Schroders global commentary indicates that currently, major central banks around the world are preparing to cut interest rates. The European Central Bank (ECB) has already cut rates in early June 2024, and the Bank of England may follow suit. Additionally, there are preliminary signs over the past month showing that the US economy is slowing down while inflation data is improving. Therefore, the bank has lowered the possibility of an economic "hard landing" and raised the possibility of a "soft landing". If economic growth continues to weaken, this will create a favorable environment for the Federal Reserve to begin lowering policy rates later this year. Due to the reduced probability of an economic hard landing, the bank has improved its outlook for the global bond market. Currently, major central banks around the world are preparing to cut interest rates. Although other major central banks have stated that their rate decisions will not be affected by the actions of the Federal Reserve, the Fed's decisions will have a long-term impact on the overall financial markets, including the difficulty for consumers and businesses in obtaining financing, as well as significant effects on commodity prices and currency exchange rates. If the US economy indeed continues to slow down, this will help the Federal Reserve to begin lowering policy rates later in 2024. Over the past month, there have been preliminary signs of the US economy slowing down and improving inflation data, prompting the bank to reduce the likelihood of an economic hard landing and increase the likelihood of a soft landing (the bank's base forecast scenario). The impact of economic slowdown is already reflected in various economic indicators, such as consumer confidence, job quit rate, and initial claims for unemployment benefits, suggesting that previous concerns about an overheated labor market may have been overstated. Nonfarm employment figures are crucial, and data from April and May 2024 show a slowdown in job growth in core industries, which is a positive sign. Regarding inflation, with geopolitical tensions easing, oil prices have fallen from their highs in April 2024. Additionally, consumer price index (CPI) data for April and May 2024 in the US, particularly in core industries excluding housing, have improved. Overall inflation in the US remains at a relatively high level, but it has improved compared to the first quarter, which is a step in the right direction. The bank believes that if economic growth momentum continues to weaken, this will create a favorable environment for the Federal Reserve to begin lowering policy rates later this year. The bank points out a puzzling phenomenon in the financial markets the ISM Services Purchasing Managers' Index (PMI) dropped below 50 for the first time in over a year in April 2024, indicating industry contraction with significant weaknesses in new orders, employment, and production. The specific reasons for this situation are still unclear, and this leading indicator seems less reliable post-pandemic. Therefore, it may be premature to raise concerns about an economic hard landing based on a weak survey index. However, in the coming months, the bank will rigorously review service sector data, including official data and survey data, more than usual. Due to the reduced likelihood of an economic hard landing impacting bond returns significantly, the bank has improved its outlook for the global bond market. Additionally, the latest Federal Reserve meeting eliminated discussions on further rate hikes as long as economic data remains strong (this dynamic is crucial). This demonstrates that maintaining a positive outlook on the global duration (or interest rate risk) is reasonable. The bank's fixed income asset allocation saw relatively small changes compared to last month, with a slight increase in the view on emerging market local currency bonds. The bank remains optimistic about mortgage-backed securities, agency mortgage-backed securities, short-term European investment-grade credit, and semi-sovereign bonds, and remains underweight US investment-grade credit and global high-yield bonds due to relatively low attractiveness of valuations. (Investment-grade bonds are of the highest quality as determined by credit rating agencies; high-yield bonds are more speculative with credit ratings lower than investment-grade bonds.)