Today's Charts & Ideas: What Markets Are Telling Us #28

06/28/2025 | Unsubscribe

Good Morning!

Here are some important charts and ideas capturing the latest trends in US markets to help you understand what is happening from multiple different perspectives:

🧧 Japan’s Bond Yield Spike: Why It Matters for Global Investors

Japanese long-term bond yields (especially 30-year and 40-year) have surged to their highest levels since 2019, rising sharply in recent days.

📈 Explanation of the Chart

• The chart shows the yield (interest rate) on Japanese government bonds (JGBs) for different durations: 2-year, 10-year, 30-year, and 40-year.

• From 2019 to mid-2023, yields were mostly low and stable, near or below 1%.

• Since 2023, and especially into 2025, yields on longer-term bonds (30y in blue, 40y in red) have spiked to over 3%, a significant jump.

• This indicates that investors now demand much higher returns to hold Japanese government debt long-term, possibly due to inflation fears, central bank tightening, or shifting global capital flows.

💼 What This Could Mean for You

Even if you don’t invest in Japan, these moves can affect your daily life and long-term finances:

• Higher Mortgage or Loan Rates (Eventually): Rising global yields can push up borrowing costs, even outside Japan, including in the US.

• Stock Market Volatility: If Japanese investors pull money from US stocks or bonds to invest back home, it could trigger selling pressure on global markets.

• Investment Shifts: Your 401(k), mutual funds, or ETFs with international exposure may feel ripple effects if Japanese capital leaves US assets.

🔁 Alternative Perspectives to Consider

• Temporary Spike? The surge in yields might be short-lived if Japan's central bank intervenes or if inflation cools.

• Global Diversification Still Matters: Japanese investors may reduce foreign investments, but global markets are complex — not all capital will exit the US.

• Japan's Shift May Take Time: Many institutions have long-term commitments abroad, and unwinding positions isn't instant or guaranteed.

💡 One Possible Investor Takeaway

Investors might reflect on the importance of watching foreign capital flows — a spike in Japanese bond yields may signal increased global volatility. As a result, some may choose to review their portfolio's exposure to international assets or consider diversification strategies to reduce potential risks from sharp capital movements.

📝 Loan Growth Suggests US Economy Isn’t in Recession — Yet

US commercial and industrial (C&I) loans grew 2.4% year-over-year in April 2025 — the strongest growth in over a year and a sign of resilience in business lending.

📈 Explanation of the Chart

• The chart shows the annual percentage change in C&I loans from 1980 to 2025.

• C&I loans tend to drop during recessions, which are marked by gray shaded areas.

• Historically, loan contractions were seen during the 1991, 2001, 2008, and 2020 recessions.

• After extreme swings during the pandemic, growth is stabilizing, at +2.4% as of April 2025.

• This suggests businesses are still borrowing, which typically signals economic confidence.

💼 What This Could Mean for You

Here’s how this data might affect everyday people:

• Jobs and Wages: More business loans usually support hiring, investment, and operations, potentially helping job security and wage growth.

• Recession Fears May Be Premature: Despite headlines and cautious CEO commentary, this data doesn’t point to a downturn yet.

• Business Owners: Access to credit may be improving, supporting expansion or recovery plans.

🔁 Alternative Perspectives to Consider

• Growth Is Still Modest: While positive, 2.4% growth is relatively weak compared to past expansions.

• Delayed Effects Possible: Lending data can lag. A slowdown could still arrive later this year.

• CEOs May See Trouble Ahead: Business leaders could be reacting to other risks (like global demand or regulation) that are not yet reflected in loan data.

💡 One Possible Investor Takeaway

Investors might take this as a cue to watch credit trends as a recession indicator. Modest loan growth can support confidence in cyclical stocks or sectors tied to business investment, but caution is still warranted if lending softens again.

📬 Retail Rush to Investment-Grade Bonds: What It Might Signal

Investment-grade (IG) bond funds just saw their largest weekly inflow since September 2024 — a sign that many investors are moving money into safer, high-quality debt.

📈 Explanation of the Chart

• The chart tracks weekly flows (light blue bars) and the 4-week average (dark line) into corporate IG bond funds since 2017.

• Spikes in the chart show moments when investors poured large sums into IG bonds, often during times of market stress or when yields became attractive.

• In 2025, a sharp surge in inflows indicates strong recent demand, likely as investors look for safety, steady income, or a “dip-buying” opportunity in bonds.

💼 What This Could Mean for You

Here’s how this shift in investor behavior may relate to your life:

• Interest Rates May Be Peaking: Bond prices often become more attractive when rates stop rising, potentially offering better returns.

