Second Quarter Financial Market Overview

After a turbulent yet resilient first six months of the year, we wanted to share an updated macroeconomic perspective and investment outlook.

Overview

The U.S. economy has displayed stamina in the face of persistent monetary and fiscal policy uncertainty. While the Federal Reserve projects gross domestic product (GDP) growth of 1.4% for 2025 — reflecting a more cautious stance — unemployment has held steady at 4.2% and the recent easing of trade tensions with China has helped mitigate the most severe stagflationary risks. As a reminder, stagflation occurs when rising inflation and a stagnating economy occur at the same time, a hard-to-fight combination.

Still, despite lower severe stagflationary risks, inflation continues above the Fed’s 2% target, hovering near 3%. The Federal Reserve has maintained its policy rate at 4.25%-4.50% through June, but has signaled a more accommodative stance ahead. With two rate cuts anticipated this year, the central bank appears committed to supporting growth while managing inflationary pressures.

Following the sharp volatility in April, driven by tariff announcements, markets have rebounded impressively. Fueled by tech outperformance, the S&P 500 index rallied more than 24% from its April 8th bottom, finishing the first half of the year at an all-time high.

Looking ahead, economic activity should benefit from greater policy clarity and the prospect of fiscal stimulus from the One Big Beautiful Bill Act. While corporate earnings are set to post solid growth, particularly within the technology sector, trade anxieties could reestablish new headwinds.

How are Q2 Corporate Earnings Stacking Up?

The latest quarter presented a more challenging earnings environment for S&P 500 companies. Analysts are projecting the slowest earnings growth in two years amid widespread estimate revisions and heightened uncertainty around trade policies and economic conditions.

For Q2 2025, S&P 500 earnings are expected to grow 5.0% year-over-year, which would be the slowest pace since Q4 2023. This outlook dropped from an earlier estimate of 9.4% at the end of March, with all eleven sectors now projected to report lower earnings.

Among S&P 500 companies, 59 have issued negative earnings guidance, while 51 have issued positive guidance for the quarter. The index’s forward 12-month price-to-earnings (P/E) ratio stands at 21.9, above both its five- and ten-year averages. Higher P/E ratios can mean a company’s stock is overvalued or that higher growth is expected. 

Despite earlier concerns, the technology sector’s earnings outlook has stabilized in recent weeks after initial downward revisions. The sector is expected to be a key driver of overall index performance, with analysts projecting approximately 21% earnings growth for the full year 2025. Major tech companies are benefiting from continued AI investment and infrastructure spending, though growth rates have moderated from previous quarters.

Economic Growth and GDP Outlook

The U.S. economy contracted in Q1 2025, with the final GDP estimate showing a 0.5% annualized decline. It was the first quarterly drop in three years, largely due to a surge in imports ahead of tariff hikes.

For Q2 2025, growth is expected to rebound to around 1.5% annualized, but this is a significant slowdown from previous years, with 3.2% growth in 2023, 2.5% growth in 2024.

The economy’s trajectory appears heavily dependent on tariff policies. Under the baseline scenario, real GDP growth is expected to be 1.4% in 2025 and 1.5% in 2026. The slowdown is due to weaker household and government spending, with consumption growth decelerating after an unsustainable surge in late 2024.

Manufacturing and Capital Spending Remain Sluggish

The manufacturing sector continues to contract. New orders weakened for the fifth straight month, while employment conditions deteriorated further. Increasing prices paid for inputs suggest that the tariffs on imported goods are hampering businesses’ ability to plan.

Business investment is also subdued, with capital expenditure expected to grow only 0.7% in 2025, down significantly from 3.7% in 2024. The Business Roundtable CEO Economic Outlook Index, which measures CEOs’ plans for hiring and capital spending, dropped 15 points to 69 in Q2 2025, well below its historic average of 83.

Productivity Is the Secret Sauce

Productivity is crucial for the economy because it is the main driver of long-term economic growth and rising living standards, enabling more (and better) goods and services to be produced with the same resources. Sustained productivity gains are essential for increasing GDP per capita and improving overall prosperity. U.S. productivity dipped 1.5% in Q1 2025, mainly due to higher labor costs and slower output growth.

Trade and Tariffs Headaches

The U.S. trade landscape in mid-2025 remains highly unsettled, with new tariffs and critical deadlines shaping economic and market conditions.

