Trump couldn’t help himself at the weekend and took another one of his regular juvenile potshots at Fed chairman Powell, this time he’s apparently “a total stiff”. But he graciously conceded that he’s not about to fire him (because by law he can’t). Wall Street just rolled its eyes and got on with the important stuff like focusing on earnings reports, economic data and the Fed meeting/Powell’s press conference on Wednesday.
After nine straight days of gains that had raised stock prices by more than 10% and erased the massive losses caused by the tariff announcements on April 2nd, a wave of profit-taking finally overwhelmed markets at the open on Monday and stocks dropped meaningfully.
This was compounded by Trump’s bizarre movie tariff proposal (apparently inspired by a quick chat with Angelina Jolie’s dad) which impacted stocks like Netflix, Paramount and Disney and confirmation of Warren Buffett’s retirement from Berkshire Hathaway. Dip-buyers emerged in the afternoon, however, and took the indexes off the lows, but fell short of carrying the S&P 500 to a tenth day of green in a row.
Earnings reports from the likes of Ford and Palantir were mostly disappointing, Rite Aid filed for bankruptcy (again!) and the Tesla brand continues to get more and more toxic in Europe as sales there cratered further and this was all reflected in lower stock prices when markets opened on Tuesday and the indexes closed the session lower. After the bell, intriguing reports began to leak of upcoming trade talks in Switzerland between the US and China.
Everyone knew that the Fed wasn’t going to change interest rates the next day, but whether this meeting was going to be positive or negative for stocks was always going to depend on; a) how forcefully, if at all, would the central bank signal a June or July rate cut - the more forceful the better, and b) how would Trump react to no rate cut - the less of a reaction, the better.
The answers began to arrive on Wednesday lunchtime when, as anticipated, the Fed statement confirmed no change in interest rates but unexpectedly attached a warning that the economy faced growing risks of higher unemployment and higher inflation. Powell’s press conference was a masterclass in saying nothing, despite the best efforts of the financial press pack to tease out a soundbite. He used the word "wait" more than twenty times.
Those searching for a firm signal that a June or July interest rate cut will happen were left disappointed but at least Trump did not throw a public tantrum about the Fed’s inaction. Inspired by more solid earnings reports, including from Disney, stocks had moved higher going into the announcement and maintained those gains through the close.
The president’s boast of a US/UK trade deal provided an early assist to stock markets on Thursday morning. However, despite Trump and Starmer’s gaslighting attempts to talk it up as “full and comprehensive”, it soon became clear that it was neither. The deal maintained the baseline 10% tariff on UK goods (despite the fact that the US actually has a trade surplus with the UK) and simply tweaked a few mutual sector and product exemptions here and there, doing nothing to bring any jobs to the US.
All eyes will be on Switzerland over the weekend where the US/China negotiations will be of far more consequence and it was in anticipation of events in Geneva that stocks ended the session higher, not the piddling UK deal.
Friday began with a blizzard of speculation about the outcome of the upcoming weekend’s Swiss talks, with Trump himself floating an endgame of an 80% China tariff (it’s currently 170%). Wall Street, however, is becoming numbed to baseless unreliable blather on these matters from the administration and there was little market reaction. The indexes churned sideways all day on low trading volume to finish the week marginally in the red.
The tariff policy in essence forces all Americans to pay an additional tax on goods in order to maybe, possibly bring some additional manufacturing jobs to certain pockets of the country in certain industries over an uncertain timeframe. This is going to feed inflation for everyone and will be a real headwind for corporate earnings. We just don’t know how much of one yet, but we’ll start getting an idea next earnings season in early July as Q2 will have taken place entirely post-“Liberation Day” and the 90-day pause will be coming to an end.
The recent rally has been a relief and it is true that the actual events and hard data of the past month have turned out not to be as bad as feared during the crashing market of early April, as well as the Q1 earnings season providing a better backdrop than anticipated (78% of S&P 500 companies reported better-than-expected earnings for last quarter).
But “not as bad as feared” doesn’t mean good. Tariff backtracking is now priced in to stock prices. At these levels, the market is now once again susceptible to any disappointing tariff news.
Having said that, on April 3rd, it felt like we are staring down the economic abyss, but the distance between us and the edge may be wider than we first thought. For now, mind the gap. We need to closely watch jobs data and/or consumer spending (see .. AND I QUOTE .. below).
Attention New York and Brooklyn readers:
I will be part of an in-person panel speaking in Brooklyn on the evening of June 2nd called “Get Your Act Together”, talking about planning ahead with the future in mind when it comes to financial asset protection, family dynamics and legacy considerations. I’d love to see you there!
