Published June 6, 2025

May turned out to be one of those months that reminded investors why the market hates uncertainty — and then proceeds to rally anyway. The S&P 500 surged 6.2 percent, the Nasdaq climbed 9.6 percent, and even the Dow managed a respectable 3.9 percent gain. Between April 8 and May 5, the size of the gain (17 percent) in the S&P 500 has occurred in such a short period only six times in the past 75 years, according to Birinyi Associates. The entire month was the best May performance for equities since 1990.

The month’s defining moment came on May 29, when a federal trade court struck down President Trump’s sweeping tariffs. Markets rallied. Then, within hours, an appeals court put the ruling on hold. The tariffs were back. So was the confusion. Companies that had spent months adjusting to the new trade rules were back to square one.

This kind of policy reversal would have been extraordinary a generation ago. Now it is becoming routine. Companies are spending more time with trade lawyers than with their customers. The regulatory burden has become so complex that businesses are shifting resources away from innovation and growth just to navigate the compliance maze.

Yet somehow, consumers kept spending. Discretionary purchases held steady in May, suggesting that Americans are either adapting to the policy chaos or accelerating their purchases ahead of tariffs. Manufacturing orders showed artificial strength as companies built inventories, not because demand was growing, but because they feared higher import costs down the road. Employment numbers remained strong, although data emerging in early June indicates there is some softening.

At the end of the month, Jamie Dimon […]

Published May 9, 2025

April 2025 was a month that reminds us why investing requires a strong stomach. President Trump’s “Liberation Day” tariffs on April 2 set off the worst four-day stock market slide since the 2008 financial crisis. Then, in a dramatic reversal on April 9, we saw the biggest single-day point gains in history for the Dow, S&P 500, and Nasdaq, as the tariff implementation date received a 90-day reprieve, largely to forestall an imminent meltdown in the U.S. Treasury market.

By May 2, markets had strung together nine consecutive winning days – the longest streak since 2004. The Nasdaq and S&P 500 had recovered their tariff-induced Liberation Day losses. Yet a significant percentage of stocks remain 20 percent below their 52-week highs.

On April 21, the dollar hit its lowest level since March 2022 due to concerns about Trump removing Jerome Powell as Fed Chair. With this backdrop, foreign investors continued the sale of U.S. assets that Liberation Day had precipitated.

For decades, the world has been saving and the U.S. spending, with those savings funding our deficits in the form of purchases of U.S. Treasurys. The resulting demand for our bonds results in low borrowing rates for the Treasury. The announcement of draconian tariffs on April 2 signaled a shift by the U.S. to a multipolar world that would make U.S. investments less attractive, resulting in a massive global repositioning to reduce exposure to U.S. assets. Additionally, oil prices registered a dramatic decline of 15 percent in April, as measured by Brent crude, reflecting reduced global demand, fears of recession and increased supply from Russia and Saudi […]

Published April 11, 2025

After a strong start to the year, equity markets hit major turbulence in March, mirroring the unexpected upsets in the annual college basketball tournaments known as “March Madness.” New trade policies introduced by the Trump administration rattled investors. The S&P 500 fell 6 percent, the Nasdaq dropped 8.5 percent, and the Dow Jones Industrial Average slipped 4.3 percent for the month. Then the S&P 500, a broad market measure, dropped another 11 percent in the first week and a half of April. On April 2, “Liberation Day,” Trump announced tariffs on our primary trading partners, and the draconian measures were speedily matched in angry retaliation.

The market downturn was in response to the administration’s announcement of these sweeping new tariffs under the banner of “reciprocity.” The explanation was that they were designed to narrow America’s trade deficits with various trading partners, irrespective of whether those countries were charging high import tariffs. Markets, which dislike uncertainty, reacted predictably by repricing stocks lower, thereby reducing risk in an environment where global trade relationships are being rewritten.

Consider the humble coffee maker. When a 25 percent tariff hits imported kitchen appliances, the $80 wholesale cost to your local retailer suddenly jumps to $100. The retail cost then increases from $120 to perhaps $134. But the story doesn’t end there.

The coffee maker company, facing declining sales, cuts costs to survive. It delays developing the new model and cancels the expansion of its distribution center, putting 50 new jobs on hold indefinitely. Meanwhile, companies that make complementary products – specialty coffee, filters, cleaning supplies – see their sales decline. Even the trucking companies that transport these goods see a […]

Published March 7, 2025

February, historically a challenging month for investors, lived up to its reputation this year. After a strong start in January fueled by AI enthusiasm and recovery hopes, equity markets retreated as consumer confidence deteriorated with mounting policy uncertainties.

The S&P 500 finished February down 1.4 percent, the Dow Jones Industrial Average fell 1.6 percent, and the tech-heavy Nasdaq dropped 4 percent – its worst monthly performance since April 2024. This pullback came despite economic fundamentals that, on the surface, still appear relatively stable.

