Volatility Returns
It was a rocky week for the markets as a mix of political headlines and economic worries unsettled investors. The biggest shock came Friday morning when President Trump made surprise comments about potentially placing steep tariffs on Apple products and imports from the European Union. These sudden threats, especially after previous talks of exemptions, raised questions about where U.S. trade policy might be headed and apparently caught markets off guard.
Earlier in the week, credit rating agency Moody’s downgraded the U.S. government’s credit outlook, which seemingly spooked investors and caused bond yields (interest rates) to jump. There were brief moments of optimism, like progress reported in peace talks involving Russia and Ukraine, and some positive U.S. economic data, but they weren’t enough to steady the broader market as investors digested further signs that the Federal Reserve may keep interest rates higher for longer.
On a more positive note, Amazon’s CEO said consumer spending remains strong, and prices haven’t jumped, both reassuring signs that the economy may be holding up better than feared.
Between trade tensions, political headlines, and mixed economic signals, both stock and bond markets took a hit last week. The S&P 500 dropped over 2.5%, and 10-year Treasury yields surged to their highest levels since February before easing slightly to just above 4.5%. Meanwhile, the U.S. dollar continued to weaken. In commodities, gold jumped more than 5% as investors rushed to it as a potential safe haven amid inflation worries, far outpacing the more modest gains in industrial metals. Oil, on the other hand, stayed relatively flat throughout the week.
Source: stockcharts.com
The Week Ahead:
Despite all that happened last week, there was a bit of relief over the long holiday weekend. President Trump agreed to delay the new EU tariffs after a call with European leaders, giving both sides more time to work toward a deal. That news has helped lift futures heading into the new week.
This week’s economic calendar is packed with key data that could sway markets and shape investor sentiment. The spotlight is on the Federal Reserve’s meeting minutes on Wednesday, which will offer insights into policymakers’ views on inflation and interest rates amid ongoing trade tensions.
Additionally, the release of April’s Personal Consumption Expenditures (PCE) index on Friday (the Fed’s preferred inflation gauge) will be closely watched for signs of price stability. Consumer confidence reports are also due, providing a glimpse into household sentiment.
On the corporate front, Nvidia’s earnings report stands out in a relatively quiet week, with investors eager to see how the tech giant is navigating current challenges.
When it’s all said and done, this week’s data could prove pivotal for the markets and help determine their direction over the coming weeks.
Tying it all together:
Investor sentiment has apparently taken a welcome turn for the better since reaching historically low levels just a few weeks ago as encouraging progress on tariffs and the U.S.-China trade front suggests we may finally be moving past the threat of a full-blown trade war.
Despite recent market volatility, the underlying economic picture seemingly remains resilient. Key data like job growth, consumer spending, corporate earnings, and inflation have remained relatively strong, reinforcing the idea that the economy continues to rest on solid ground. These hard numbers reflect real activity and have seemingly helped markets recover from recent turbulence.
While forward-looking indicators like business surveys and consumer sentiment have shown some weakness, they’re often influenced by short-term uncertainty. As the broader outlook improves, we may see confidence rebound. However, with markets approaching recent highs, valuations are likely to come back into focus. Continued strength in earnings and supportive corporate guidance will be key to justifying current prices.
Going forward, staying disciplined, aligning portfolios with one’s risk tolerance, and focusing on fundamentals will be essential for navigating what remains an evolving and cautiously opportunistic environment.
Please feel free to share these commentaries and, should you have any questions regarding your current strategy or the markets in general, please reach out to your CIAS Investment Adviser Representative.
Important Disclosures:
Past performance is not indicative of future results. This material is not financial advice or an offer to sell any product. The statements contained herein are solely based upon the opinions of Edward J. Sabo and the data available at the time of publication of this report, and there is no assurance that any predicted or implied results will actually occur. Information was obtained from third-party sources, which are believed to be reliable, but are not guaranteed as to their accuracy or completeness.
The actual characteristics with respect to any particular client account will vary based on a number of factors including but not limited to: (i) the size of the account; (ii) investment restrictions applicable to the account, if any; and (iii) market exigencies at the time of investment. Capital Investment Advisory Services, LLC (CIAS) reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The information provided in this report should not be considered a recommendation to purchase or sell any particular security. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed may not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of an account’s portfolio holdings. It should not be assumed that any of the securities transactions, holdings or sectors discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein.
CIAS is a registered investment advisor. More information about the advisor, including its investment strategies and objectives, can be obtained by visiting www.capital-invest.com. A copy of CIAS’s disclosure statement (Part 2 of Form ADV) is available, without charge, upon request. Our Form ADV contains information regarding our Firm’s business practices and the backgrounds of our key personnel. Please contact us at (919) 831-2370 if you would like to receive this information.
Capital Investment Advisory Services, LLC
100 E. Six Forks Road, Ste. 200; Raleigh, North Carolina 27609
Securities offered through Capital Investment Group, Inc. & Capital Investment Brokerage, Inc.
100 East Six Forks Road; Raleigh, North Carolina 27609
Members FINRA and SIPC