Last week’s macro backdrop showed cooling inflation but softening demand. US retail sales unexpectedly declined by 0.9% in May — the biggest drop in four months — hinting at consumers pulling back amid high rates and lingering price pressures.
Last week, investors were navigating a delicate balance between relief and risk. On one hand, US inflation data brought some welcome news – prices are rising more slowly than expected, giving the Fed more reason to hit pause on rate hikes.
Investors stepped into the final week of May feeling cautiously optimistic. Inflation seemed to be cooling, and consumers were still spending steadily — a combination that gave markets a bit more stability.
The market experienced a decline during the previous week because investors became concerned about new trade tensions and increasing borrowing costs and rising US government debt. The market experienced a setback when President Trump announced unexpected European import tariffs including iPhones at a time when China trade negotiations were showing positive developments. The new trade policy brought back the uncertainty that had previously dominated the market.