• Safer Options Regain Popularity: IG bonds are seen as low-risk investments. People may be moving money from stocks to these for stability.

• Good Time to Reevaluate Your Mix: Even if you don’t invest directly in bonds, your mutual funds or retirement accounts might be shifting toward more conservative holdings.

🔁 Alternative Perspectives to Consider

• Short-Term Bounce? The inflows could reflect a temporary reaction to market volatility, not a long-term trend.

• Inflation & Fed Policy Still Matter: If inflation picks up again or rate cuts stall, bond returns could disappoint.

• Retail = Late to the Party? Some analysts argue retail investors often pile in after the smart money, so this could be a sign of nearing a top, not a bottom.

💡 One Possible Investor Takeaway

This surge in inflows might encourage investors to review the role of bonds in their portfolio, especially IG bonds, as a potential way to balance risk and generate income, particularly if market uncertainty or rate cuts are on the horizon.

📨 Inflation Expectations Are Getting Political — Why That Matters

Different political groups in the US now have wildly different expectations for inflation in the year ahead, with a record gap between Republicans (1.2%) and Democrats (9.6%).

📈 Explanation of the Chart

• This chart shows 1-year inflation expectations by political affiliation:

  • Republicans: Expect only 1.2% inflation

  • Democrats: Expect 9.6% inflation

  • Independents & Headline (Average): Around 7.3%

• Expectations were more aligned over the past few years, but have diverged significantly.

• The yellow bars show the spread between Republican and Democrat expectations, now the widest on record at -8.4%.

• This expectation jump is happening despite actual inflation data remaining relatively stable, suggesting sentiment is shaped by political beliefs more than economics.

💼 What This Could Mean for You

Here’s how this might impact your life or financial decisions:

• Consumer Behavior Could Diverge: People who expect high inflation may rush to buy goods or demand higher wages, while others may tighten spending.

• Investment Decisions Could Vary: If inflation views are biased by politics, portfolio choices (stocks, bonds, gold) might follow emotion, not facts.

• Household Planning: Your expectations — whether pessimistic or optimistic — could affect how much you save, spend, or invest.

🔁 Alternative Perspectives to Consider

• Reality May Be in the Middle: Inflation expectations don’t always match inflation. Media, political narratives, or recent price spikes can drive them.

• Useful as Sentiment Signal: These splits might say more about public confidence and election-year uncertainty than actual price trends.

• Policy Impacts: Sharp divisions in inflation views could influence how voters respond to interest rate decisions or fiscal spending proposals.

💡 One Possible Investor Takeaway

Investors might use this data as a reminder to separate sentiment from statistics, keeping investment decisions rooted in actual economic data rather than emotionally charged expectations.

📉 US Leading Economic Index Hits Lowest Since 2016

The Conference Board’s Leading Economic Index (LEI) dropped to 99.4 in April 2025 — the lowest reading in over nine years, signaling a weakening economic outlook.

📈 Explanation of the Chart

• This chart tracks the LEI from 2005 to April 2025. The LEI combines 10 economic indicators that typically move ahead of the overall economy (like jobless claims, new orders, and consumer sentiment).

• A rising LEI usually suggests economic growth. A falling LEI often signals trouble ahead.

• Since early 2022, the LEI has steadily declined, dropping over 20 points — a pattern similar to previous pre-recession periods.

• The current reading of 99.4 is below its pre-pandemic levels and the lowest since March 2016.

💼 What This Could Mean for You

The LEI’s decline can affect households and workers in various ways:

• Job Market Risk: Employers may become cautious, slowing hiring or cutting back hours.

• Housing and Credit Tightening: Banks may get more conservative with lending, affecting mortgages and business loans.

• Investment Volatility: Markets may become more sensitive to bad news, with increased swings in stock or bond prices.

• Budgeting Carefully: Economic slowdowns can lead to higher financial stress, saving and emergency planning become more important.

🔁 Alternative Perspectives to Consider

• Soft Landing Still Possible: While the LEI is down, other real-time data (like job growth and retail sales) remain stable — a slowdown doesn’t guarantee recession.

• LEI Can Lag Market Trends: Markets often price in economic shifts early. If investors already expect this weakness, the worst could be behind us.

• Fed Policy Could Pivot: Weak LEI data may encourage the Fed to cut rates, which could boost the economy later in the year.

💡 One Possible Investor Takeaway

Investors might view the falling LEI as a signal to prepare portfolios for slower growth, possibly by reviewing exposure to cyclical stocks, prioritizing quality companies, or increasing cash buffers.

That’s it for today!

Best Regards,

Ultimate Alerts Team

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