The market’s not listening: Why familiar signals are falling flat
As May came to a close, investors found themselves surrounded by headlines that under normal circumstances should have calmed the markets. Inflation is nearing the Federal Reserve’s target, corporate earnings have been solid and economic growth remains intact. Yet, despite these positive signals, the markets remain hesitant, even uneasy. Could it be that the traditional cues no longer carry the same weight?
Inflation Nears Target, But the Market Isn’t Reassured
Chief Investment Officer Thierry Hasse
By traditional standards, this would mark a milestone and a chance for Fed Chair Jerome Powell to take a victory lap as inflation inches back toward the central bank’s 2% target. But instead of celebration, Powell and his colleagues struck a more cautious tone. The concern? That new tariffs could reverse the progress, with higher import costs eventually passed on to consumers.
In his first Oval Office meeting with the president since the election, Powell reiterated the Fed’s commitment to staying above the political fray, emphasizing that monetary policy decisions would continue to be based on “careful, objective and non-political analysis” of incoming economic data.
Yet for investors the message wasn’t enough. Even encouraging numbers are being met with skepticism—a sign that familiar signals, even from the Fed, may no longer move the markets as they once did.
Stocks Rise, But Confidence Wavers
After rebounding from an almost 20% sell-off in April, the S&P 500 gained 6.2% in May, finishing the month up 0.5% year-to-date (Source: CNBC). Solid first-quarter earnings helped drive the rally, but investors continue to grapple with legal and policy uncertainty.
On Wednesday night, the U.S. Court of International Trade struck down the administration’s reciprocal tariffs, citing a lack of proper authority. A day later, an appeals court granted a stay. The back-and-forth is now likely headed to the U.S. Supreme Court.
Even with positive earnings behind them, investors appear hesitant—uncertain whether to trust that the worst is behind us. The market’s reaction suggests that the old catalysts for confidence may no longer carry the same weight.
Treasury Yields Rise as Fiscal Concerns Deepen
Meanwhile, fixed income markets are sending a different kind of signal. The yield on the 30-year U.S. Treasury briefly hit 5.15% in May—the highest in more than two decades—after tepid demand at a 20-year bond auction (Source: Bloomberg).
Investors are expressing growing concern over rising government debt levels, especially in light of the recently passed “Big Beautiful Bill,” which adds new layers of tax and spending provisions. Rather than finding reassurance in domestic policy, bond investors are demanding higher yields to compensate for fiscal risk.
This concern isn’t limited to the U.S. In Japan, 40-year government bond yields reached a record 3.69% last week (Source: CNBC). As the Bank of Japan began to scale back its bond-buying program, further evidence that long-held assumptions around sovereign debt and inflation are being re-evaluated globally.
Labor Market Data Could Shift the Focus—Or Not
Looking ahead, attention will turn to the U.S. labor market. On Friday, June 6, the Bureau of Labor Statistics will release May’s nonfarm payrolls report, with expectations for steady job growth and an unemployment rate holding at 4.2%.
Traditionally, a strong jobs report might help stabilize markets. But in this environment, even positive data may not carry the usual influence. With investors overwhelmed by a mix of legal battles, fiscal shifts, and global rate pressures, the labor report could come and go without a clear response—yet another sign that the old market playbook may no longer apply.
What We’re Watching This Week
The current market environment has been shaped by fast-moving and often unconventional policy shifts—tariff rulings, fiscal packages and legal appeals—all of which make it harder for investors to rely on past patterns.
Consequently, at Elevage Partners, we’re not just watching the numbers—we’re paying attention to how markets are choosing to interpret them. Traditional signals moving markets in historically predictable directions are now a less reliable factor. Thoughtful planning and deliberate portfolio decision-making remain more important than ever. When market reactions grow unpredictable, having a clear, personalized financial strategy grounded in your long-term goals can offer more clarity, confidence and control—even when the headlines don’t.
At Elevage Partners, we anticipate—we prepare.
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