Below are the economic and market highlights for the week:
-
The “Buy America” trade came roaring back to life in May as traders closed the books on a strong month for the major indices. Tech, industrials, and consumer discretionary sectors were the top performers, driven in part by the Trump administration suspending implementation of some tariffs until July and indicating more trade deals on the horizon. The S&P 500 and Dow Jones Industrial Average rose 6.15% and 3.94%, respectively. Meanwhile, the tech heavy Nasdaq Composite Index finished with a 9.56% gain and the Russell 2000 small cap index rose 5.35%.
-
The Fed’s preferred inflation gauge, the personal consumption expenditures index, rose 0.10% in April, putting the annual inflation rate at 2.10%. Core inflation, which excludes volatile food and energy also rose 0.10% for the month and was up 2.50% year-over-year. Despite slowing inflation, consumers concerned over the possibility of a recession tapped the brakes on spending which rose just 0.20% month-to-month. As consumption slowed, the savings rate surged to 4.90%, the highest in nearly a year.
- After four consecutive months of growth, durable goods orders succumbed to the global trade wars. New orders fell 6.30% in April, down sharply from the 7.60% gain the prior month. Excluding the volatile transportation sector, new orders rose 0.20%. The modest uptick was driven by businesses rushing to order supplies ahead of the April “Liberation Day” tariffs. With the on-again, off-again White House tariff policy, durable goods orders look likely to remain volatile as businesses take a wait and see approach to filling orders.
April Showers Bring May Flowers
After a turbulent April marked by “Liberation Day” tariffs, U.S. stocks came roaring back to life in May. The suspension of the higher tariff rates announced in April along with some incremental progress on various trade fronts led to greater optimism that tariffs will not significantly dent economic growth. The latest tariff rollback came on Tuesday as the Trump administration announced it would delay the introduction of new tariffs on the European Union. The announcement reverses the administration’s 50% tariff placed on the EU on Friday. On Wednesday night, investors and businesses seemed to score another win against tariffs as the U.S. Court of International Trade ruled President Trump overstepped his authority when he imposed his “reciprocal” tariffs. The ruling would effectively block the president’s tariffs. However, the Trump administration appealed the ruling arguing it would reduce the U.S.’s leverage during tariff negotiations. By Thursday afternoon an appeals court agreed and reinstated the levies. Stocks brushed off the late-week legal maneuvering, managing to close higher on strong earnings from tech darling Nvidia.
As we look towards June, tariffs will continue to remain the trending topic as the battle over trade policy moves to the courts. The uncertainty is likely to weaken the U.S.’s bargaining position with major trading partners, who are likely to opt for the domestic legal process to play out before conceding to any major changes in their trading terms. The on-again, off-again nature of trade policy means that businesses will remain defensive, refraining from planning, investing, and hiring while consumers are already exhibiting more cautious behavior. May’s rally may have corrected for April’s overreaction, but markets have now largely priced in much of the optimism over a trade resolution, meaning investors may find future gains harder to come by over the summer.
The Week Ahead
Key reports include Nonfarm Payrolls, ISM Manufacturing, and ISM Services.
Words of Wisdom
May and June mark graduation season at colleges across the country, and as students gather in their caps and gowns to receive their diplomas, universities hope to leave them with final words of inspiration before their newly minted alumni embark on their post-college lives. This year, an array of influential and renowned figures – actors, scientists, athletes, entrepreneurs … and a Muppet – have been invited to provide commencement speeches to classes of graduating students. Below are some of this summer’s speakers and highlights of their remarks:
Kermit the Frog, representing the legacy of Jim Henson who graduated from the University of Maryland in 1960, delivered a heartfelt speech at the school’s graduation last week focused on three lessons that are close to his heart: finding your people, taking the leap, and making connections. He imparted advice that “life is better when we leap together” and “dreams are how we figure out where we want to go, and life is how we get there,” encouraging graduates to stay true to their aspirations. Kermit’s commencement speech wasn’t his first rodeo. He spoke at Southampton College’s 1996 ceremony, where he accepted an honorary “Doctorate of Amphibious Letters” and told graduates, “May success and a smile always be yours … even when you’re knee-deep in the sticky muck of life.” He ended his speech at the University of Maryland with a sing-along with the crowd to Rainbow Connection. You can view Kermit’s speech here.
Mia Hamm, a two-time World Cup winner, four-time NCAA champion, and two-time Olympic gold medalist, returned to her alma mater, the University of North Carolina at Chapel Hill, to inspire graduates with her experiences of teamwork and resilience. Hamm gave examples of past teammates who demonstrated leadership by putting the team first, aiming for unity instead of uniformity, and “carrying the water” for other teammates. Hamm said that while each graduate will receive a diploma with only their name on it, written in invisible ink are the names of everyone who helped them get there.
Entrepreneur Sal Khan, founder and CEO of Khan Academy, a nonprofit dedicated to making a free, world-class education accessible to all, gave the keynote address at Carnegie Mellon University (CMU) on May 11th. He prepared for his speech by reaching out to CMU students via a Zoom session, the first speaker in the university’s history to have done so. Khan told students, “You will have more tools and opportunities than 99.9% of the people who have ever lived on this planet. Yes, you will face many moments of frustration and rejection, but these are part of the adventure. So build yourself up, secure your foundation, reflect on and invest in what gives you meaning, keep chipping away through the ups and the downs, and recognize that you are living in an epic science fiction story, one that will change the course of history, and you have the chance to write a better ending.”
Actress Jennifer Coolidge spoke to Emerson College’s Class of 2025 and advised them that when they find what they really want to do, they should “just friggin’ go for it.” She told students to really “psych themselves up” into believing absurd possibilities, and to believe that they are not absurd. Coolidge shared how she became her “own champion” and urged graduates to not listen to the people who “mess up the real story that you’ve got going.” The actress ended her speech by expressing that “it really doesn’t matter what anyone thinks or says.”
Charles F. Bolden Jr., U.S. Marine Major General and former astronaut and NASA administrator, delivered his remarks earlier this month to The Ohio State University. Bolden flew more than 100 combat missions in the Vietnam War. He helped oversee the Mars Curiosity Rover’s landing, deploy the Hubble Space Telescope, and was a part of the first U.S.-Russian joint shuttle mission. Before that, he served 34 years in the Marine Corps. Bolden thanked the 62 graduates who had been commissioned the previous day as second lieutenants in the U.S. military. He shared that he still believes in the promise of citizens everywhere partnering to rise above our differences. He encouraged students to live a life of service to others and to humanity, stating, “No matter what community you live in, what your political views are, there is something you can do to make this nation better, right where you live and work.”
Steve Carell will speak at Northwestern University on June 15th. Carell is an award-winning actor, writer and producer, revered for his work in film, television and theater. Carell shared that his “speech’s theme will be ‘The Importance of Lowering Expectations,’ which for these graduates should start with my speech.” Carell’s daughter is an alum of Northwestern, and his son is a member of the class of 2026.
Katie Ledecky, swimming’s most decorated female athlete with five Olympic gold medals and 15 World Championship titles, will speak at her alma mater, Stanford University, on June 14th at the school’s 134th commencement ceremony. Stanford shared that Ledecky is an “ideal speaker to encourage our graduates to redefine what is possible.”