AE Wealth Management: Weekly Market Insights | 5/4/25 – 5/10/25
Weekly Market Commentary
THE WEEK IN REVIEW: May 4-10, 2025
Fed says we can afford to wait
The Federal Reserve’s May meeting concluded last Wednesday but brought us no clarity about what to expect for the future direction of interest rates. What we got, instead, was one big fat “we’ll see” and unchanged rates.1
The Fed last cut rates at the December 2024 meeting and has shown no inclination to resume cuts. In his post-meeting press conference, Chairman Jerome Powell said the economy was solid, despite last week’s negative gross domestic product (GDP) reading for the first quarter.2,3 Powell said this was an anomaly due to the tariff dust-up and would probably be revised upward. Powell further said the jobs picture remained “healthy” and we haven’t yet reached the 2% inflation target.
We already knew all this; what we didn’t get was any commitment one way or the other from Powell on what he sees or expects going forward. It was easier to pick a new pope than it is to figure out what we can expect from the Fed.4
Powell seems to have chosen to sit among us spectators in the stands rather than take an active role on the field. He said he didn’t know what the impact of the tariffs or any new trade deals might have on the economy or inflation. He also said we have time on our side and can afford to wait and see what the fallout might be before making a move on rates.
We don’t need another fan in the stands telling us what we’re seeing on the field — we need someone to take charge and lead. Given the vast amount of experience and talent at the Fed, I would expect Fed officials to have thought through the range of outcomes from trade policy to economic slowdown and at least begin laying out how to keep the economy on track and healthy. That doesn’t seem to be the Fed’s focus right now, unlike the European Union and the Bank of England, both of which cut rates recently to shore up their weakening economies.5,6
U.S. markets bizarrely stepped back from the expectation for a June cut to a cut in July without much complaint.7 Perhaps that’s wishful thinking on the markets’ part, but coupled with Powell’s passiveness, it might not be a great combination as we head into the summer months.
Let’s make a deal
An announcement was made last week that the UK and U.S. have agreed to a trade deal.8 Expectations of a deal with India — which would have been far more significant — were also dangled before us, but now it seems India is distracted with other matters and that deal may be delayed.9 It’s good to have some movement on that front, but the UK deal was just OK.
The U.S. also struck a deal with China over the weekend to pause tariffs for 90 days — a major breakthrough on that front.10 China’s exports to the U.S. dropped by over 20% in April, but they made up for it by ramping up their exports to Europe, Africa, Latin America and Southeast Asia countries by a similar percentage.11
In the deal, reciprocal tariffs between our two countries will drop from 125% to 10%. Will it last beyond the 90 days? We’ll wait and see — but it’s at least enough to get us through the bulk of the summer months. Markets liked the news, and they’ve already had a significant bump to start the new week.
Coming this week
- This week will be all about inflation. The latest readings obviously come too late for the Fed’s rate decision, but if the Consumer Price Index (CPI) declines for the third month in a row, Trump will likely ramp up his rhetoric on rate cuts and criticism of Powell not moving fast enough for his liking.
- This month’s CPI reading (both regular and core) will be the first inflation data to feature tariff pricing embedded in the reading. It will be interesting to see just how much of a decline (if any) we’ll see in inflation and how it could impact our future path for interest rates. Look for those readings to come out on Tuesday.
- Wednesday will feature MBA mortgage applications, while Thursday will include unemployment claims and the Philly Fed. We’ll also get the all-important Producer Price Index (PPI) data.
- Earnings will continue all week. So far, they haven’t been bad.12 As of May 9, 78% of reporting companies said they had positive earnings per share (EPS) while 62% reported positive revenues. Earnings growth in the S&P 500 for the first quarter is 13.4%.
