May 5, 2025

“Sell in May and go away”
Old Wall Street adage

Not so Fast! But first the numbers, the S&P 500 gained 2.85%, the Dow Jones Industrial Average matched it up 2.855 also, Nasdaq led the charge, up 3.37%. Internationally, the FTSE 100 had a good week, up 2.155 and the MSCI-EAFE gained 2.45%. The 2-Year treasury paid 3.824% and the 10-year yield was 4.308%.

So, what happened? Stock Market on Friday May 2, 2025, saw the Dow, Nasdaq end sharply higher after U.S. jobs report; S&P 500 erases post-‘liberation day’ losses as it logs the longest winning streak since 2004. The markets’ rally fully recovered the losses endured after President Trump announced “liberation day” tariffs on April 2.

Most Select Sectors posted losses in April. In a reversal from Q1, Technology was the leader and Energy was the laggard, up 2% and down 14%, respectively. Tech results have been generally strong, which could give investors some confidence that underlying business demand remains healthy. The contribution of cross-sector effects to total S&P 500® dispersion fell below its long-term average in April. It’s a new ball game now as more tariff deals appear to be succeeding. If you were on vacation or didn’t look at the news last month, you would comeback and wonder what all the hubbub was about. Further, we believe that by the end of summer we could wonder what we were concerned about. Only time will tell if April’s volatility was justified, but in the meantime, investors are waiting to see if the hard economic and earnings data starts to reflect all the uncertainty being generated by the trade turmoil.

Speaking of the surprise jobs report, after all the doom and gloom in the media about the expected effect of the government layoffs, Surprise! Surprise! The economy added 177,00 private sector jobs. From Industry news.  “The American labor market posted stronger-than-expected growth in April, with employers adding 177,000 jobs despite heightened economic uncertainty and ongoing reductions in the federal workforce. The monthly report from the Bureau of Labor Statistics, released Friday, surpassed forecasts by economists surveyed by Bloomberg and Dow Jones, who had projected gains of 133,000 to 135,000 jobs. Though the April figure marked a slight decline from March’s downwardly revised total of 185,000, it nevertheless reflected a resilient labor market amid shifting political and economic conditions.

The unemployment rate held steady at 4.2 percent, a level that has remained largely unchanged in recent months. The broader measure of unemployment, which includes those marginally attached to the labor force and people working part-time for economic reasons, edged down to 7.8 percent. Labor force participation ticked up to 62.6 percent, suggesting more Americans are seeking and securing work.” This fueled the Market rally at the end of last week which, as previously mentioned, logged the longest winning streak since 2004.

Interest rates? With the economy on still sound footing, the expectations for near-term rate cuts from the Federal Reserve are falling. That didn’t stop President Donald Trump from continuing his pursuit for lower rates. “NO INFLATION, THE FED SHOULD LOWER ITS RATE!!!” he posted on social media last Friday morning. Rate cut or not, investors responded with a good old-fashioned rally. Every sector in the S&P 500 was up last Friday, with 456 of 500 stocks in positive territory.

What about tariffs and the trade war? Among the critical details is that inflation is slowing, and trade policies are working, good news for the FOMC, wage growth and hiring plans are rebounding. With all this in play, a recession seems unlikely, but the full impacts of tariffs have yet to be felt. However, with the favorable deal announced with India, (Which by the way, has about the same size population and consumer market as China) seems to have motivated our biggest trade adversary. The Chinese government said last Friday that its “door is wide open” for trade talks. (Quiet capitulation is obvious, due to the massive trade imbalance in the Chinese’s favor). And the reality is that Chinese reliant US companies are moving quickly to shore up potential problems. For example, Apple CEO Tim Cook said last Thursday that the majority of iPhones sold in the U.S. in the current fiscal quarter will be sourced from India, while iPads and other devices will come from Vietnam as the company works to avoid the impact of President Trump’s tariffs on its business. Other major tariff deals are expected from South Korea and Japan. The surprise victory of Nigel Farage’s reform party in the British elections over the weekend is sending Trumpian shock waves throughout Europe. A lot has changed since Trump unveiled those big boards in the Rose Garden listing all the countries and their tariffs. From then on there’s mostly been a positive 90-day pause on tariffs and a notable lack of retaliation from other major trading partners. Essentially, the threat of a global trade war has subsided and instead it’s a one-on-one tariffs showdown between the world’s two largest economies.

Finally, as we are near Memorial Day and the start of the summer season, we expect inflation to continue to subside and further success on trade negotiations. Congress can get the “Big Beautiful Bill” passed by summer to memorialize the tax cuts vital to the Administrations economic plan, and the Fed may finally allow some rate relief later this year, to allow the markets to move forward to a successful 2025.

Mike