MARKET RECAP

• Dow was down 1%, SPX down 0.3% and the NASDAQ down 0.1%. The dollar was down to levels dating back to 2000 on the impact of Trump’s tariff moves.
• Trump is back to his crazy tariffs, threatening a 200% tariff on pharmaceutical imports and 50% on copper, sending the metal to a record high price.
• The One Big Beautiful Bill Act, passed last week, is estimated to increase the deficit by $3.3 trillion over the next decade, according to the CBO. Trump and the Republicans insist this won’t happen. In either case, both political parties continue to ignore the deficit. Small changes now can make a big difference later. However, we are not taking any action to correct the problem. And when at some future point, the situation becomes too big to ignore, it is going to be much more difficult to fix. As the late economist Stanley Fischer once said, financial crises “take much longer to develop than you expect, and then…they happen much more quickly than you expect.”
• Trump continues to go after Fed Chair Jerome Powell, in his push for lower interest rates. Blaming Powell for not lowering rates, but the Fed has held off to see the impact of tariffs on inflation. Trump would help his cause if he didn’t resume has campaign to raise tariffs to ridiculous levels, and didn’t just pass a bill that will increase the deficit by trillions.
• NVDA broke above $4 trillion in market value.

BITCOIN – Bitcoin broke through resistance and is trading at 118,800.

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MARKET RECAP

• Trump signed the “big, beautiful” bill. Right on time to the target of July 4th that he had set.
• Trump indicated that he would impose unilateral tariffs of up to 70% on August 1.
• Jobs increased by 74,000 in June, but over half of private industries cut jobs during the month. That was only the third time since April 2020 that it had happened. Businesses cited uncertainty as the reason for holding back on hires due to immigration issues and tariffs. There is also an artificial intelligence factor, hesitancy to hire if AI can do the job at some future point. The average workweek dropped by 0.1 hours to 34.2. The unemployment rate fell by 0.1 percentage points to 4.1%, but part of that decline was due to a workforce decrease of 130,000 people.
• CPI was only up by 0.1% in May, leaving one to wonder where the increased tariffs are going. Tariffs are currently running at approximately $400 billion annually, and aggregate profits of the S&P 500 are around $2 trillion. If the $400 billion is not being covered by higher profits, it means it will come from US companies or overseas vendors.

US STOCK MARKET (VTI)

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MARKET RECAP

• US stocks were flat on the week.
• The US joined Israel’s fight against Iran yesterday and put on what will hopefully turn out to be a knockout punch to the Iranian nuclear program.
• Oil is expected to open between $80 and $85 per barrel, up from $77 on Friday. If Iran carries out threats to close the Strait of Hormuz, prices will spike much higher.
• Social security will run out of funds in 2034, a year earlier than expected, as both political parties continue to ignore the problem.
• The Fed left interest rates unchanged.

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MARKET RECAP:

