At a glance

A constructive U.S. jobs report supported stronger global equity prices last week. Bond yields rose, pressuring prices, and investors trimmed expectations for Federal Reserve interest rate cuts.

Number of the week:

4.2%

The U.S. unemployment rate in May, the same as the previous two months.

Term of the week:

Real estate investment trust (REIT)

A company that owns, operates or finances income-generating real estate. Like mutual funds, REITs pool the capital of numerous investors, allowing individual investors to earn dividends from real estate investments without having to buy, manage or finance any properties themselves.

Quote of the week:

High frequency data reflect a solid economic backdrop. Weekly retail sales and credit and debit card transactions indicate consumers continue spending at a healthy rate, supporting economic activity. Movie theater ticket sales, restaurant reservations and air travel activity corroborate broader consumer spending strength. Minimal supply disruptions stemming from tariffs have emerged thus far despite a drop in imported goods from $347 billion in March to $278 billion in April.

Bill Merz, CFA, Senior Vice President, Head of Capital Markets Research and Portfolio Construction, U.S. Bank

Global economy

Quick take: Last week’s constructive non-farm payroll report reflects a balanced labor market that continues to support consumer spending and broader economic growth, particularly the service sector. Recent trade data evidence tariff-related impacts through lower imports and weaker-than-expected manufacturing purchase manager indices. This week’s May Consumer Price Index and Producer Price Index reports will provide an inflation update in the wake of rising tariff revenue.

Equity markets

Quick take: A benign U.S. jobs report helped lift both international and U.S. stocks last week despite ongoing concern around tariffs, government spending and the public spat between President Trump and Tesla CEO Elon Musk. Emerging markets outpaced developed international and U.S. indices. Year-to-date, international equities continue to outpace domestics, while U.S. large-caps are outperforming smaller companies. First quarter S&P 500 reported revenue was in line with expectations while earnings exceeded them.

Bond markets

Quick take: Stronger-than-expected payroll and wage growth drove bond yields higher last week, weighing on bond prices across the market. Investors reduced their expectations for future Federal Reserve (Fed) rate cuts, with the stronger data alleviating investor concerns of near-term economic weakness.

Real assets

Quick take: Real estate investment trusts (REITs) rose 0.2% last week, with gains in data center REITs offsetting declines in telecommunication and multi-family REITs. Global infrastructure returned 1.0.% while broad commodity indices gained nearly 3.9%.

Based on our strategic approach to creating diversified portfolios, guidelines are in place concerning the construction of portfolios and how investments should be allocated to specific asset classes based on client goals, objectives and tolerance for risk. Not all recommended asset classes will be suitable for every portfolio. Diversification and asset allocation do not guarantee returns or protect against losses.

Past performance is no guarantee of future results. All performance data, while obtained from sources deemed to be reliable, are not guaranteed for accuracy. Indexes shown are unmanaged and are not available for direct investment. The S&P 500 Index consists of 500 widely traded stocks that are considered to represent the performance of the U.S. stock market in general. The NASDAQ Composite Index is a market-capitalization weighted average of roughly 5,000 stocks that are electronically traded in the NASDAQ market. The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index and is representative of the U.S. small capitalization securities market. The MSCI EAFE Index includes approximately 1,000 companies representing the stock markets of 21 countries in Europe, Australasia and the Far East (EAFE). The MSCI Emerging Markets Index is designed to measure equity market performance in global emerging markets. The S&P Global Purchasing Managers' Index data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies. The Consumer Price Index is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. It is one of the most frequently used statistics for identifying periods of inflation or deflation. The Producer Price Index (PPI) is a family of indexes that measures the average change over time in selling prices received by domestic producers of goods and services. PPIs measure price change from the perspective of the seller.

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This information represents the opinion of U.S. Bank Wealth Management. The views are subject to change at any time based on market or other conditions and are current as of the date indicated on the materials. This is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific advice or to be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation. The factual information provided has been obtained from sources believed to be reliable but is not guaranteed as to accuracy or completeness. U.S. Bank is not affiliated or associated with any organizations mentioned.

Based on our strategic approach to creating diversified portfolios, guidelines are in place concerning the construction of portfolios and how investments should be allocated to specific asset classes based on client goals, objectives and tolerance for risk. Not all recommended asset classes will be suitable for every portfolio.

Diversification and asset allocation do not guarantee returns or protect against losses.

Past performance is no guarantee of future results. All performance data, while obtained from sources deemed to be reliable, are not guaranteed for accuracy.

Equity securities are subject to stock market fluctuations that occur in response to economic and business developments.

International investing involves special risks, including foreign taxation, currency risks, risks associated with possible differences in financial standards and other risks associated with future political and economic developments. 

Investing in emerging markets may involve greater risks than investing in more developed countries. In addition, concentration of investments in a single region may result in greater volatility.

Investments in fixed income securities are subject to various risks, including changes in interest rates, credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors. Investment in fixed income securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term securities. Investments in lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities.

Investments in high yield bonds offer the potential for high current income and attractive total return, but involve certain risks. Changes in economic conditions or other circumstances may adversely affect a bond issuer’s ability to make principal and interest payments.

The municipal bond market is volatile and can be significantly affected by adverse tax, legislative or political changes and the financial condition of the issues of municipal securities. Interest rate increases can cause the price of a bond to decrease. Income on municipal bonds is free from federal taxes, but may be subject to the federal alternative minimum tax (AMT), state and local taxes.

There are special risks associated with investments in real assets such as commodities and real estate securities. For commodities, risks may include market price fluctuations, regulatory changes, interest rate changes, credit risk, economic changes and the impact of adverse political or financial factors. Investments in real estate securities can be subject to fluctuations in the value of the underlying properties, the effect of economic conditions on real estate values, changes in interest rates and risks related to renting properties (such as rental defaults).

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The information provided represents the opinion of U.S. Bank and is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific investment advice and should not be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation.

U.S. Bank and its representatives do not provide tax or legal advice. Your tax and financial situation is unique. You should consult your tax and/or legal advisor for advice and information concerning your particular situation.