The U.S. economy expanded at a 2.3 percent annual rate in the fourth quarter of 2024, continuing the moderate but steady growth that has characterized the post-pandemic recovery. The unemployment rate held at 4 percent, essentially full employment, and job creation continued at a modest pace. Inflation, while still above the Federal Reserve’s target, showed signs of stabilizing, giving policymakers encouragement to consider rate reductions later this year.

As the policies of the new administration in Washington, D.C., began to take concrete shape, the Conference Board’s Consumer Confidence Index in February recorded its steepest drop – 6.7 percent – in over three years. This decline wasn’t limited to future expectations – confidence in present economic conditions also weakened.

This sentiment shift manifested in retail performance, with Walmart reporting its guidance for the remainder of the year below expectations, citing weakness in discretionary spending. Higher prices continue to strain household budgets. While wages have risen, they haven’t kept pace with the increased costs of necessities. The rapid rise in egg prices due to the bird flu epidemic was a headline grabber in this regard. For investors, the decline in consumer optimism signals potential trouble for […]

Published Feb 10, 2025

An old market adage is: “As January goes, so goes the year.” If that holds true, 2025 could prove interesting indeed. The S&P 500 advanced 2.7 percent for the month, and the Dow Jones posted an even more impressive 4.7 percent increase. The tech-heavy Nasdaq managed to climb 1.6 percent, although not without some drama along the way.

The Federal Reserve, as expected, kept rates steady in January. Chairman Jerome Powell, in his typically measured way, emphasized that the Fed would remain “data dependent,” while monitoring inflation and growth. The market seemed to accept this stance, at least for now. And jobs and inflation numbers reported for January did not cause the market to believe that there would be any near-term change. Economists, including those at Goldman Sachs, who had been predicting three rate cuts for 2025 as recently as December, have, for the most part, tempered those calls to possibly one cut. As we have seen before, the Fed’s patience can wear thin when inflation signals appear, which could well happen with labor shortages and the cascade of new tariff announcements.

The tech sector hit major turbulence in January when DeepSeek, a Chinese startup, announced it had built an AI model that matches those of industry leaders at a fraction of the cost. Never mind that innovation drives technology forward – traders hit the panic button. Nvidia, the U.S. AI and GPU semiconductor chip leader, with its 80 percent market share in discrete GPUs (graphics processing units) and near dominance in data center GPUs, dropped 17 percent – its worst decline since October 2023. This was the largest market capitalization decline in the history of […]

Published Jan 10, 2025

The year 2024 will be remembered as one of the most extraordinary periods in market history. A potent combination of easier monetary policy, continued fiscal stimulus, and the transformative impact of artificial intelligence capabilities created powerful tailwinds for investors. The S&P 500’s achievement of 57 record highs was a remarkable performance. 2024 was the second of back-to-back years of 20 percent-plus increases, totaling a 53.19 percent gain for the index over two years. That surge followed a 19.44 percent decline in 2022. And 2024’s increase represents $9.76 trillion added to investor accounts. Over half of this increase was provided by the “Mag 7” – the top seven stocks in the index.

The tech-heavy Nasdaq led the charge with a nearly 40 percent gain, as both established tech giants and emerging companies capitalized on AI breakthroughs. However, unlike previous tech-driven rallies, this surge was supported by seemingly solid economic fundamentals. Companies positioned along the AI supply chain – from chip manufacturers to data center builders – captured the lion’s share of gains. The market rewarded not just direct AI players, but any company that could demonstrate a meaningful connection to this technological revolution.

Foreign capital poured into U.S. markets at a historic pace in 2024, drawn by strong returns and economic stability. As an example, South Korean investors pushed their U.S. stock holdings to $112.1 billion – up 65 percent from 2023 – while pulling money from their home market. British investors followed suit, adding a record $34 billion to U.S. equities. This flight to American markets reflects both the strength of the dollar and global investors’ hunt for growth in an uncertain world.

The data-driven […]

Published December 6, 2024

November’s decisive presidential election outcome unleashed a wave of market optimism, with the S&P 500 reaching new highs and delivering its best performance through the first three quarters of any year this century. The S&P achieved record high closing prices more than 50 times through the end of November. The Dow Jones Industrial Average crossed 44,000 for the first time, while after the election the Russell 2000 index of small-capitalization stocks surged 8.6 percent — its largest weekly gain since April 2020.

As it became clear that the uncertainty of a potentially contested election was removed, investor cash that had been sitting on the sidelines came pouring out of money markets and gold and into equities. Optimism about the favorable regulatory and tax treatment for corporate America took hold. Sector rotation was dramatic and immediate. Banks surged on expectations of regulatory relief and increased M&A activity, with JPMorgan Chase, Wells Fargo and Goldman Sachs all rising more than 12 percent in the session after the election. Industrial stocks, particularly equipment manufacturers and domestic steelmakers, rallied on prospects of protective tariffs.