• U.S. Stock Market Performance: The S&P 500 posted its strongest monthly gain since November 2023, rising about 6.2% in May, while the Nasdaq surged 9.6%. Despite a volatile session on May 30, the S&P 500 ended nearly flat, reflecting mixed reactions to Trump’s tariff rhetoric. On May 27, U.S. stocks soared, with the Dow up 1.78%, S&P 500 up 2.05%, and Nasdaq up 2.47%, fueled by Trump’s decision to delay a 50% tariff on EU goods until July 9, boosting consumer confidence. However, markets faced uncertainty later in the week as Trump accused China of violating a tariff agreement, escalating trade tensions.
• Tariff Developments: Trump’s tariff policies were a focal point. On May 27, a U.S. Court of International Trade ruling blocked most of Trump’s “reciprocal” tariffs, citing overstepped authority, which initially lifted markets. However, on May 30, a federal appeals court reinstated most of these tariffs, creating uncertainty. Investors speculated on the “TACO” trade (Trump Always Chickens Out), expecting Trump might soften his stance, but concerns persisted about alternative import duty measures. A key date to watch is June 5, when plaintiffs in the tariff case must respond to the appeals court.
• Corporate Earnings and Sector Impacts: Nvidia’s earnings on May 28 were a major driver, with revenue of $44.1 billion beating estimates but falling short on adjusted EPS due to a ban on H20 unit shipments to China. Nvidia’s stock rose 3% in extended trading, contributing to a 24% monthly gain. Gap Inc. shares dropped after forecasting a multimillion-dollar hit to 2025 operating income from tariffs, though it maintained its forecast. Broadcom saw strong demand for AI-related chips, projecting a 44% year-over-year AI revenue increase for Q2 2025. Chip designers like Cadence and Synopsys fell after reports of U.S. restrictions on software sales to Chinese firms.
• Economic Indicators: Consumer confidence rebounded in May as trade tensions eased, though concerns about stagnating incomes persisted. U.S. markets showed resilience, with a 1.2% weekly gain and 12% annual increase, supported by expectations of 14% annual earnings growth. The CBOE Volatility Index (VIX) rose 1.9% to 19.31 on May 29, reflecting heightened uncertainty. Gold prices, volatile around $3,200 in mid-May, were seen as a hedge against instability, with potential for new highs if trade tensions worsened.
• Global Markets: European markets reacted positively to the U.S. tariff block on May 27, with the Stoxx Europe 600 and other indices advancing. In Asia, Japan’s Nikkei 225 fell 1.22% on May 30 amid high inflation (3.6% core in April), while South Korea’s Kospi dropped 0.84%. Germany’s inflation hit 2.1% in May, slightly above estimates.
• Other Developments: The Federal Reserve’s May minutes raised concerns about the U.S. losing its status as a global financial safe haven due to tariffs. Bond yields soared amid gaping budget deficits, adding to market jitters. Investors awaited key data releases in early June, including PMI Manufacturing, unemployment rates, and the Fed’s Beige Book.

(highlights above provided by Grok)

MARKET RECAP

• US stocks fell by 2.58%, international stocks advanced by 0.69%, and bonds declined by 0.43%.
• The 30-year bond yield broke 5%, closing at 5.04%. The 10-year is at 4.51%, that is up 28 basis points in May.
• The Atlanta Fed’s GDPNow projects 2.4% growth in Q2.
• Trump turned the positive momentum of the previous week on its head on Monday when he threatened a 50% tariff on all EU goods. He doesn’t learn.Trump should be working towards zero percent tariffs on both sides.
• The House passed the “Big Beautiful [budget] Bill,” which will add an estimated $3 trillion to the deficit, leading to an increase in yields. Need less new tax breaks have been added, such as no tax on tips (cost $125 billion over the decade), no tax on overtime ($62.5 billion), car-loan interest deduction ($57 billion), tax relief for seniors ($25 billion), increased state and local tax deduction cap, and others.
• Trump is passing up very rare opportunity to actually help get our fiscal house in order. He controls both the Senate and the House, and they do whatever he says. He should have implemented real spending cuts, and small tax increases (like a percent or so).
• Senator Ron Johnson plans to make a major effort to stop the bill.

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MARKET RECAP

• SPX +5.27%, Russell 2000 +4.46%, Nasdaq +7.15%.
• SPX is now 3% off its record high.
• Stocks have staged a dramatic recovery since the April 8th low. Trump has backed off the dramatic tariff increases over the last few weeks, but he is still insisting on tariffs of at least 10% (at least so far) at best for some nations and more for others. While not nearly as bad as it could be, it is still bad for the economy. And the damage to the American brand make take a long time to recover, if it even does.
• The consensus is that Scott Bessent takes precedence over Peter Navarro. That is a good thing!
• China and the US agreed to reduce tariffs. The US tariff rate on Chinese imports is now 30%, and China will charge the US 10%. The US rate includes a 20% penalty for fetanyl.
• Walmart warned they would increase prices and Trump then laid into them. What does Trump expect? If he doesn’t want Walmart to increase prices then don’t set tariffs.Yes, tariffs lead to price increases!
• Moody’s downgraded US debt.

SPX

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