Early on Monday morning, Treasury Secretary Bessent confirmed a 90-day “cooling-off period” between the US and China with both countries slashing their tariffs on each other. The US levy on China was taken down from 170% to 30% and China will now charge 10% on US goods instead of 125%.
Wall Street took a victory lap, taking credit for having taught the administration the harsh lesson that high tariffs just don’t work.“They touched the stove and found out that it really hurts” gloated one analyst.
Stock indexes exploded higher as the worst of the apocalyptic recession scenarios appeared to have been taken off the table and the session ended with spectacular gains on massively-increased trading volume. The technology sector provided the most of the jet fuel and pushed the tech-heavy NASDAQ index back into official bull market territory.
As recession fears fade though, so does the perceived likelihood of imminent rate cuts from the Fed to combat such a downturn. Interest rates moved higher as a result and rate cut bets were pulled back (see INTEREST RATES and FEDWATCH INTEREST RATE TOOL below).
A distortion of upcoming economic data is inevitable with the whiplash tariff narrative making backward-looking data much less meaningful. So there was little of the usual anticipation about the pre-market Consumer Price Index (CPI) measure of retail inflation release on Tuesday morning. It came in a touch softer than expected at a 2.3% annualized rate.
Stocks shrugged and opened unchanged but prices then drifted steadily higher over the course of the session on the continued afterglow from the US/China deal, once again led by a Tech/AI sector boosted by Middle East chip deals, to cement Monday’s tremendous gains.
The S&P 500 moved back into the green for 2025 for the first time since late February on the back of a 19% rocket ride from the lows of April 8th (the day after I published my note “THIS MARKET. YOUR INVESTMENTS. MY BRAIN DUMP”) with the NASDAQ up an astonishing 24% over the same period. It’s the fastest recovery from any year-to-date losses of 10%+ since the 1980s.
The S&P 500 experienced a more muted session on Wednesday, closing a smidge higher although the NASDAQ continued to outperform. The healthcare sector lagged, however, battered from all sides by the potential slashing of prescription drug prices, frightful turmoil at UnitedHealth, the nomination of an unqualified Surgeon-General without a medical license and Health Secretary Kennedy’s continuing promotion of crackpot nonsense over science.
The Thursday pre-market was all about retail. Walmart issued a solid earnings report for Q1 but warned that it will be raising prices this month on American consumers as a result of the tariffs. Retail Sales for April came in a little weaker than expected, but this data obviously was not yet inclusive of any effects of the tariff policy.
Stocks initially moved lower at the opening bell but recovered to finish the day narrowly positive on a degree of revived optimism that maybe the Fed might cut interest rates over the summer after all, with Tech/AI lagging more defensive names a bit this time.
A disastrous day for Coinbase. Just hours after it was admitted into the exclusive S&P 500 index club and the stock price rocketed on day one, it was revealed that hackers had access to very detailed Coinbase client account data for months and made ransomware demands. The company also learned that it was being investigated by the Securities and Exchange Commission (SEC) for misrepresenting its number of users as well as for the marketing of illegal securities. The stock price reversed heavily downwards.
A fifth up-day in a row for stocks looked on the cards on Friday but pre-market data showed consumer sentiment falling to the second lowest level in history and those consumers expect inflation to break 7.0% over the coming year, that’s the highest level of expectation since 1981. The good news though is that there has been very little correlation over the years between how Americans feel about the economy and how they shop.
The stock indexes stumbled out of the gate as a result but made up ground as the day went on and a sensational week came to a close with yet more solid gains.
There was, however, a dampener after the close on Friday when Moody’s joined the other two credit rating agencies by downgrading the United States from its highest credit rating of Aaa to its second-highest Aa1, saying it did not expect the Trump administration’s current policies to improve the country’s fiscal outlook at all. After-market stock prices fell on the news and interest rates shifted higher.
This will certainly be a market concern when traders return to their posts this week.
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 ..
If it hasn’t happened yet, you will likely soon be tempted by the siren song of the possibility of investing in private equity via public markets. But it’s “an uphill—and unnecessary—battle”. Don’t fall for it.
.. AND I QUOTE ..
“J. P. Morgan once had a friend who was so worried about his stock holdings that he could not sleep at night. The friend asked, “What should I do about my stocks?” Morgan replied, “Sell them down to the sleeping point.”
Burton Malkiel, A Random Walk Down Wall Street
LAST WEEK BY THE NUMBERS:
Last week’s market color courtesy of finviz.com
Last week’s best performing US sector: Technology (two biggest holdings: Microsoft, Apple) ⬆︎ 6.4% for the week
Last week’s worst performing US sector: Healthcare (two biggest holdings: Eli Lilly, UnitedHealth Group) for the second week in a row ⬇︎ 0.6% 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 rose 4.3% last week, is up 1.4% so far this year and ended the week 4.0% 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 3.1% last week, is down 5.0% so far this year and ended the week 13.5% 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 ⬆︎ 4.37% (4.34% a week ago)
2 YEAR TREASURY ⬆︎ 3.98% (3.88% a week ago)
5 YEAR TREASURY ⬆︎ 4.06% (4.00% a week ago)
10 YEAR TREASURY *** ⬆︎ 4.43% (4.37% a week ago)
20 YEAR TREASURY ⬆︎ 4.92% (4.86% a week ago)
30 YEAR TREASURY ⬆︎ 4.89% (4.83% 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:
⬆︎ 6.81%
One week ago: 6.76%, one month ago: 6.80%, one year ago: 7.02%
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 .. ⬆︎ 91% probability (83% a week ago)
0.25% lower than now .. ⬇︎ 9% probability (17% a week ago)
What is the most commonly-expected number of remaining 0.25% Fed Funds interest rate cuts in 2025?
⬇︎ 2 (down one 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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