Currently, most imports face a 10% tariff, while Chinese goods are taxed at 30% after falling from a peak of 145%. Steel and aluminum imports carry a steep 50% tariff. These measures have triggered retaliation: China has imposed 10% tariffs on U.S. goods, and the EU is preparing renewed tariffs of up to 25% if talks fail.

In April, the U.S. trade deficit narrowed sharply to $61.6 billion as imports fell 16.3% and exports rose 3%. This reflected businesses rushing to bring in goods before tariffs increased and now adjusting their supply chains.

Negative Effects of Rising Costs

For 2025, tariffs and retaliation are expected to reduce real GDP growth by 0.5-0.6%, raise consumer prices by 1.5%, and increase unemployment by 0.3%.

The next three months will be critical. Several tariff pauses with the EU and other partners expire in July. The White House has signaled it may either extend negotiations or reinstate tariffs as high as 125% if talks collapse.

These decisions will have a direct impact on inflation, supply chains, and Federal Reserve policy. A breakthrough could ease tariffs and support lower inflation, paving the way for interest rate cuts. Renewed trade tensions could disrupt markets and delay monetary easing.

Staying Focused Amid Shifting Economic Currents

It’s been a wild quarter, with the major U.S. stock indices rebounding impressively from April lows. 

Still, knotty issues continue to loom over the economy. These include ongoing trade policy dissonance, elevated expectations of inflation, and the increasing prospect of labor market softening.

While certain vital indicators are encouraging and point to economic resilience, the stagflationary mix of slowing growth, persistent inflation pressures, and policy uncertainty presents a challenging environment for both economic performance and financial market stability in the remainder of 2025.

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June saw markets improve as the inflation narrative shifted and trade policy zigged and zagged. Confronted with such a challenging assortment of factors, the Federal Reserve is remaining cautious. Read on for key highlights from last month.

Major U.S. Stock Indexes

U.S. stocks hit new highs last month as the financial markets returned to a risk-on stance. Both the S&P 500 and Nasdaq 100 finished June in record territory. 

• The S&P 500 rose 4.96%.
• The Nasdaq 100 increased 6.27%.
• The Dow Jones Industrial Average climbed 4.32%.

Federal Reserve Stays the Course 

• Financial markets are betting the “patient” faction led by Federal Reserve Chair Jerome Powell will maintain its hold, with traders pricing in just a 23% chance of a July rate cut. 

• Powell told Congress last week that “For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance.” 
• What could accelerate rate cuts? Deterioration in the economic outlook, particularly weakness in the labor market. While the unemployment rate remains low at 4.2%, leading indicators of job growth are pointing to a cooling labor market, with continued jobless claims now at their highest level since November 2021.

Inflation and Tariffs

• Prices in the U.S. rose 2.3% in May compared with a year ago, up from just 2.1% in April. Excluding the volatile food and energy categories, core prices rose 2.7% from a year earlier, an increase from 2.5% the previous month. 

• Most people expect inflation to rise soon due to tariffs, since the added costs will end up paid by someone along the supply chain — whether it’s manufacturers, retailers, or consumers — according to Fed Chair Powell.
• Indeed, early indications show the inflationary impact of tariffs: Walmart in May reported that its customers will start to see higher prices in June and July with back-to-school shopping, and Nike expects U.S. tariffs will cost the company $1 billion this year, saying it will institute “surgical” price increases in the fall. 

Are Consumers Tiring? 

• Factors indicating consumer fatigue include falling gas sales, declining auto purchases after a tariff-fueled buying rush earlier in the year, and broader unease over the economic outlook. Excluding autos, sales fell 0.3%, though retail sales rose 0.4% without the most volatile categories. 

• The University of Michigan’s consumer sentiment index, released on June 27, rebounded from its near two-year low in May, marking the first increase in six months. However, the survey continued to reflect expectations of rising inflation and an impending economic slowdown.
• The data follows the June 26 revisions to U.S. GDP estimates, which reduced first-quarter consumer spending growth from a 1.2% increase to a mere 0.5%.

