Economic Insights - May 2019
New lows in U.S. treasury bond yields since December suggested the global growth slowdown would take longer to overcome than the optimism in the monster stock market rally since late last year. Turns out, the bond market was right again. In other news, we're still waiting for better growth from interest rates. Long-term safe-haven government bonds yields may even have slightly more downside risk. And a Fed rate cut is more likely. But, eventually, a modest inflation surprise next year could push long-maturity yields higher. What's changing? The investment environment that provided such strong returns from 2009 through early last year. In the next cycle, investors will likely demand at least some inflation premium in long-term rates, paving the way for the outperformance of value stocks. And the mid-cycle slowdown for the current slowdown in industrial activity feels like a flashback to 2015. Still, world growth should pick up modestly later this year. These insights and more from our chief global economist's monthly roundup and look ahead.