From the Trading Desk at Stipelis
The Strategy Session for Wednesday, May 27, 2026
A shift that Starts quietly
From the trading desk, the most important changes in markets rarely happen with a headline. They start underneath the surface, in areas most people are not focused on. Right now, that place is the yield curve.
After spending a long period inverted, the curve has begun to move back toward normal levels. Short-term rates have eased lower, and the gap between short and long-term yields is widening again. This does not mean policy has changed yet. But it does suggest that markets are beginning to expect less pressure from central banks going forward.
This transition phase matters because it tends to influence other markets before it becomes widely accepted.
Why Rates Matter for Everything Else
Equity markets are closely tied to interest rates, even if that connection is not always obvious. When short-term rates stop rising and begin to fall, it changes how investors think about the future.
Lower expected rates reduce the cost of capital and increase the value of future earnings. That alone can support higher equity prices, even in the absence of strong economic growth.
What stands out in the current environment is that this adjustment is happening without signs of stress. Credit spreads remain stable, volatility is contained, and liquidity appears steady. This is not a reaction to crisis conditions. It is a shift in expectations.
A Strong Market With Uneven Signals
While equity markets have been firm, not all sectors are moving together. Energy markets have been weaker, with crude oil and refined products showing consistent pressure. At the same time, agriculture and select commodities have held up better.
This divergence is important. If markets were being driven by strong growth expectations, energy would likely be participating. Instead, the strength in equities appears tied more to changing financial conditions than to improving demand.
That creates a different kind of market environment. It is one where some areas respond quickly to liquidity while others continue to reflect slower underlying conditions.
What the Curve Has Done Before
Looking at past cycles, this type of movement in the curve tends to mark turning points. When inversion reaches an extreme and begins to reverse, it often signals that the tightening phase is losing momentum.
In prior periods, that transition has led to stronger performance in risk assets, at least in the early stages. Markets tend to adjust quickly once policy pressure begins to ease, even if official decisions come later.
However, these periods are rarely smooth. The shift from tightening to easing is not immediate or uniform. It unfolds over time, and markets often move ahead of the data.
Where This Leaves the Market Now
Based on current conditions, the market appears to be in an early transition phase. The signals from rates suggest less tightening pressure ahead, but not a fully defined easing cycle.
This helps explain the behavior seen across assets. Equities have shown strength, supported by improving expectations around policy. At the same time, some sectors remain under pressure, reflecting uncertainty about growth.
The key question is whether this shift continues. If the curve keeps moving toward normal levels, it could reinforce the current environment. If it stalls or reverses, it may suggest that the adjustment is not yet complete.
For now, the most consistent message is coming from rates. Markets are beginning to adjust to a future that may look different from the recent past, even if that change is still unfolding.
Stephen Coleman – founder
Stipelis Global Trading LLC is registered with the Commodity Futures Trading Commission and is a member of the National Futures Association.
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The opinions expressed are those of Stipelis Global Trading LLC and are considered market commentary. They are not intended to act as investment recommendations. Individuals should make investment decisions based on their own analysis and with direct consultation with a financial advisor.
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