Job Pressures Impact Confidence

• The number of Americans receiving ongoing unemployment benefits has risen to its highest level in three and a half years, signaling a softening labor market. Both current job availability and hiring conditions have weakened. 
• The Conference Board Consumer Confidence Index fell by 5.4 points in June to 93.0. The Present Situation Index — based on consumers’ assessment of current business and labor market conditions — fell 6.4 points to 129.1. The Conference Board surveys focus on the labor market and job security from the worker’s perspective. 
• Despite consumers’ declining view about business conditions for the sixth straight month, with a less favorable take on job availability, spirits for the labor market were still moderately upbeat. 

Looking Ahead

The market’s rebound from April lows and recent global events is encouraging, but significant uncertainties remain. Most notable is the potential impact of the Middle East conflict on oil supplies from the Gulf, which holds half of global reserves and a third of production.

Amid tariff uncertainties and market volatility, it’s crucial to stay focused on your long-term goals. Investing success comes from thoughtful strategy, as opposed to market timing. Volatility is part of the process, and markets often – but not always – price in future risks well before they materialize.

If you’d like to discuss the current outlook or review your strategy based on recent developments, please reach out

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Last week brought a decision by the Fed on its key interest rate and no respite in the Israel-Iran conflict, making it an opportune time to share a quick rundown of what happened and highlight what’s ahead. Here’s a snapshot of what you should know.

Stock Index Performance

• The S&P 500 dipped by 0.15%.
• The Nasdaq 100 fell by 0.02%.
• The Dow Jones Industrial Average was lower by 0.02%.

Federal Reserve & Interest Rates

• The Federal Reserve kept its main interest rate steady at a range of 4.25% to 4.5%, though Fed officials still see two quarter-point rate cuts in 2025. 
• Federal Reserve Chair Jerome Powell said that tariffs will likely push inflation higher in the months ahead, citing early signs of price pressures and business plans to pass along higher costs from tariffs.
• The Fed lowered its U.S. growth forecast for 2025 from 1.7% to 1.4% and raised its inflation forecast to 3.1% from its 2.8% forecast in March.
• While the Fed is waiting to see if tariffs do spark those inflationary pressures, it has indicated it will sit tight as long as the labor market is stable.

Israel-Iran Conflict

• The attacks between the two countries ended week one with Iran’s supreme leader, Ayatollah Ali Khamenei, saying that Iran won’t surrender and warning that the U.S. will “undoubtedly be met with irreparable damage” if it enters the conflict.
• Brent crude oil closed last week at $77 a barrel, an 11% jump since Israel launched its air campaign against Iran.
• Financial markets are on edge with a worst-case scenario: Tehran could cut off ship traffic carrying oil and gas supplies through the Strait of Hormuz, potentially shocking the global economy. 

Home Builder Sentiment & Retail Sales 

• Home builder sentiment reported a reading of 32, the lowest since December 2022, according to the National Association of Home Builders (NAHB). Any reading below 50 is considered contractionary.
• Homebuyers have been on hold due to higher mortgage rates, tariffs, and economic uncertainty. Builder confidence helps track the pace of home buying.
• Retail sales fell for the second consecutive month, declining by 0.09% in May, below the forecasted 0.06% decline.

 The Week Ahead 

• This week’s attention will likely start with the level of U.S. involvement in the Middle East conflict, with the U.S. launching air strikes on Iranian nuclear facilities over the weekend. 
• Early Purchasing Managers’ Index (PMI) survey data for the U.S. and eurozone will give insight into global economic trends and business confidence in June. Note that the data collected amid ongoing tariff uncertainty may also be exacerbated by tensions in the Middle East. 
• Fresh inflation numbers will help guide expectations of monetary policy, as will consumer confidence surveys from both the Conference Board and the University of Michigan. U.S. trade data should also reflect the impact of tariffs.

That’s it for this week’s update! If you’d like to explore any of these topics further or have other questions as the week unfolds, don’t hesitate to reach out.

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Last week brought softer inflation data than expected, news of a U.S.-China trade deal, and an Israel-Iran conflict that unnerved the market. With so many developments last week, read on for a bite-sized summary of what you should know.

Weekly Stock Index Performance

Fueled by continued tariff concerns and geopolitical fears amid attacks between Israel and Iran, all three major indexes fell last week, with the Dow slipping back into negative territory for the year.

Overall:

• The S&P 500 fell 0.4%. 
• The Dow Jones Industrial Average lost 1.3%. 
• The Nasdaq Composite decreased by 0.6%.

