2025 Week 20

1. Markets Move Sideways After Historic Rebound

U.S. equity markets traded in a tight range this week, pausing after an extraordinary 22% rally from the April 7 lows that officially turned the S&P 500 positive for the year. Despite this comeback, the index remains about 8% below its February high. Investors appear hesitant to commit further capital amid trade and policy uncertainty.

Key Takeaway: Markets are consolidating after a historic short-term recovery, reflecting uncertainty around the next catalyst.

2. Trade Deals: Headlines vs. Substance

Equities rebounded midweek on the back of renewed optimism surrounding global trade. The U.S. and U.K. announced a trade framework, including a 10% tariff on British goods, while steel and aluminum were exempted. In a bigger development, U.S.-China tensions eased as both nations drastically cut tariffs and agreed to a 90-day negotiation pause. However, recent history has shown these deals to be fluid and short-lived.

Key Takeaway: Trade headlines are driving sentiment, but the permanence of deals remains questionable.

3. Fed Holds, Uncertainty Grows

The Federal Reserve kept its benchmark rate at 4.25–4.50% for the third consecutive meeting, emphasizing a cautious stance. Fed Chair Jerome Powell acknowledged the conflicting risks of inflation and unemployment, noting it’s "not at all clear" what action should come next. Markets now anticipate only two rate cuts in 2025, with the first likely delayed until September.

Key Takeaway: The Fed remains in a holding pattern, awaiting clearer signals from inflation and employment data.

4. Oil Swings Sharply on Tariff Jitters

U.S. crude fell below $56 early in the week—its lowest level in over four years—before rebounding to close near $61. The volatility underscores heightened sensitivity to trade-driven demand expectations and broader economic uncertainty. Oil remains far below its recent $80 peak from four months ago.

Key Takeaway: Oil markets are increasingly reactive to trade dynamics and economic signals.

5. Earnings Growth Accelerates

As the Q1 earnings season wraps up, results have exceeded expectations. With 90% of S&P 500 companies reporting, net income is tracking for 13.4% growth—up from 12.8% last week and on pace for the strongest quarter in over two years. Notably, this strength is more evenly distributed than in 2024’s tech-led surge.

Key Takeaway: Corporate earnings are showing broad-based strength, supporting equity valuations.

6. Gold and Bitcoin Surge as Safe Havens

Gold resumed its 2025 rally, gaining over 3% this week and nearing its all-time high from April 21. Bitcoin also surged, reclaiming the $100,000 level for the first time in over three months, closing near $103,000. Both assets appear to be benefiting from lingering macro uncertainty and shifting policy expectations.

Key Takeaway: Safe haven assets are gaining renewed investor interest amid policy and market uncertainty.

7. Inflation Data Shows Improvement, But Risks Linger

The latest CPI reading showed headline inflation slowing to 2.31%, the lowest since early 2021. Core inflation also eased to 2.78%. While encouraging, these figures do not yet reflect potential inflationary impacts from the latest round of tariffs. As long as unemployment stays low (currently at 4.2%), the Fed is likely to maintain its wait-and-see approach.

Key Takeaway: Inflation appears under control for now, but tariff impacts could emerge later in the year.

8. Global Markets Still Outpacing U.S.

International equities, particularly in the Eurozone, have led global returns in 2025. The $EZU ETF is up over 22% year-to-date, compared to the S&P 500’s modest gains. Although the performance gap narrowed in May, global diversification continues to reward investors.

Key Takeaway: International stocks remain strong performers, even as the U.S. stages a comeback.

9. Housing Weakness Extends to Second Homes

Rising mortgage rates and affordability challenges are hitting the second-home market hard. Total originations for vacation properties dropped to 86,604 in 2024, a 66% plunge from the 2021 peak. This trend reflects broader cooling across the housing sector.

Key Takeaway: The secondary housing market is under significant pressure amid tighter financial conditions.

10. Government Spending and Trade Gaps Reach Records

U.S. interest payments on national debt hit $1.11 trillion,now exceeding defense spending. Simultaneously, the trade deficit widened to a record $1.11 trillion over the past year, with imports in March alone hitting $419 billion. A surge in pharmaceutical imports ahead of tariffs was a major contributor.

Key Takeaway: Structural imbalances in debt servicing and trade are deepening, posing long-term economic concerns.

Next week, investor focus will turn to Tuesday’s CPI release and early commentary from major retailers as earnings season nears completion.