RSVP at the link above.
If you are not yet a client of Anglia Advisors and would like to explore becoming one, please feel free to reach out to arrange a complimentary no-obligation discovery call with me.
ARTICLE OF THE WEEK ..
More than a third of surveyed Americans view real estate as the best long-term investment, with gold in second place. They are sooooo wrong.
.. AND I QUOTE ..
“There’s a growing belief that the Trump administration will back off its aggressive tariff policy once further weakness begins to show up in jobs growth and consumer spending. But here’s the risk: By the time that happens it may be too little, too late since earnings growth is already slowing, which may trigger more selling if the economic outlook deteriorates further from here.”
Seth Merrill, Chief investment officer, Crewe Advisors
LAST WEEK BY THE NUMBERS:
Last week’s market color courtesy of finviz.com
Last week’s best performing US sector: Industrials (two biggest holdings: GE Aerospace, RTX) for the second week in a row ⬆︎ 1.4% for the week
Last week’s worst performing US sector: Healthcare (two biggest holdings: Eli Lilly, UnitedHealth Group) ⬇︎ 4.1% for the week
SPY, the S&P 500 Large Cap ETF, tracks the S&P 500 index, made up of 500 stocks from a universe of the largest U.S. companies. Its price fell 0.4% last week, is down 3.8% so far this year and ended the week 8.0% below its all-time record closing high (02/19/2025).
IWM, the Russell 2000 Small Cap ETF, tracks the Russell 2000 index, made up of the bottom two-thirds in terms of company size of a universe of 3,000 of the largest U.S. stocks. Its price rose 0.2% last week, is down 9.1% so far this year and ended the week 17.2% below its all-time record closing high (11/08/2021).
INTEREST RATES:
FED FUNDS * ⬌ 4.33% (unchanged)
PRIME RATE ** ⬌ 7.50% (unchanged)
3 MONTH TREASURY ⬆︎ 4.34% (4.33% a week ago)
2 YEAR TREASURY ⬆︎ 3.88% (3.83% a week ago)
5 YEAR TREASURY ⬆︎ 4.00% (3.92% a week ago)
10 YEAR TREASURY *** ⬆︎ 4.37% (4.33% a week ago)
20 YEAR TREASURY ⬆︎ 4.86% (4.81% a week ago)
30 YEAR TREASURY ⬆︎ 4.83% (4.79% a week ago)
Treasury data courtesy of ustreasuryyieldcurve.com as of the market close on Friday.
* Decided upon by the Federal Reserve. Used as a basis for interbank loans and for determining high yield savings rates.
** Wall Street Journal Prime rate. Used as a basis for determining many consumer loan rates such as credit cards, personal loans, home equity, securities-based lending and auto loans.
*** Used as a basis for determining mortgage rates.
AVERAGE 30-YEAR FIXED MORTGAGE RATE:
⬌ 6.76%
One week ago: 6.76%, one month ago: 6.62%, one year ago: 7.09%
Data courtesy of: FRED Economic Data, St. Louis Fed as of last Thursday.
FEDWATCH INTEREST RATE TOOL:
Where will the Fed Funds interest rate be after the next rate-setting meeting on June 18th?
Unchanged from now .. ⬆︎ 83% probability (65% a week ago)
0.25% lower than now .. ⬇︎ 17% probability (34% a week ago)
What is the most commonly-expected number of remaining 0.25% Fed Funds interest rate cuts in 2025?
⬌ 3 (unchanged from a week ago)
All data based on the Fed Funds interest rate (currently 4.33%). Calculated from Federal Funds futures prices as of the market close on Friday. Data courtesy of CME FedWatch Tool.
FEAR & GREED INDEX:
“Be fearful when others are greedy and be greedy when others are fearful.” Warren Buffet.
The Fear & Greed Index from CNN Business can be used as an attempt to gauge whether or not stocks are fairly priced and to determine the mood of the market. It is a compilation of seven of the most important indicators that measure different aspects of stock market behavior. They are: market momentum, stock price strength, stock price breadth, put and call option ratio, junk bond demand, market volatility and safe haven demand.
Extreme Fear readings can lead to potential opportunities as investors may have driven prices “too low” from a possibly excessive risk-off negative sentiment.
Extreme Greed readings can be associated with possibly too-frothy prices and a sense of “FOMO” with investors chasing rallies in an excessively risk-on environment . This overcrowded positioning leaves the market potentially vulnerable to a sharp downward reversal at some point.
A “sweet spot” is considered to be in the lower-to-mid “Greed” zone.
Data courtesy of CNN Business as of Friday’s market close.
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