner, leaving the persistent 2s/10s curve inversion relatively unchanged (-38 bps). As anticipated, the Fed opted to hold rates steady and slow (taper) the Quantitative Tightening (QT) balance sheet runoff at the May 1 FOMC meeting. Although their official statement said that “there has been a lack of further progress toward the Committee’s 2% inflation objective” given the higher-than-expected inflation in Q1, in the press conference following the meeting, Chair Powell provided some dovish relief by saying the next rate move was unlikely to be a hike.