Inflation Data

• Consumer Price Index data for May came in lower than expected, with a 2.4% annual inflation rate vs. the 2.5% forecast. The lower reading was likely thanks in part to lower energy prices, with the price of gasoline down 12% year-over-year.
• Producer Price Index data showed a lower month-over-month inflation reading than expected, with the annual inflation rate rising 2.6%, up from 2.5% last month. 
• At this time, we have yet to see any huge tariff-driven jumps in inflation, though some economists expect to see jumps later this summer, with increases likely to be seen first in so-called “core goods,” which exclude food and energy.

Prices at the Pump to Rise?

• As noted in reference to inflation metrics, gasoline prices have remained low and shown stability in recent months. However, amid the Israel-Iran conflict, U.S. crude oil prices rose by 7.3% on Friday, the biggest single-day gain since the beginning of the Russia-Ukraine war in March 2022.  
• As a result of this increase, gas prices may rise by 10 to 25 cents per gallon over the next few weeks.
• Past attacks between Israel and Iran have caused a similar spike, followed by a decline once further escalation was avoided. We will see how this situation plays out over the coming days.

U.S.-China Trade Deal

• Amid continued tensions, the U.S. and China reached a deal during talks in London last week between the two nations.
• President Donald Trump said China had agreed to provide companies in the United States with rare earth metals and magnets, and the U.S. has promised it would not follow through with the revocation of Chinese students’ visas.
• Treasury Secretary Scott Bessent testified to Congress that the deal was narrow in focus and that a more comprehensive trade deal will “be a much longer process.”

The Week Ahead: Fed Meeting

• All eyes this week turn to the Federal Open Market Committee (FOMC) meeting, scheduled for June 17-18.
• While there is virtually no likelihood of a rate cut at this meeting, market watchers will be paying attention to Fed commentary around future cuts as well as its dot plot, which shows Fed officials’ future expectations for interest rates and the economy.

That’s it for this week’s update! If you’d like to explore any of these topics further or have any other questions or needs as the week unfolds, don’t hesitate to reach out.

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Last week brought the extension of a market rally and slightly stronger-than-expected jobs data, albeit with some indications of labor market cooling. Read on for a bite-sized summary of what you need to know. 

Weekly Stock Index Performance

• The S&P 500 rose 1.5%.
• The Nasdaq Composite increased by 2.2%.
• The Dow Jones Industrial Average saw a rise of 1.2%.

Major Indexes Extend Rally 

• Major indexes have ascended more than 1,000 points, or about 20%, since their April lows, with the S&P recording its best month since late 2023 in May. 
• On Friday, the S&P 500 closed above the psychologically important 6,000, following stronger-than-expected jobs data.

Jobs Data Strong With Signs of Cooling

• May jobs data, released last Friday, showed the addition of 139,000 jobs vs. 125,000 expected by Dow Jones economists. The unemployment rate remained historically low at 4.2%. 
• However, March’s and April’s jobs numbers were revised lower, with the average number of jobs added from January through May now at the lowest number in 30 years, excluding recession years.
• Some economists noted continued resilience in the labor market, yet others expressed concern about “fissures” beginning to show.

Federal Reserve Considerations

• Amid President Trump’s continued push for Federal Reserve rate cuts, the market is pricing in no more than a 50% chance of a rate cut occurring before the Federal Reserve’s September meeting. 
• The Friday jobs report is unlikely to change that expectation, as the data showed some cooling but no serious issues. Wage growth, which was higher than expected, may also be supportive of the Fed’s wait-and-see approach. 
• The next Federal Reserve meeting will be June 17-18, and as of Monday morning, the CME FedWatch tool showed a 96.6% chance of rates staying the same at this meeting.

The Week Ahead 

• May Consumer Price Index data will be released on Wednesday, and Producer Price Index data will be released on Thursday — offering an important window into the inflation picture amid concerns about the impacts of tariffs on inflation.
• U.S. and Chinese officials will be meeting this week in London for trade talks, following a temporary slashing of tariffs last month.

That’s it for this week’s update! If you’d like to explore any of these topics further or have any other questions or needs as the week unfolds, don’t hesitate to reach out.

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Last month brought us surging stocks fueled in part by progress on trade with the United Kingdom and China and inflation metrics released during the month following a similar relaxing pattern as the previous month.  

It has been a volatile two months, with swings in both directions, making it an opportune time to share an overview of what happened and what could be ahead. Read on for a monthly summary of what you should know.

