WEEKLY MARKET RECAP WEEK ENDING MAY 23, 2025

Dennis
&
Aaron

Stocks fell this past week as interest rates sold off in response to the downgrade of U.S. Sovereign debt along with a ratcheting up of the trade rhetoric between the Trump Administration, its trading partners and large U.S. Companies with operations overseas.  As noted previously, “our sense of the current environment is one where the stock market as well as interest rates remain somewhat rangebound, supported by a modestly growing economy, low unemployment and the possibility of ending the trade war but kept from bolting higher as investors worry that these negotiations may take longer than expected and the yet to be determined economic impact from President Trump’s unconventional relationship with our allies and adversaries, alike.  Simply put, the market is biding its time to see how things play out.”

  • Speaking at the JP Morgan Annual Investor Day, CEO Jamie Dimon, who we greatly admire, said that he believes investors are too complacent when it comes to the risks of higher inflation and stagflation.  Dimon cited the potential eventuality of these risks become reality a result of huge deficits and tariffs.  Separately Dimon noted that “we have huge deficits; we have what I consider almost complacent central banks” and “my own view is people feel pretty good because you haven’t seen effective tariffs.”
  • Given their debt to GDP ratio of 2.5:1 along with their $1.13 trillion position in U.S. Treasuries, it was somewhat disconcerting to hear the Japan Prime Minister, Shigeru Ishiba, describe their fiscal situation as “undoubtedly extremely poor, worse than Greece’s.”  This is exacerbated by the fact that their economy shrank during the first quarter as the interest rate on their 10-year sovereign note has risen 41.72% from 1.093% to 1.549% thus far this year.
  • In a post this past Friday on his Truth Social Platform, President Trumped stated that “I have long ago informed Tim Cook of Apple that I expect their iPhone’s that will be sold in the United States of America will be manufactured and built in the United States, not India, or anyplace else.  If that is not the case, a Tariff of at least 215% must be paid by Apple to the U.S.”  Apparently, President Trump’s “little problem with Tim Cook” continues.
  • In a post this past Friday on his Truth Social Platform, President Trump recommended a “straight 50% Tariff on the European Union, starting on June 1, 2025.”  The President also stated that “The European Union, which was formed for the primary purpose of taking advantage of the United States on TRADE, has been very difficult to deal with.  Our discussions with them are going nowhere.”
  • According to Mortgage News Daily, the average rate on a 30-year fixed loan hit their highest level in over three months this past week, crossing above the 7% threshold.  The publication attributed the tick up in rates to markets “generally protesting the absence of more serious spending cuts in the spending bill.”  We would agree.

It’s The Economy…”

  • The Census Bureau reported that New Single-Family Home Sales jumped 73,000 during April to a Seasonally Adjusted Annualized Rate (SAAR) of 743,000 from 670,000 during March (3.3% y/y).  Sales of New Homes have fallen by 27.93% from their peak of 1.031 million in October 2020 and 41.91% from the peak in July 2005 of 1,279,000 units.  The median sales price of a new home rose 0.9% (2.0% y/y) to $407,200 in April dropping 2.1% to $403,700 in March.  The average sales price of a new home rose 3.7% (3.6% y/y) to $518,400 in April after rising 1.4% in March.  The average price was 4.2% below the high of $541,200 in July 2022.  These sales prices are not seasonally adjusted. The number of unsold new homes on the marketfell0.6% (8.6% y/y) to 504,000 in April, after a 1.2% March increase.  The latest was 6.9% above the low of 466,000 in October 2022.  The seasonally adjusted months’ supply of new homes for sale fell to 8.1 months in April from 9.1 months in March.  The latest reading remained above a low of 6.9 months in May 2023.  The median number of months a new home stayed on the market remained at 3.0 months in April as compared to March, well above the record low of 1.5 months in both September and October of 2022, but well below a high of 5.1 months in March 2021.  (Source, U.S. Census Bureau)
  • Sales of Existing Homes fell 0.5% to a Seasonally Adjusted Annualized Rate (SAAR) of 4.00 million units during April from 4.02 million during March (-2.0% y/y).  According to the National Association of Realtors (NAR) “total housing inventory registered at the end of April was 1.45 million units, up 9.0% from March and 20.8% from one year ago (1.2 million).  Unsold inventory sits at a 4.4-month supply at the current sales pace, up from 4.0 months in March and 3.5 months in April 2024.”  The report also noted that “the median existing-home price for all housing types in April was $414,000, up 1.8% from one year ago ($406,600).”(Source, National Association of Realtors)
  • The Conference Board reported that its U.S. Index of Leading Economic Indicators fell 1.0% during April after declining 0.8% in March and by 2.0% over the trailing six months.  The Leading Economic Index (LEI) “registered its largest monthly decline since March 2023, when many feared the US was headed into recession, which did not ultimately materialize.  Most components of the index deteriorated.  Notably, consumers’ expectations have become continuously more pessimistic each month since January 2025, while the contribution of building permits and average working hours in manufacturing turned negative in April,” this according to Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at the Conference Board.


Economic Reports scheduled to be released this week include the following: on Monday, April Index of Leading Economic Indicators; on Tuesday, April Orders for Durable Goods and May Consumer Confidence; on Thursday, the Weekly Report of Initial Claims for Unemployment Benefits along with the First Revision to Q1 Gross Domestic Product (GDP), and, on Friday, April Personal Income and Spending.

Q1-2025 Earnings Season Has Begun To Wind Down.  Nonetheless, several companies of note are scheduled to report, to include Veeva Systems (VEEV), HP (HPQ), Nvidia (NVDA), Salesforce (CRM), Marvell Technology (MRVL), Zscaler (ZS), Dell Technologies (DELL) and Costo Wholesale (COST).

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