May 11, 2025
Volume 12, Issue 19
Weekly Recap
The major domestic equity indexes closed narrowly mixed last week. Small and mid-cap indexes led the way, posting gains for the fifth consecutive week, while the Dow Jones Industrial Average fell modestly. The S&P 500 and the Nasdaq Composite declined 0.47 percent and 0.27 percent, respectively. Equities started last week lower, with the S&P snapping a nine-day winning streak in a quiet trading session on Monday. However, stocks recovered some losses on Wednesday following reports that U.S. and Chinese officials plan to meet in Switzerland this weekend for trade discussions, potentially paving the way for broader negotiations and tariff de-escalation. Stocks continued to gain through Thursday, buoyed by the U.S. and UK’s announcement of the first new trade deal since the Trump administration’s “reciprocal” tariffs were unveiled on April 2, which helped fuel investors’ hopes of more deals to come.
The highlight of last week’s economic calendar came on Wednesday, as the Federal Reserve concluded its monetary policy meeting and announced it would be holding the fed funds target rate steady in the range of 4.25 to 4.50 percent, as was widely expected. In the Fed’s post-meeting statement, policymakers noted that “economic activity has continued to expand at a solid pace.” However, they cautioned that “uncertainty about the economic outlook has increased further” and “the risks of higher unemployment and higher inflation have risen.”
In a news conference following the meeting, Fed Chair Jerome Powell noted that, with regard to changing monetary policy, Fed officials remain in a “wait and see” mode as they continue to assess incoming data to determine the economic impacts of the Trump administration’s significant policy changes, particularly wide-ranging tariffs, which are “likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment.” Mr. Powell also acknowledged that policymakers could find themselves in a “challenging scenario” in which the Fed’s dual-mandate goals – maximum employment and price stability – are “in tension.” The probability of a rate cut at the Fed’s next meeting declined last week, as measured by futures markets tracked by the CME FedWatch Tool.
Last week’s calendar of economic data releases was relatively light compared with the prior week. The Institute for Supply Management did report its Services Purchasing Managers’ Index for April, which rose to 51.6 percent from March’s reading of 50.8 percent, the 10th consecutive month of expanding activity in the sector (readings above 50 percent indicate expansion). Three of the four subindexes (new orders, employment, and supplier deliveries) improved month-over-month, and the fourth (business activity) remained in expansion territory at 53.7 percent. Notably, however, the prices index rose to 65.1 percent, the highest reading in over two years, which was largely attributed to impacts from tariffs. Meanwhile, ISM’s Manufacturing PMI, reported in the prior week, indicated a contraction in the sector for the second month in a row in April. According to Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, “Demand and production retreated and destaffing continued, as panelists’ companies responded to an unknown economic environment.” U.S. Treasury securities generated negative returns last week as yields drifted higher in the wake of the Fed’s rate announcement and positive trade headlines. The benchmark 10-year U.S. Treasury note closed last week yielding 4.37 percent.
Market Monitor
A full listing of market performance data is available here.
DQYDJ.com (“Don’t Quit Your Day Job”) offers helpful investment calculators here, including one that shows total returns for individual stocks. Koyfin.com provides reams of data on individual stocks, including the ability to track total return — and just about anything else — over time.
In the News
The Federal Reserve on Wednesday held interest rates steady amid concerns over the economic impact of the Trump administration’s tariffs. “If the large increases in tariffs that have been announced are sustained,” Fed Chairman Jerome Powell said at a news conference yesterday, “they are likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment.” But Powell also expressed his apprehension about moving too fast to adjust rates, adding that the Fed is going to “be patient.” His comments lowered expectations for a rate cut in June, with analysts predicting that borrowing rates will remain at their target range of 4.25 to 4.5 percent.
The number of people newly filing for unemployment benefits declined last week, signaling continued resilience in the labor market through the month after President Trump unveiled his “Liberation Day” tariffs. The Labor Department announced Thursday that 228,000 filed new jobless claims in the week through May 3, down from 241,000 a week earlier. Economists polled by The Wall Street Journal had expected to see 230,000 new filings.
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced Tuesday that the goods and services deficit was $140.5 billion in March, up $17.3 billion from $123.2 billion in February, revised.
The Institute for Supply Management’s services PMI moved a notch higher to a reading of 51.6, its highest level seen since January 2023.
Warren Buffett announced his retirement. After receiving a terminal cancer diagnosis, former columnist for The Wall Street Journal, Jonathan Clements, hatched a plan to turn kids into lifelong savers.
Charts of the Week
I found the following articles to be of note. Some may be of interest only to advisors while others are aimed more broadly. You may hit paywalls below; many can be overcome here.
- Why There Will Never Be Another Warren Buffett (Jason Zweig)
- An exceptional debate (Jason Draho)
- A Tidal Wave of Change Is Headed for the U.S. Economy (Ann Swanson)
- This time really is different for the dollar (Kenneth Rogoff)
- Got Diversification? (Verdad)
This is the best thing I’ve read recently. The saddest. The sweetest. The smartest. The most incredible. The most emotional. The worst day. Teen-aged saint. Compost. The Great Reshuffle. Self-serving bias.
Berkshire Hathaway stock could drop 99 percent and still be outperforming the S&P 500 from 1965-to-today.
“The long-term trend is up. Nobody knows what the market is going to do tomorrow, next week, next month. But they spend all their time talking about it because it’s easy to talk about. But it has no value.” ~ Warren Buffett
“The modern ideal – at quantitative hedge funds and proprietary trading firms and multi-strategy funds – is making lots of independent investment decisions and being right 55 percent of the time. It’s not [like Warren Buffett] buying Apple and being right for a decade.” ~ Matt Levine
Securities and advisory services are offered through Madison Avenue Securities, LLC, a member of FINRA and SIPC, a registered investment advisor. This report provides general information only and is based upon current public information we consider reliable. Neither the information nor any opinion expressed constitutes an offer or an invitation to make an offer, to buy or sell any securities or other investment or any options, futures, or derivatives related to such securities or investments. It is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities, other investment, or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities or other investments, if any, may fluctuate and that price or value of such securities and investments may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Diversification does not guaranty against loss in declining markets.