Major U.S. Stock Indexes

It was bulls on parade during May on Wall Street, courtesy of tariff relief hopes. The S&P 500 had its best month of May in 30 years.

Here’s how major U.S. stock indexes fared in May:

• The S&P 500 rose by 6.15%.
• The Nasdaq 100 surged by 9.04%.
• The Dow Jones Industrial Average traded higher by 3.94%.

Inflation Relaxation

Inflation metrics showed more signs of relaxing in May, much like in April, even though many consumers expect it to rise due to tariffs.

Consumer Price Index (CPI)

• Consumer expectations notwithstanding, inflation for consumers showed signs of easing in April. CPI data indicated a monthly increase of 0.2%, leading to a 12-month inflation rate of 2.3%. This figure was below expectations and represents the lowest rate since February 2021.
• Once again, shelter costs were the primary driver of the monthly increase in consumer inflation. Data indicated a 0.3% rise in shelter prices for the month, which accounted for more than half of the overall change in the CPI.
• Wholesale pricing, measured by the Producer Price Index (PPI), also decreased in April, falling to 2.4% from the previous 2.5%.

Core PCE

• Core Personal Consumption Expenditures (PCE), the Fed’s preferred inflation gauge, was released towards the end of May, so it is the freshest piece of inflation data. It showed that Core PCE softened to 2.6% in April, matching consensus estimates.

Putting together the inflation metrics released in May, one could surmise a continuation of last month’s cooling narrative, while the full future impact of tariffs is yet to be known.

Fed Meeting

• As expected, the Federal Reserve left its key overnight lending rate unchanged at 4.25% to 4.50% during its meeting in May.
• A cautious tone was observed, given recent economic developments that showed both areas of strength and weakness. The Fed ruled out any preemptive rate cuts related to tariffs.
• Federal Reserve Chair Jerome Powell emphasized the Fed’s “wait and see” approach.

Labor Market

• The freshest labor/payroll data release showed a seasonally adjusted 177,000 jobs created in April, surpassing the Dow Jones estimate of 133,000.
• The job number was stronger than expected, even with concerns over the recently imposed blanket tariffs.
• Equity market reaction to the data was positive. The unemployment rate remained steady at 4.2%, indicating relative labor market stability, while average hourly earnings rose by just 0.2% for the month, shy of the 0.3% estimate.

The Consumer: Pensive, Waiting

• Data from the University of Michigan indicated that consumer sentiment remained at one of the lowest levels ever recorded in May. Trade uncertainty seems to be the main factor driving the consumer’s emotions.
• After retail sales skyrocketed in March with consumers getting ahead of potential higher prices due to tariffs, April was a different story.
• Retail sales growth of 0.1% was reported for April, and the March data was revised higher to a whopping 1.7%.

April Showers Gave Us May Flowers

• After a wild month of April for the financial markets, May gave us flowers. By the end of May, the broader tone had shifted away from tariff and trade fears to tariff progress.
• Earnings results have been solid for Q1, and the month of May closed out with NVIDIA beating revenue estimates. 
• The tone seems like a good one to start the fresh month. But we have learned in 2025 that narratives can shift extremely quickly. While nobody can know what is ahead, the shift in narrative from April to May was a classic example of the resolve required to be a successful long-term investor.

If you would like to discuss the current market outlook and explore investment strategies based on your objectives or market developments, please feel free to contact us.

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Last week brought higher government bond yields following House approval of a new budget bill, as well as firmer gold and Bitcoin pricing. Read on for a bite-sized summary of what you should know.

Weekly Stock Index Performance

• The S&P 500 declined by 2.61%. 
• The Nasdaq 100 fell by 2.39%.
• The Dow Jones Industrial Average was lower by 2.47%.

Budget Bill / Bond Yields 

• The One, Big, Beautiful Bill got the bond market a bit edgy last week.
• Bond yields shot higher last week, with most attention paid to the 30-year U.S. government bond yield as it traded above 5.0% for the first time since 2023.
• Rates on mortgages rose last week, too, with the average 30-year fixed mortgage trading near the 7.0% level, the highest since April 11th.

Bitcoin, Gold Rise

• While stocks turned sluggish last week after the previous week’s rally, capital found its way into gold and bitcoin.
• Bitcoin reached a fresh all-time high last week, eclipsing $111,000 per coin. The potential immediate catalyst seemed to be sluggish demand for the U.S. Treasury’s 20-year bond auction.
• The price of gold also bounced last week ahead of the holiday weekend on safe-haven buying.

