Weekly Market Update – May 5, 2025

Price Return Last Week

S&P 500 +2.9% S&P Mid Cap +3.5% Russell 2000 +3.2%

MSCI EAFE +3.2% MSCI EM +3.4%

10 Yr US Treasury Rate – rose from 4.27% to 4.32%

Source: Refinitiv Eikon

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Recent News

Auto Tariffs Eased – In an effort to ease the pressure U.S. automakers are facing with the recently announced 25% auto parts tariffs, President Trump signed an executive order offering a rebate to American automakers.  Automakers will now receive a rebate of 3.75% of a vehicle’s sales price for the next year.  This is intended to help offset increased costs that car manufacturers will face as they work to adjust their supply chains for the new tariffs.

Source: The Associated Press

Film Tariffs – President Trump stated that he had authorized a 100% tariff on films produced overseas.  Additional details were not clear and it remains to be seen how a non-physical item could be tariffed.  In 2023, the U.S. movie industry had a $15 billion trade surplus as most big-budget films get the majority of their revenue from abroad.

Source: The Wall Street Journal

GDP – Q1: (0.3%) (Reuters Poll est. 0.3%), Q4: 2.4%

In a surprise drop, first quarter GDP fell at a 0.3% annual rate, over half a percentage point below analyst estimates.  Part of the decline can be attributed to imports, which ramped up during the quarter as businesses tried to get ahead of tariffs.  On the bright side, consumer spending remained strong, growing at a 1.8% annual rate and business spending on software and other items rose at a 9.8% annual rate.  The Q1 decline represents the largest decline in GDP since Q1 2022.

Source: The Wall Street Journal

Jobs Report – Apr: 177k (Reuters Poll est. 130k) Mar: 185k

The April jobs report was slightly better than expectations, but many economists have noted that it does not reflect the full impact of the April 2 tariff announcement.  Nevertheless, the odds of the Fed cutting rates in June to support the economy fell from 58% to 36%.

Source: Thomson Reuters

Core PCE – Mar: 0.0% (Reuters Poll est. 0.1%) Feb: 0.5%

Excluding food and energy, inflation was unchanged in March versus the previous month.  This was welcome news but does not represent any price increases that may have occurred after the Trump administration's recent tariff increases.  The year-over-year change in core inflation was reported at 2.6%.

Source: Refinitiv Eikon

Canadian Election – The Liberal Party won a fourth consecutive term in office, allowing newly appointed Prime Minister Mark Carney to remain in power.  The results marked a rapid turnaround since January, where polls showed the Liberal Party trailed the Conservative Party by over 20-points.  Carney previously served as the head of the Bank of Canada during the financial crisis and the Bank of England after Brexit and campaigned that he was the best person to negotiate a new economic and security deal with President Trump.  He has argued for tax cuts and spending to revitalize Canada’s economy and pledged to strengthen trading ties with Europe and Asia to avoid being too reliant on the United States.

Source: The Wall Street Journal

Popaganda – In the late 1980’s Soviet leader Mikhail Gorbachev looked to reform the Soviet economy and improve its standard of living.  Pepsi was already being sold in the country, but supplies were limited and Gorbachev wanted to improve access.  Pepsi was keen on expanding distribution but the Soviet ruble was worthless so they would have to find a way to barter with the USSR.  One thing the Soviets did have was a surplus of military equipment, so they agreed to trade 17 Soviet submarines and various other ships to Pepsi in exchange for Pepsi syrup.  Pepsi would turn around and sell the submarines for scrap and Pepsi’s CEO bragged to the U.S. national security advisor “we’re disarming the Soviet Union faster than you are.”

Source: Atlas Obscura, BBC

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Upcoming Events

5/5 – ISM Non-Manufacturing PMI, Notable Earnings Reports: Vertex, Palantir, Ford, Clorox

5/6 – Notable Earnings Reports: Marriott, Waters, Zoetis, DoorDash, Constellation Energy, AMD, Arista Networks

5/7 – Fed Meeting, Notable Earnings Reports: Disney, Emerson Electric, Johnson Controls, Vistra, Uber, Bunge, Rockwell Automation, Fortinet, Occidental Petroleum

5/8 – Notable Earnings Reports: ConocoPhillips, Match Group, Expedia, Mckesson, News Corp, Monster Beverage

Source: Refinitiv Eikon