May 19, 2025

“The stock market is a device for transferring money from the impatient to the patient.”
(after the last 6 weeks I had to use this again)
Warren Buffett

I have always said that money is the great equalizer, your enemy or rival becomes your friend if the relationship is financially mutually beneficial. But first here are the numbers. The S&P 500 was up 2.6%, the Dow Jones Industrial average gained 1.8% and the Nasdaq added 2.87%. Internationally, The FTSE 100 had a good week up 1.52% and the MSCI-EAFE joined in adding 1.5%. The 2-Year treasury paid 3.993% and the 10-Year yielded 4.445%.

So, what happened last week? The U.S. stock market closed higher Friday, with all three major benchmarks posting big weekly gains as investors cheered a breakthrough in U.S.-China trade talks that led to lower tariffs. The Dow Jones Industrial Average rose 331.99 points last Friday, or 0.8%, to finish at 42,654.74. The S&P 500 gained 41.45 points, or 0.7%, to end at 5,958.38. The Nasdaq Composite advanced 98.78 points, or 0.5%, to close at 19,211.10. The Dow has now erased its 2025 losses, joining the S&P 500 in positive territory year to date.

As Market Warch reported, U.S. stocks on Friday wrapped up a strong week on Wall Street as investors breathed a sigh of relief after officials from Washington and Beijing agreed on a 90-day pause in their tariffs, easing concerns that escalating global trade tensions could hurt the world’s two largest economies. What’s more, a batch of softer-than-expected inflation data also showed tariff policies haven’t added to price pressure in the U.S. economy — at least for now.

Speaking of Inflation, April 2025’s CPI rose 0.2%, with inflation easing to 2.3% year-over-year, the lowest since February 2021. Shelter and energy drove monthly gains, while food prices saw a slight decline. Core inflation held steady at 2.8%, with notable cost increases in shelter, healthcare, and insurance. More consumers are seeing real progress in price reductions food and gasoline prices, lets see how the next sentiment reading looks.

Internationally, President Trump went on a whirlwind Mid East tour using economic deals as the tactic to charge the age-old direction of securing peace and stability in the region, (See my opening comment). Judging by the enthusiasm and investment commitments he received, even the biggest Trump critic had to admit it was a very successful approach. Especially surprising was the Presidents inclusion and talks with the new Syrian regime, indicating he is willing to talk to anyone if there is an opportunity for change and progress with long time advisories. This plus the ever-changing Tarriff negotiations all point to good things on the President’s objective of changing the world trading game. President Donald Trump offered an update last Friday on his trade negotiations with countries around the world — saying it’s not possible for his administration to meet with all trading partners, so some of them will get information about tariff rates by letter in the coming weeks. Most countries are facing a 10% baseline U.S. tariff on their products, after Trump on April 9 announced a 90-day pause for the much higher import taxes that he had rolled out on April 2. Countries are aiming to make trade deals with the Trump administration to prevent a reimposition of the higher levies when the 90-day pause ends around July 8. Last Friday, Trump told reporters that there are “150 countries that want to make a deal, but you’re not able to see that many countries.” He said he thinks Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick “will be sending letters out” over the “next two or three weeks.”

So, what is on Tap this week in global economics? There will be a flurry of crucial data releases and policy decisions that will offer clearer direction amid growing uncertainty. In Europe, attention centers on May sentiment indicators following the imposition of U.S. tariffs, which have contributed to declining consumer confidence and contracting PMI readings in major economies like France and Germany. While inflation appears contained, the European Central Bank’s meeting minutes and GDP data from Germany will provide insight into whether further monetary easing is on the table. Further, British Bank Barclays no longer expects the United States economy to fall into a recession later this year and has revised up its growth forecasts following a temporary truce in the trade war between China and the United States, it said in a note published on May 15.

Any bad news? Moody’s downgrades U.S. government to Aa1 from Aaa, citing inability to reverse rising deficits and interest costs. The decision by Moody’s shouldn’t come as much of a surprise. The company in November 2023 cut its outlook on the U.S. credit rating to negative from stable, a move that’s often a precursor to a downgrade. Treasury Secretary Scott Bessent was unconcerned with the development.

Market Watch also reports and mentioned above, The University of Michigan’s consumer sentiment index ticked down to its second-lowest reading since 1978 in the first two weeks of May, according to preliminary results released Friday. The index fell to 50.8 from April’s reading of 52.2. The all-time low was a reading of 50 recorded in June 2022, when inflation hit a 9.1% annual rate. But in the past five years, there has been little correlation between how Americans feel about the economy and how they’ve shopped. And while there have been some signs that consumption is cooling, spending remains resilient. First-quarter consumer spending gained 1.8% from last year, according to a preliminary GDP reading. Retail sales ticked up 0.1% last month from March, a slightly lower increase than the 0.2% gain economists were forecasting, but an increase nonetheless.

How about the Housing Market? The spring housing market is showing signs of weakness, with persistently high mortgage rates and economic anxiety weighing on both buyers and builders. April data on existing and new home sales will reveal whether modest interest rate dips encouraged activity, while jobless claims and leading indicators are expected to paint a mixed picture of labor market stability and economic momentum.

Overall, the Market both in the US and Internationally seemed to defy the bears and based on good earnings, international trade and tariff deals the hits keep on coming so far, our projection for the trifecta of three good years in arow, despite the bumps, seems to be playing out. Let see if the Federal Reserve will get on board later this summer and begin cutting interest rates. To help borrowers and especially the housing market.

One final question, are you happy you didn’t panic last month?

Mike