Existing Home Sales Decline

• Data showed existing home sales fell by 0.5% month over month in April, making it the slowest April since 2009. 
• High interest rates and sour consumer expectations seem to be combining to affect the spring housing market.

The Week Ahead 

• Attention this week turns to the Fed’s favorite inflation gauge, Core Personal Consumption Expenditures (PCE). Will the recent trend of in-line to lower inflation data continue with the on-again and off-again tariffs?
• Eyes will be on bond yields as markets further digest the budget bill and any developments in the Senate.

That’s it for this week’s update! If you’d like to explore any of these topics further or have any other questions or needs as the week unfolds, don’t hesitate to reach out.

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Did Something in This Update Spark Your Interest?

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Last week brought a temporary U.S.-China tariff cut and softer-than-expected monthly inflation data, making it an opportune time to share an overview of what happened and what’s ahead. Read on for a bite-sized summary of what you should know.

Weekly Stock Index Performance

• The S&P 500 rose by 5.27%. 
• The Nasdaq 100 surged by 6.81%.
• The Dow Jones Industrial Average was higher by 3.41%.

U.S.-China Tariff Cuts

• It was a big day last Monday for U.S. stocks, with developments in U.S.-China trade relations. The announcement of a temporary tariff cut paved the way for the biggest day of gains for major U.S. stock indexes last week on Monday.
• Effective May 14th, both the U.S. and China reduced tariffs on each other, resulting in U.S. tariffs on Chinese imports coming down to 30% and Chinese tariffs on U.S. goods coming down to 15%.
• According to some media outlets, price hike risks for consumers remain, and the U.S. consumer expects inflation to spike by 7.3% by year-end, according to data from the University of Michigan.

Inflation Relaxation

• Consumer expectations aside, consumer inflation showed signs of relaxation in April. April Consumer Price Index data showed a 0.2% monthly increase, resulting in a 12-month inflation rate of 2.3%, below expectations and the lowest reading since February 2021.
• Once again, shelter was the main component pushing the monthly consumer inflation metric higher. Data showed a rise in shelter pricing of 0.3% for the month, which accounted for more than half of the overall move in CPI.
• Wholesale pricing (PPI) also fell in April, declining to 2.4% versus 2.5% expected.

Bullish Reversal?

• Bear market? Bull market? With so much happening in 2025, where do we stand? As of last Monday, as markets reacted to trade and tariff developments, the Nasdaq 100 closed the session better than 20% higher than its recent low made on April 8th.
• One definition of a bull market is a rise of greater than 20% off a recent low. NVIDIA and Tesla have been drivers of the recent tech rally.
• While nobody knows what will happen next with any degree of certainty, we do know that volatility has normalized from April levels, and the markets reacted very positively to the progress on tariffs.

The Week Ahead

• It’s a quiet start to the week economic data-wise. But this Thursday, we get some fresh Gross Domestic Product data and Fed meeting minutes from the last policy meeting. We also get another fresh look at inflation on Friday via the Fed’s preferred inflation gauge, Core Personal Consumption Expenditures.
• It is a full trading week, with the U.S. equity markets closed next Monday, 05/26, in observance of Memorial Day.

That’s it for this week’s update! If you’d like to delve into these topics further or have any other questions or needs as the week unfolds, don’t hesitate to reach out.

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Did Something in This Update Spark Your Interest?

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Links to third-party websites are for general information purposes only and do not constitute any offer or solicitation to buy or sell any services or products of any kind. The other parties are responsible for the content on their website(s). You are encouraged to read and evaluate the privacy and security policies on the specific site you are entering. They are not intended and should not be relied upon as investment, insurance, financial, tax, or legal advice.

Last week brought trade framework progress between the U.S. and the U.K. and a Federal Reserve that seemed a bit uncertain during its policy meeting. Read on for a bite-sized summary of what you should know.

Weekly Stock Index Performance

For the week ending May 9th, major U.S. stock market indexes were marginally lower, with smaller trading ranges and lower volatility than we have seen in recent weeks.

• The S&P 500 decreased by 0.47%.
• The Dow Jones Industrial Average decreased by 0.16%.
• The Nasdaq 100 finished the week lower by 0.20%.