The Federal Reserve continued its measured approach to monetary policy, cutting rates by 0.25 percent to a range of 4.5 percent to 4.75 percent, following September’s larger 0.5 percent reduction. There was a highly unusual, single dissenting vote – the first opposing a Fed chair in almost 20 years. Fed Gov. Michelle Bowman expressed concern that the inflation goal has not been met and further rate cuts might reignite it. In fact, October’s core PCE (Personal Consumption Expenditures) inflation ticked up to 2.8 percent, moving away from the Fed’s 2 percent target. This persistent […]

Published November 8, 2024

October 2024 delivered a complex blend of economic signals that tested market resilience. The S&P 500’s decline of roughly 1.0% for the month masked significant underlying crosscurrents, as investors processed natural disasters, labor disruptions, and pre-election uncertainty amid shifting monetary policy expectations.

The headline grabber was October’s surprisingly weak jobs report, showing only 12,000 positions added – a dramatic drop from September’s revised 223,000 gain. This apparent weakness was most likely due to temporary disruptions from Hurricanes Helene and Milton, along with the Boeing machinists’ strike affecting 33,000 workers directly and thousands more through supply chain impacts. Stripping out these transitory effects suggests underlying job growth remained in the healthy 100,000-150,000 monthly range. The unemployment rate held steady at 4.1%, while wage growth ticked up to 4.0% year-over-year, indicating continued labor market resilience beneath the headline volatility.

The economy’s fundamental strength was further evidenced by third-quarter GDP growth of 2.8%, powered by robust consumer spending and government expenditure. While this marked a slight moderation from Q2’s 3.0% pace, it reinforced America’s remarkable economic outperformance. Since early 2020, U.S. real economic growth has reached 10%, tripling the average of other G7 nations. This divergence reflects not only increased fiscal stimulus spending, outpacing that of other developed countries, but also deep-seated advantages in productivity and innovation – the average American worker now generates approximately $171,000 in annual economic output, far exceeding the $120,000 in the eurozone, $118,000 in Britain, and $96,000 in Japan, as reported in The Economist.

Inflation continued its uneven decline, with September’s CPI registering a 2.4% annual increase, down from 2.5% in August but above expectations of 2.3%. Core inflation proved especially stubborn at […]

Published October 11, 2024

As leaves began their annual transformation in autumn, the stock market defied its usual seasonality. September has historically been a challenging month for U.S. stocks — often the worst of the year — but not this time. This year, September provided noteworthy market returns, spurred by the Federal Reserve’s 50-basis-point rate cut, resulting in a resurgence in stock market optimism. Year to date, through the end of September, the S&P delivered its best return since 1997, with an increase just shy of 21 percent.

On Sept. 18, the Federal Reserve, led by Chairman Jerome Powell, lowered the federal funds rate by 0.50 percent to a range of 4.75 percent to 5 percent. This larger-than-expected cut was described by Powell as “recalibrating policy down over time to a more neutral level.” In other words, the Fed lowered rates not because the economy needs a boost but rather quite the contrary. Powell explained that the cut is because rates are just too high, not because of weakness in the economy. This reassurance fueled the market bounce. The decision also reflects the Fed’s growing confidence in the progress made to tamp down inflation, which has eased from a peak in June 2022 of nearly 7 percent for the PCE to an estimated 2.2 percent as of August, according to the latest PCE data released on Sept. 27. It’s a sign of the “soft landing” many people hope for.

The market’s reaction to the Fed action and Powell’s words was overwhelmingly positive. The day after the announcement, the Dow Jones Industrial Average surpassed 42,000 points for the first time, while the S&P 500 and Nasdaq Composite also reached […]

Published September 6, 2024

August 2024 began with a jolt as financial markets grappled with the sudden unwinding of the now widely known “yen carry trade.” This strategy, where investors borrow in low-interest-rate currencies like the Japanese yen to invest in higher-yielding assets elsewhere in the world, had become increasingly prevalent due to Japan’s ultra-low interest rates basically providing “free” money. However, as the Bank of Japan raised rates and the gap between U.S. and Japanese government bond yields narrowed, this trade began to unravel spectacularly.

The rush to cover positions led to a surge in the yen and forced selling across various asset classes, contributing to significant market instability in the early days of the month. The Nikkei, Japan’s market benchmark, declined 27 percent from its July top.

This event served as a stark reminder of the interconnectedness of global markets and the potential ripple effects of leveraged trading strategies. It underscored the need to understand and manage risk in investment portfolios, particularly when it comes to complex strategies involving currency markets. Moreover, it reminded individual investors of the value in staying calm during such market disruptions, as these events often prove temporary.

Despite the early month turbulence, major U.S. stock indexes managed to close August with noteworthy gains. The S&P 500 finished up 2.3 percent for the month, the Dow Jones Industrial Average rose 1.8 percent and the tech-heavy Nasdaq Composite ticked up 0.6 percent. FactSet reported S&P earnings for the second quarter of 2024 up 10.9 percent, which would be the highest year-over-year increase since Q4 2021. Strong earnings reports and positive guidance from many companies in diverse sectors and recurring signs of a resilient consumer […]