What Happened Last Week
- Stocks Rally: The S&P 500 rallied for nine straight days to close above pre-Liberation Day levels.
- Better Than Feared Data: Payrolls and Mag-7 earnings supported last week’s strong rally.
- Trade Deal Optimism: Speculation of pending trade deals also fueled the rally.
What We’re Watching This Week
- Concrete Trade Deals: It is time to see some trade deals to support the market’s recent recovery.
- Earnings: Although we are through the bulk of earnings season, a few important names will continue to trickle in throughout this week and through the end of May.
- Fed Meeting: Fed expected to hold rates steady, turning the attention to the presser and any reaction from the President.
Investment Management Team’s Views
The chase was on last week as the S&P 500 powered higher, gaining over 10% in its longest consecutive winning streak since 2004. Almost all major market segments closed on Friday above their pre-Liberation Day levels, with the recent push higher in equities due largely to a rebound in the mega-cap tech names and short covering flows. Optimism around trade deals is running very high, but the disruption to the business climate is massive and needs to change quickly to prevent lasting damage. Concrete trade deals need to come soon to validate and further extend the recent rally.
Last week’s scheduled market catalysts – the monthly jobs report, earnings from four Mag-7 names, and the Treasury quarterly refunding announcement – were all better than feared. The first quarter GDP report was heavily distorted by tariff front-running and will likely be materially revised. Taking the economic data in totality, it is clear to us that the economy is not as strong as it was over the last three years. While we didn’t enter this shock from a weak position, less economic momentum translates into less room for error. We continue to think that tariff levels and the associated uncertainty need to come down quickly to prevent a recession. Time is not on the economy’s side right now.
This week is a lighter one by recent standards. Trade speculation will dominate the day-to-day, with growing promises of deals, but there is little concrete detail at the moment. In our view, starting talks with China would be an important step. On earnings, although we are through with the bulk of the season, some major reports from the AI darlings Nvidia and Broadcom Inc. will trickle in over the next few weeks. Lastly, the Fed meeting is likely to be a non-event, with our focus on the press conference and any further criticism of Powell by President Trump.