U.S-U.K.Trade Deal 

• While last week started sluggishly for stocks on Monday and Tuesday, news broke on Wednesday of a trade deal on the horizon between the U.S. and the U.K. Markets liked the sound of that, and investor sentiment picked up heading into Thursday’s meeting in the Oval Office between President Donald Trump and  Peter Mandelson, the U.K. ambassador to the U.S.
• Broad outlines of the deal were unveiled at the gathering, while full agreement details were not readily available. It seems that the U.S. duties on steel from the U.K. will drop to zero from 25%. 
• The agreement seems to set an early “baseline” on tariffs at 10%.

Energy Down, Bitcoin Up

• Positive developments on trade aside, gas prices have surely headed lower recently here at home. With the price of crude oil reaching four-year lows last week, drivers should save a few bucks heading into the peak driving season this year.
• The national average for gasoline in the U.S. was $3.135 per gallon (regular) as of 5/11/25, according to data from AAA. One year ago, the national average price per gallon was $3.625 — good news for drivers approaching the Memorial Day holiday.
• Cryptocurrency prices rose after the trade agreement last week, with the largest cryptocurrency by market cap, Bitcoin, rising to over $100,000 per coin. The recent all-time high was back in January of this year near $109,000.

Uncertain Fed?

• As expected, the Fed left its key overnight lending rate unchanged at 4.25%-4.50% at its May meeting last week. 
• An uncertain tone was struck given some recent economic developments featuring economic strength, and others showing weakness. The Fed ruled out any preemptive rate cuts relating to tariffs.
• Federal Reserve Chair Jerome Powell reiterated the Fed’s “wait and see” mentality and made some other notable comments regarding the state of the economy.

The Week Ahead = CPI & More

• After last week’s quiet stock index trading ranges and little in the way of economic news, this week is a bit different! 
• We get Consumer Price Index data on Tuesday. On Thursday, we will get Producer Price Index data, retail sales data, and Powell speaking at an event. And consumer sentiment data will be released on Friday.

That’s it for this week’s update! If you’d like to delve into these topics further or have any other questions or needs as the week unfolds, don’t hesitate to reach out. 

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Last month brought volatile markets early in April, yet it also presented moderating inflation metrics and a strong finish for large-cap technology stocks. With all of these developments in mind, now feels like a good time to share an overview of what happened and what could be ahead. Read on for a monthly summary of what you should know.

Major U.S. Stock Indexes

April was a remarkably volatile month on Wall Street, courtesy of tariff talk and uncertainty. However, major U.S. stock indexes finished the month well off their lowest levels seen during the early part of the month.

Here’s how major U.S. stock indexes fared in April:

• The S&P 500 declined by 0.76%.
• The Nasdaq 100 rose by 1.52%.
• The Dow Jones Industrial Average decreased by 3.17%.

A Month of Tariff Uncertainty & Volatility

The ongoing tariff talk has been a rollercoaster ride of volatility. Here is the tariff-talk roundup:

• Starting out the month of April, additional imposed and imminent retaliatory tariffs sent major U.S. stock market averages sharply lower, experiencing their worst week since 2020.
• At the close of the first trading week of the month, the Dow landed in correction territory, and the Nasdaq Composite landed in bear market territory (a 20% or greater decline from a recent high).
• But hold the phone. As the month progressed into the second week, we not only got some unprecedented volatility, but we also got some tariff relief.
• The tone on tariff uncertainty seemed to be one of less concern towards the end of the month, as investors looked for more progress on tariffs.

Inflation Moderation

Inflation metrics showed more signs of moderating in April – a welcome sign during a period of market turbulence.

Consumer Price Index (CPI)

• The Consumer Price Index (CPI) for March (April data release) reported an annual inflation rate of 2.4%. This reading represents a decline of 0.1% from the previous month and a decrease from 2.8% in February, reaching a six-month low. This data was two ticks lower than Dow Jones estimates, which predicted an inflation rate of 2.6%.
• Additionally, Core CPI, which excludes food and energy prices, reached a four-year low in March. This development is quite encouraging news for the economy, especially given the lingering concerns about inflation related to tariffs.

