What Happened Last Week?
- Equities advanced over the week amid renewed scrutiny of the Trump-era tariffs. Greater clarity is anticipated as the Supreme Court reviews whether the President has the authority to impose broad-based tariffs.
- Nvidia capped off a strong earnings season for major tech firms offering support for stock prices as markets factor in continued optimism for the remainder of the year.
- Late last week President Trump announced a 50% tariff on imported steel & aluminum and the E.U. announced intentions of imposing counter-measures.
- Interesting Fact: The S&P 500 delivered its strongest May performance since 1990, while the Nasdaq saw its best May gains since 1997.
Key Events This Week
- Important economic datapoints to be released this week include JOLTS, Nonfarm Payrolls, and Mortgage Applications.
- Presidents Trump and Xi are scheduled to engage in trade discussions this week—a pivotal moment that will likely determine whether a meaningful trade agreement is achieved or if the tariff dispute intensifies.
- The non-farm payroll report is due this week, and investors will be closely watching for insights into labor market trends.
Impact on Client Portfolios
- Fixed income portfolios continue to be tilted towards capital preservation with highly rated and lower duration securities. Short term fixed income securities have less price volatility, and we expect short term rates to be more sensitive to Fed rate cuts.
- Diversification remains key as greater EPS growth is expected from the S&P 493 than Mag-7. Interest rates and growth expectations appear to be driving markets, so investors need to focus on high quality companies with clean balance sheets and a clear path to growth.
- Muted economic growth, elevated valuations and interest rates are a unique combination for markets. Fixed income may be a less effective offset to equity performance going forward. Investors should look beyond fixed income to hedge the volatility of equity returns.
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