A threat by President Trump to place escalating tariffs on Mexican goods if Mexico’s government does not take more steps to stop migrants from reaching the U.S. border overshadowed positive economic data and sparked another dip in U.S. stocks. The tariffs the president detailed would start on June 10 at 5% growing to 25% by October 1 if Mexico did not comply with three demands to halt the flow of Central Americans seeking asylum at the U.S. border. The unorthodox application and wide impact these tariffs could have on U.S. consumers caused a flight to safer assets and drove the 10-Year Treasury down to 2.14% – below most cash rates.
U.S. large and small cap stocks continued their downslide but thanks to a very strong first quarter, both still have respectable gains for the five months ending in May. While international developed stocks also declined, emerging markets posted a slight gain last week – each also generating reasonable year-to-date gains. The continued downward pressure on interest rates is signaling the belief that the Fed may lower rates in the foreseeable future and bond funds rose in response. Oil prices took a strong tumble on the chaotic trade environment and weak economic data out of China.
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