May 12, 2025

“All that I am, or hope to be, I owe to my angel mother.”

Abraham Lincoln

Happy Mother’s Day, here are the numbers from last week. The S&P 500 finished up slightly .08%, the Dow Jones Industrial Average added .18%, the Nasdaq gained .63%. Internationally, the FTSE 100 led up .68% and the MSCI-EAFE added .36%. The 2-Year treasury yield was 3.889% and the 10 Year paid 4.282%.

So, what happened, after a continued win streak until Friday the major markets recovered all the post tariff losses and neared pre-correction levels. But first what happened with the Federal Reserve meeting? The Federal Reserve last Wednesday held its key interest rate unchanged as it waits for the Trump administration’s trade policy to take shape and sees its impact on a sputtering economy. In a move that carried little suspense given the wave of uncertainty sweeping the political and economic landscape, the Federal Open Market Committee held its benchmark overnight borrowing rate in a range between 4.25%-4.5%, where it has been since December. The post-meeting statement noted the volatility and how that is factoring into policy decisions. “Uncertainty about the economic outlook has increased further,” the statement said. “The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen, As Barron’s Nicole Goodkind points out, “Powell’s message was both superbly boring and incredibly clear (in some regards, the opposite of what’s coming out of the White House): Slow and steady wins the race,”

The U.S. stock market closed mostly lower on Friday, as investors looked ahead to trade talks expected between the U.S. and China last Saturday. All three major benchmarks saw modest declines, as investors weighed the Federal Reserve’s policy decision on May 7 to leave its benchmark interest rate unchanged amid tariff uncertainty. Treasury Secretary Scott Bessent indicated earlier this week that he will meet with a representative from China in Switzerland last Saturday to discuss trade, with investors watching for signs that the U.S.’s 145% levy on goods imported from China may be lowered amid concerns that large tariffs will hurt the U.S. economy. But overall markets finished the week in the black.

Well, that uncertainty took a huge step towards clarity over the weekend, with previously announced trade deals with the U.K. President Donald Trump last Thursday said his administration has reached a preliminary deal with the U.K. on trade, offering a bit of relief to investors who have spent weeks waiting for such agreements. The U.S. and the United Kingdom unveiled the framework of a trade deal Thursday, preserving a 10% import tariff while expanding U.S. access to British markets for beef, ethanol, and other goods. In exchange, the U.K. will fast-track American imports, drop some non-tariff barriers, and buy $10 billion in Boeing aircraft. The first 100,000 U.K.-made cars imported annually will be capped at the lower tariff, with the rest subject to 25%. British Prime Minister Keir Starmer called it a “historic day.” Though details remain unfinished, both leaders framed it as a win. India, likewise outline is now in the books, the most important, watched, and desired is reset after meetings last weekend with China in Switzerland bore significant progress. As previous observed here the Chinese need the US Markets if they hope to survive both politically and economically. This provided the leverage require to forge a new trading order with China. The “reset” is all part of the negotiated strategy the Trump administration has brought to bear. Obviously, all the doom and gloom of the media will cause them some heartburn as they seem not to understand what these policies are intended to bring and have, so far, been successful. A U.S.-China deal could set stocks on the way to regaining their February all-time highs.

Outside of trade, the data remain supportive for U.S. stocks. Earnings season is largely complete, with major retailers among the lone holdouts. (Walmart reports this week.) Earnings season has been solid. Thus far, 78% of S&P 500 companies have reported better-than-expected earnings, according to FactSet, just above the five-year average of 77%. What really mattered this quarter, though, was what companies said about their outlooks. Here too, the news was better than feared. In fact, the percentage of S&P 500 companies offering better-than-expected outlooks for the current quarter is higher than usual, FactSet notes. (Out of 75 forecasts, 45% have been positive, versus a five-year average of 43%.)

Any concerns? From Market Watch, Worker productivity, one of the biggest drivers of a strong U.S. economy since the pandemic, stumbled in the first quarter of 2025, for the first time since the second quarter of 2022. U.S. productivity decreased at a 0.8% annual rate in the first quarter, the government said Thursday. Economists surveyed by the Wall Street Journal had projected a 0.7% decrease. Over the past four quarters, U.S. productivity has increased at a 1.4% pace, the slowest pace since the first quarter of 2023. Maybe a breather was in order but on the upside real wages increased. Productivity is a magic elixir of sorts for economic growth and a higher standard of living. Businesses earn higher profits and can afford to pay employees more when workers produce more goods and services in the same amount of time as they did the year before.

In other significant news, Chicago-born Cardinal Robert Prevost was elected Pope on Thursday, becoming the first American to lead the Catholic Church. The early observations indicate his desire to work with the President on the US immigration hard line stance, and is seen as a capable administrator, cannon lawyer, and consensus builder. The impact could have ramifications on economic issues; The Catholic faithful and world leaders will see how much his impact is felt. (Fun fact: Newly elected Pope Leo XIV is a Chicago White Sox fan, according to his brother, despite his mother being a Cubs fan. Villanova alums are already using the occasion to razz Domers (University of Notre Dame alums) on his affiliation with that university.)

Also, the US Transportation Department announced a major overhaul of the US flight control system which has antiquated and in desperate need of modernization, this also will have a huge impact on flight safety and commerce.

Finally, President Trump announced the ceasefire last Saturday morning, following “a long night of talks” mediated by Vice President JD Vance and Secretary of State Marco Rubio. Between India and Pakistan, two countries with nuclear weapons. A Pakistan Foreign Ministry official said the country remains committed to the ceasefire, urging communication and restraint despite India’s violations in “some areas.” Indian Foreign Secretary Vikram Misri said that Pakistan violated the truce after explosions were reported in an area of Kashmir controlled by India. Hope they give peace a chance!

Also hope, all you Mothers out there were shown proper appreciation last Sunday, and look for a big open on Wall Street today.

Mike