May 3, 2025 Market Update

Equities trading remained choppy last week, as investors reacted to shifting tariff policies and their economic impact.  Over the past eight trading sessions, U.S. stocks have effectively erased the losses incurred after President Trump's 'Liberation Day' tariff announcement on April 2.

The bond market saw yields edge higher.  The move reflected renewed concerns that the Federal Reserve may keep interest rates elevated longer than previously expected.

While the week’s developments were welcome, the situation remains fluid.  Economic data continues to send mixed signals, and both Fed policy and tariff developments will likely dictate the market’s next move.  For now, the rally appears to have improved Mr. Market’s mood, but we plan to continue to proceed cautiously until there is a clearer picture of where things are heading.

Investor sentiment continued to improve last week, but how long the positive mojo will last is anyone’s guess.  Developments that contributed to the market’s advance included the following:

• President Trump announced plans to ease tariffs on automakers, aiming to alleviate some pressure from the ongoing trade tensions.  This move contributed to positive market sentiment earlier in the week.

• Meta, Microsoft, Amazon, and Apple issued strong first quarter earnings reports.

• Inflation in the U.S., during the last 12 months as measured by the change in the Personal Consumption Expenditures (PCE) Price Index, slowed to 2.3% on a yearly basis in March, down from 2.5% in February.  Core PCE, the Federal Reserve’s preferred inflation metric, rose by 2.6%.

• The Labor Department estimates that the U.S. economy contracted by 0.3% in the first quarter of 2025, following 2.4% growth in the fourth quarter of 2024.  The primary driver was a temporary surge in imports ahead of anticipated tariff hikes, which reduced net exports which weighed on GDP.  A decline in government spending also contributed to the slowdown.

• The economy added 177,000 jobs in April, the Labor Department said Friday, above economist expectations.

Viewed collectively, it does not seem as though a new recession has already begun.  That said, according to Barron’s (a leading financial publisher) “The economic fallout is coming, it’s just a matter of when and how bad it proves to be.”  

That’s all for now.  Have a great weekend and invest wisely my friends.