May 27, 2025
Volume 12, Issue 21
Weekly Recap
The major domestic equity indexes moved lower last week. Small and mid-cap indexes fared worst, while the S&P 500 and Dow Jones Industrial Average both fell back into negative territory for the year after ending the prior week slightly positive. The technology-heavy Nasdaq Composite held up best but still fell 2.47 percent. The trend away from the U.S. and into Europe continued apace. Gold rallied strongly. After a relatively quiet start to the week, stocks took a sharp turn lower on Wednesday afternoon, alongside U.S. Treasuries, following a weaker-than-expected auction of 20-year U.S. Treasury bonds, which pushed longer-term yields higher and saw yields on the long-bond hit its highest level since 2023, though Treasuries across most maturities recovered some ground by the end of the week. The weak auction and subsequent move in yields was partially attributed to credit rating agency Moody’s downgrade of U.S. sovereign debt at the end of the prior week amid concerns about rising U.S. federal debt and fiscal deficits. This appeared to be amplified later in the week after the House of Representatives passed President Donald Trump’s tax bill, which (as drafted) would increase federal debt considerably.
The front-end of the yield curve was little changed but the long-end was hurt. The 30-year U.S. Treasury bond breached the five percent level, closing last week at 5.04 percent.
Stocks continued to slide on Friday after President Trump announced plans to impose a 50 percent tariff on imports from the European Union, effective June 1, stating that trade talks are “going nowhere.” His announcement also included a threat of 25 percent tariffs on iPhones unless Apple moves production of the product to the U.S., sending shares of the consumer technology giant more than 3 percent lower on Friday.
After hitting a 16-month low in April, U.S. business activity growth rebounded in May, according to S&P Global’s Flash Purchasing Managers’ Index survey data. Activity in the services sector improved from a 17-month low in April, jumping from a PMI reading of 50.8 to 52.3 in May (readings above 50 signal expansion, while readings below 50 indicate contraction). The Manufacturing PMI also improved, increasing from 50.2 in April to a 3-month high of 52.3 in May. Both readings were better than consensus estimates. While future sentiment among businesses remained subdued, it improved from April’s two-and-a-half year low to the highest level since January, “buoyed in part by reduced trade worries following the pause on additional tariffs and accompanying improved economic growth prospects.” However, the report also noted that prices rose at the fastest rate since August 2022, which was “overwhelmingly linked to tariffs,” while export orders fell and “supply chain delays intensified.” Chris Williamson, chief business economist at S&P Global Market Intelligence, also noted that “at least some of the upturn in May can be linked to companies and their customers seeking to front-run further possible tariff-related issues.”
Elsewhere, the National Association of Realtors (NAR) reported that existing home sales unexpectedly fell to a seasonally adjusted annual rate of 4 million in April, down 0.5 percent from March and the lowest April reading since 2009, while the median sales price rose to $414,000, the 22nd consecutive month of year-over-year price increases. According to NAR Chief Economist Lawrence Yun, “Pent-up housing demand continues to grow, though not realized. Any meaningful decline in mortgage rates will help release this demand.” Meanwhile, average 30-year mortgage rates climbed to the highest level since mid-February during the week, according to data from Freddie Mac. In other housing market news, the Census Bureau reported Friday morning that new home sales jumped to a seasonally adjusted annual rate of 743,000 in April, up from March’s reading of 670,000 and well ahead of consensus estimates for 690,000. The median sales price declined to $407,200, down 2 percent year-over-year.
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 House narrowly passed President Trump’s signature tax cut and spending bill by 215-214 early Thursday morning, after Republican leadership won over hardliners with last-minute changes. Only two Republicans voted with all Democrats against the measure. The package now heads to the upper chamber, where GOP senators are expected to make significant changes that must be approved by the House. Sen. Josh Hawley has already indicated that he would not support Medicaid cuts, while others have asked for greater reductions. “There is no time to waste,” President Trump said in a post on Truth Social, with Republicans setting a July 4 deadline to pass the bill. The House’s package also increases the debt ceiling by $4 trillion, in keeping with Treasury Secretary Scott Bessent’s request earlier this month for Congress to raise that ceiling by mid-July to prevent a default on U.S. debt and, in its current form, would add over $3 trillion to the federal deficit.
President Trump’s agenda of tax cuts would put more money in people’s pockets. But it also stands to dramatically widen the country’s deficit, which is fueling worries about the potential blow to households, businesses, and the broader economy. Americans are feeling gloomy about the economy after President Trump’s market-rattling first few months in office. But, overall, they are still spending even more than before, which is keeping the economy humming – at least for now.
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.
- This New Investing Idea Isn’t Right for Your Retirement Plan (Jason Zweig)
- Investing Amid Trade Wars (Kai Wu)
- A Hundred Visions and Revisions (Harry Neville)
- Small Caps vs. Large Caps: The Cycle That’s About to Turn (Daniel Fang)
This is the best thing I’ve read recently. The saddest. The coolest. The creepiest. The biggest gut-punch. The most amazing. The most absurd. The most inspiring.
The most important. The most striking. The most damning. Humility. Why Warren Buffett is stepping down. Tipping. RIP, George Wendt. My favoritecommencement speech ever was delivered 20 years ago.
The U.S. bond market has now been in a drawdown for 57 months – by far, the longest in history.
“You should never test the depth of the water with both feet.”
~ Warren Buffett
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.
