Stocks Soar, Bonds Snore

DoubleLine Portfolio Manager Ken Shinoda returns with his Channel 11 update for May, a month where equities pushed to new heights, and the bond market quietly repriced higher. Led by a powerful rebound off April lows in tech and momentum names, the Nikkei, Dow Transports and Russell 2000 indices moved into position among the standout performers of the year. Europe continued to lag, weighed down by high energy prices and manufacturing-heavy economies, while crypto pulled back as rotation into AI trades picked up steam. On the commodity front, crude oil finally showed some softness as hopes creeped into the market for a resolution to the Middle East conflict and a potential opening of the Strait of Hormuz. The macroeconomic picture was one of resilience with a catch. Manufacturing staged a genuine rebound on the back of hyperscaler capex and data center buildout, and services remained strong globally outside of Germany and the U.K. But the bond market repriced meaningfully – the 10-year yield shifted from 4.25% to a new center of gravity around 4.50%, and the market is now pricing in the possibility of a hike rather than cuts. Mr. Shinoda sees the 30-year holding around 5% as an important stabilizer for risk assets, and notes that inflation break-evens are coming down with energy prices, which he calls good news. In fixed income, it remained a floaters and short-duration story, with credit spreads grinding tighter, and the securitized sector still looking relatively cheap.