Producer Price Index & Core PCE

• The March Producer Price Index (PPI) dropped unexpectedly in March, with the wholesale pricing metric showing a 0.4% drop, supportive of an easing inflation narrative.
• Core Personal Consumption Expenditures (PCE), the Fed’s preferred inflation gauge, was released towards the end of the month, so it is the freshest piece of inflation data. Data showed that Core PCE softened to 2.6% in March, matching consensus estimates and reaching a multi-year low.

Putting together the inflation metrics released in April, one could surmise a cooling narrative, while the future impact of tariffs is yet to be known.

Q1 Earnings Season

• As May begins, we have the meat of earnings season underway.  
• At the time of writing, several Magnificent 7 earnings reports are yet to be announced.
• However, we did get stronger than expected Q1 revenue from Meta, and strong results from Microsoft.

Fed & Treasuries

There was no Fed meeting in April, but the next meeting is right around the corner on May 7th-8th. Meeting minutes from the last Fed meeting were released in April, however.

• Meeting minutes showed concerns over the potential impacts of tariffs on inflation. As a result, the tone was one of rate cuts being on hold.
• At the close of the last trading day of April, Fed Funds futures markets are pricing a high probability (91.6%) that the Fed will leave rates unchanged at the May meeting.
• Looking ahead to the June Fed meeting, probabilities show a mixed picture, with a 59.6% chance of a quarter-point cut by the Fed, as of the market close on April 30th.
• The U.S. 10-year note yield finished April around 6.9 basis points lower than March’s monthly closing level, settling near 4.177%.

GDP Contraction

• The U.S. economy shrank at a 0.3% annualized rate in the first quarter of 2025, based on Gross Domestic Product (GDP) data, as policy uncertainty weighed on the minds of Americans.
• Imports for the first quarter soared ahead of tariffs, affecting GDP data to the downside.
• The Q1 GDP data print was a tick worse than estimates by Bloomberg economists for a contraction of 0.2% and was the first quarter of negative GDP growth since Q1 2022.

Labor Market: April Data Release 

• Amidst last month’s high stock market volatility, payroll data was strong, with 228,000 jobs created in March, exceeding expectations of 140,000. The unemployment rate rose slightly to 4.2%.
• The healthcare sector led job creation in March, and average hourly earnings increased by 0.3% in March. Although strong labor market data typically garners market attention, the report released at the beginning of April coincided with tariff turbulence.

Labor Market: May Data Release

• The freshest labor/payroll data release showed a seasonally adjusted 177,000 jobs created in April, surpassing the Dow Jones estimate of 133K.
• The job number was stronger than expected, even with concerns over the recently imposed blanket tariffs.
• Equity market reaction was positive to the data. The unemployment rate remained steady at 4.2%, indicating relative labor market stability, while average hourly earnings rose by just 0.2% for the month, shy of the 0.3% estimate.

The Consumer: Retail Sales vs. Sentiment

• Data from the University of Michigan indicated that consumer sentiment dropped to one of its lowest levels recorded in April, marking the fourth consecutive month of decline. However, the reading of 52.2 was better than the expected 50.8.
• In March, retail sales skyrocketed, with analysts comparing it to a “gigantic clearance sale” due to expectations of rising prices in the coming year. Consumers rushed to buy items, particularly in the motor vehicle sector. This resulted in a 1.4% sales increase that exceeded the Dow Jones’ 1.2% forecast and was a significant rise from February’s 0.2% rise.

May Flowers?

Spring sprung with a wild month of April for the financial markets. By the end of April, as attention turned to the May 8th Fed meeting and earnings, the broader tone had at least somewhat shifted away from extreme pessimistic sentiment. 

Tariff and policy uncertainty is alive and well, but earnings are at the front of the market’s collective minds at the time of writing. All the while, the markets are digesting the contracting GDP data released on the last day of April.

While nobody can know what is ahead, April was a testament to the importance of staying calm and collected during periods of market volatility for the long-term investor. As markets experienced high volatility and doubt during April, the close of the month looked much better than the beginning.

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Did Something in This Update Spark Your Interest?

Whether you’re a client or new to us, we’re here to help!

If you have questions or want to learn more, schedule a quick 15-minute call with a member of our team by clicking here.

…

Links to third-party websites are for general information purposes only and do not constitute any offer or solicitation to buy or sell any services or products of any kind. The other parties are responsible for the content on their website(s). You are encouraged to read and evaluate the privacy and security policies on the specific site you are entering. They are not intended and should not be relied upon as investment, insurance, financial, tax, or legal advice.