“History provides a crucial insight regarding market crises: they are inevitable, painful and ultimately surmountable.”
-Shelby M.C. Davis
Here’s what you need to know this week:
· Stocks extend their winning streak
· The Federal Reserve meets to determine interest rate policy
Back to Normal?
Stocks posted large gains for the second straight week and gained ground for nine consecutive gains, the longest such streak since 2004. These gains have now recouped all the losses incurred since the announcement of President Trump’s tariff plan on April 2nd:
The main driver of these gains has been continued progress on tariff negotiations with China. US & Chinese officials have been typically tight-lipped about the negotiations, but impacts are beginning to show in the real world. Near the end of last week, both the US and China quietly exempted roughly 25% of all traded products from tariffs, including sensitive materials such as pharmaceuticals and industrial chemicals[1]. Both sides have a vested interest in reaching a deal; due to the large imbalance of imports to exports, US consumers have a strong reliance on Chinese goods while Chinese producers have a large reliance on purchases from US consumers:
Additionally, the April nonfarm payrolls report released on Friday was stronger than most economists expected. The report showed the US economy adding 177,000 jobs for the month of April, higher than the expected print of 138,000. The report also showed unemployment holding steady at 4.2% and wage gains of 3.8% over the prior year[2]. Jobs typically move on a lag so we may not be seeing the full impact of tariffs on the job market just yet, but so far they have not made much of an impact.
Fed Day
The Federal Open Market Committee (FOMC) has been meeting for the past two days to decide on interest rates and will announce their decision later this afternoon. Analysts overwhelmingly expect the Fed to hold rates steady, but will pay more attention to Federal Reserve Chairman Jerome Powell’s press conference shortly after the announcement. Powell has been criticized by President Trump for refusing to lower interest rates this year, while Powell and other voting members of the committee have effused a “wait and see” approach.
The Federal Reserve has a dual mandate: managing inflation and unemployment. While inflation has continued to fall closer to the Fed’s long-term goal of 2% annualized, multiple Fed members have voiced concern that the oncoming tariffs will increase inflation in the short-term and thus are reticent to lower interest rates until they have a better grasp on the data.
The second issue is ironically the strong jobs report for April. While the report does indicate continued strength in the labor market, the Fed typically cuts rate when the job market weakens, so this report has actually decreased the odds of a rate cut in the short term. In fact, the market odds for a June rate cut fell from 60.5% to 27.7% after the April jobs report released[3]. Investors will closely parse Powell’s speech for clues to the Fed’s thinking for June, but for now the picture is cloudy.
What Else
· Legendary investor Warren Buffett announced he will be stepping down as CEO of Berkshire Hathaway at the end of this year, nominating longtime protégé Greg Abel as his replacement; Buffett will remain as Chairman of the Board
· Negotiations of a ceasefire between Russia and Ukraine broke down over the weekend
· The papal conclave to name a new Pope begins today
· A rare flying parasite known as a screwworm has been detected in New Mexico, infecting nearly 1,000 cattle and threatening many more
· Sovereignty won the 151st Kentucky Derby
· The OKC Thunder play game 2 against the Denver Nuggets tonight at 8:30 PM on TNT
What We’re Reading
As we enter into peak horse racing season for 2025, you may have wondered what exactly makes for a great race horse? NBC interviewed Dr. Will Farmer, veterinarian and medical director at Churchill Downs, home of the Kentucky Derby. Click below to learn the science behind great race horses, as well as some of the intangibles:
What’s Happening Downtown
The Myriad Gardens is hosting the OKC Flowers & Garden Festival this Saturday, May 10th. This event is free to attend and features more than 70 local vendors selling flowers, native plants, exotic succulents and more. There will also be vendors selling food and retail such as soap and jewelry. Click below to learn more:
To read more from our blog, click here
Written by: Kane Ogle, CFP®
Steve Beck, Kane Ogle, CFP®, Amber Eduvigen, CFP®, Cale Olbert, CFP®, Brett Valentine, Brandon Ingerson, Jenni Hess
Sources: [1] Bloomberg [2] Yahoo! Finance [3] CME Group