Index Performance Returns % | |||||
| 1 WK | YTD | 1YR | 3YRS | 5YRS | |
| S&P 500 | -0.47% | -3.77% | 8.55% | 12.35% | 14.08% |
| NASDAQ | -0.27% | -7.16% | 9.68% | 15.54% | 14.47% |
| DJIA | -0.16% | -3.04% | 4.73% | 8.55% | 11.13% |
Interest Rates: | |||||
| 5/9/2025 | 5/2/2025 | ||||
| UST 10 YR Government Bond Yield | 4.38% | 4.31% | |||
| Germany 10 YR | 2.55% | 2.54% | |||
| Japan 10 YR | 1.36% | 1.26% | |||
| 30 YR Mortgage | 6.83% | 6.76% | |||
| Oil | $61.05/ppb | $58.39/ppb | |||
| Regular Gas | $3.14/ppg | $3.17/ppg | |||
| All data as of May 9, 2025 | |||||
Sources:
1 Darla Mercado, CFP®. CNBC. May 7, 2025. “Fed meeting recap: Powell rules out a preemptive rate cut to blunt any tariff impact.” https://www.cnbc.com/2025/05/07/fed-meeting-live-updates-traders-await-insight-from-powell-on-next-rate-cut-tariff-impact.html. Accessed May 11, 2025.
2 Federal Reserve. May 7, 2025. “Transcript of Chair Powell’s Press Conference.” https://www.federalreserve.gov/mediacenter/files/fomcpresconf20250507.pdf. Accessed May 11, 2025.
3 Bureau of Economic Analysis. April 30, 2025. “Gross Domestic Product, 1st Quarter 2025 (Advance Estimate).” https://www.bea.gov/news/2025/gross-domestic-product-1st-quarter-2025-advance-estimate. Accessed May 11, 2025.
4 Colleen Barry. AP. May 8, 2025. “This conclave to choose a new pope was short — but not the shortest ever.” https://apnews.com/article/vatican-popes-voting-history-conclaves-a128cd50aff90495006e8af136050d5a. Accessed May 11, 2025.
5 European Central Bank. April 17, 2025. “Monetary policy decisions.” https://www.ecb.europa.eu/press/pr/date/2025/html/ecb.mp250417~42727d0735.en.html. Accessed May 11, 2025.
6 Michael Race and Faisal Islam. BBC. May 8, 2025. “Bank lowers interest rates and hints at more cuts to come.” https://www.bbc.com/news/articles/cwyqyp7xp12o. Accessed May 11, 2025.
7 CME Group. “FedWatch.” https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html. Accessed May 11, 2025.
8 Elisabeth Buchwald, et al. CNN. May 8, 2025. “Trump announces trade deal with UK as tariffs continue to spark economic uncertainty.” https://www.cnn.com/business/live-news/trump-us-uk-trade-announcement. Accessed May 11, 2025.
9 Shubham Batra, Shivangi Acharya and Ira Dugal. Reuters. May 9, 2025. “Exclusive: India offers to slash tariff gap by two-thirds in dash to seal trade pact with Trump.” https://www.reuters.com/world/india/india-offers-slash-tariff-gap-by-two-thirds-dash-seal-trade-pact-with-trump-2025-05-09/. Accessed May 11, 2025.
10 Sam Meredith. CNBC. May 12, 2025. “U.S. and China agree to slash tariffs for 90 days in major trade breakthrough.” https://www.cnbc.com/2025/05/12/us-and-china-agree-to-slash-tariffs-for-90-days.html. Accessed May 12, 2025.
11 Elaine Kurtenbach. AP/PBS News. May 9, 2025. “China’s exports to U.S. sink, offset by trade with other economies, as Trump’s tariffs hit global trade.” https://www.pbs.org/newshour/economy/chinas-exports-to-u-s-sink-offset-by-trade-with-other-economies-as-trumps-tariffs-hit-global-trade. Accessed May 11, 2025.
12 John Butters. FactSet. May 9, 2025. “Earnings Insight.” https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_050925.pdf. Accessed May 11, 2025.
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