Weekly Market Commentary

May 19, 2025

The Markets

Last week, the U.S. stock market showed why it’s a good idea to stay invested through bouts of volatility.

Major U.S. stock indices notched sizeable gains as investors celebrated a trade truce with China and better-than-expected inflation numbers, while brushing off a tepid consumer sentiment reading. Here’s what happened:

The administration negotiated a trade truce with China. The United States and China agreed to reduce tariffs for 90 days. U.S. tariffs on Chinese imports will fall to 30 percent, while China’s tariffs on U.S. imports will drop to 10 percent. The Wall Street Journal reported, “The agreement lowered tariff levels far more than Wall Street had expected, with one analyst…calling the deal a ‘best-case scenario’ for investors. Goldman Sachs cut its U.S. recession odds to 35 [percent] from 45 [percent] and boosted its growth forecast.”

Inflation is closing in on the Federal Reserve’s target. Prices increased by 2.3 percent year over year in April. That put headline inflation just a smidge above the Fed’s two percent target. When the volatile categories of food and energy were excluded, prices were up 2.8 percent year over year. The price of eggs fell by 13 percent month to month leading a decline in the cost of food. Five of six major grocery store food group indexes moved lower in April.

Consumers were concerned about inflation. While the Consumer Price Index’s April inflation numbers were encouraging, the inflation numbers in the University of Michigan’s Consumer Sentiment Survey were less so. “Year-ahead inflation expectations surged from 6.5 [percent] last month to 7.3 [percent] this month…Long-run inflation expectations lifted from 4.4 [percent] in April to 4.6 [percent] in May...,” reported Surveys of Consumers Director Joanne Hsu.

The U.S. bond market was in a less cheerful mood than the U.S. stock market last week. On Friday, Moody’s lowered the rating for U.S. government bonds on concerns about the deficit (the difference between how much the government spends each year and how much it takes in through taxes) and rising interest costs. The rating service explained:

“Successive U.S. administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs. We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration.”

Over the week, U.S. stock markets saw solid gains with the Standard & Poor’s 500 Index moving into positive territory for the year to date. U.S. Treasury yields ended the week near where they started.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

WHAT DO YOU KNOW ABOUT MEMORIAL DAY? Memorial Day offers a blend of celebration and remembrance. It’s the time when we honor the men and women who bravely sacrificed their lives in service to the United States of America. The holiday reminds us that freedom is not free and gives us an opportunity to remember those who fought and died defending our country. See what you know about Memorial Day by taking this brief quiz.

1) How do we remember the fallen on Memorial Day?

a. Flying the flag at half mast

b. Participating in The National Moment of Remembrance

c. Placing flags and flowers in cemeteries

d. All of the above

2) What type of flower is traditionally worn on Memorial Day?

a. A sunflower

b. A poppy

c. A chrysanthemum

d. A rose

3) The Medal of Honor is the United States' highest award for military valor in action. More than 3,500 soldiers, sailors, airmen, guardians, marines, and coast guards have received the honor. How many double Medal of Honor recipients have there been?

a. 7

b. 12

c. 19

d. 22

4) Visitors to military cemeteries on Memorial Day may see coins on headstones. The type of coin left behind has significance. When a person leaves a nickel on the headstone of a service member, it means they:

a. Appreciate the veteran’s service

b. Trained together at boot camp

c. Served together

d. Were there when the veteran died

How do you celebrate Memorial Day?

Weekly Focus – Think About It

"Heroism doesn’t always happen in a burst of glory. Sometimes small triumphs and large hearts change the course of history. Sometimes a chicken can save a man’s life."

– Mary Roach, Author

Answers: 1) d; 2) b; 3) c; 4) b