Monthly Market Update

Uncertainty Reigns

• Gross Domestic Product ⁽¹⁾⁽²⁾ (2Q25): The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2025 is 3.8% on June 5, 2025, down from 4.6% on June 2.
• Employment (May): Total nonfarm payroll employment rose by 139,000 in May, and the unemployment rate was unchanged at 4.2%, the U.S. Bureau of Labor Statistics reported. Employment continued to trend up in health care, leisure and hospitality, and social assistance. Federal government continued to lose jobs.
• Inflation ⁽⁴⁾ (April): The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2% on a seasonally adjusted basis in April, after falling 0.1% in March, the U.S. Bureau of Labor Statistics reported. Over the last 12 months, the all items index increased 2.3% before seasonal adjustment. The index for all items less food and energy rose 0.2% in April, after increasing 0.1% in March. The all items less food and energy index rose 2.8% for the 12 months ending in April, after rising 2.8% over the 12 months ending in March.
• The Producer Price Index (PPI) (April): The Producer Price Index for final demand, seasonally adjusted, decreased 0.5% in April, after remaining unchanged in March and increasing 0.2% in February, the U.S. Bureau of Labor Statistics reported. On an unadjusted basis, the index for final demand moved up 2.4% for the 12 months ended April 2025.
• Retail and Food Services Sales ⁽⁶⁾ (April): Advance estimates of U.S. retail and food services sales for April 2025, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $724.1 billion, up 0.1% (±0.5%) from the previous month, and up 5.2% (±0.5%) from April 2024.
• Personal Income and PCE ⁽⁹⁾ (April): Personal incomeincreased $210.1 billion (0.8% at a monthly rate) in April, according to estimates released by the U.S. Bureau of Economic Analysis. From the preceding month, the PCE price index for April increased 0.1%. Excluding food and energy, the PCE price index also increased 0.1%. From the same month one year ago, the PCE price index for April increased 2.1%. Excluding food and energy, the PCE price index increased 2.5% from one year ago.

Looking for Tariff Ripple Effects

The last Fed meeting took place on May 7, 2025. The FOMC decided to hold federal funds to the target range of 4.25% to 4.50%. As of this writing, markets are pricing a 99.1% chance of a hold at the June 18^th 2025 meeting, with only a 0.9% chance of lowering rates by another -25 bps. ⁽⁷⁾⁽⁸⁾

Highlights of Chair Powell’s Press Conference:

• Tariff Fears Led Lower GDP and Consumer Sentiment: “Following growth of 2.5% last year, GDP was reported to have edged down in the first quarter, reflecting swings in net exports that were likely driven by businesses bringing in imports ahead of potential tariffs … Surveys of households and businesses, however, report a sharp decline in sentiment and elevated uncertainty about the economic outlook, largely reflecting trade policy concerns. It remains to be seen how these developments might affect future spending and investment.”
• Caution Over Tariff Inflationary Pressure: “If the large increases in tariffs that have been announced are sustained, they are likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment. The effects on inflation could be short lived, reflecting a one-time shift in the price level.  It is also possible that the inflationary effects could instead be more persistent.  Avoiding that outcome will depend on the size of the tariffs’ effect—tariff effects, on how long it takes for them to pass through fully into prices, and, ultimately, on keeping longer-term inflation expectations well anchored.”
• Solid Labor Market: “In the labor market, conditions have remained solid. Payroll job gains averaged 155,000 per month over the past three months. The unemployment rate, at 4.2%, remains low and has stayed in a narrow range for the past year.  Wage growth has continued to moderate, while still outpacing inflation.  Overall, a wide set of indicators suggests that conditions in the labor market are broadly in balance and consistent with maximum employment.”

The last Beige Book report was published on April 23, 2025.  Little has changed since the previous report, but uncertainty around international trade policy was a key point across districts.

Beige Book Highlights:

• Economic Activity & Sentiment: “Reports across the twelve Federal Reserve Districts indicate that economic activity has declined slightly since the previous report. All districts also reported elevated levels of economic and policy uncertainty, which have led to hesitancy and a cautious approach to business and household decisions. Consumer spending reports were mixed, with most Districts reporting slight declines or no change; however, some Districts reported increases in spending on items expected to be affected by tariffs … On Balance, the outlook remains slightly pessimistic and uncertain, unchanged relative to last report.”
• Employment & Labor Market “Employment has been little changed since the previous report. … Comments about uncertainty delaying hiring were widespread. All Districts described lower labor demand, citing declining hours worked and overtime, hiring pauses, and staff reduction plans. Wages continued to grow at a modest pace, although many Districts reported a general easing in wage pressures. A few Districts indicated that higher costs of living continued to put upward pressure on wages.”
• Prices: “Prices have increased at a moderate pace since the previous report. There were widespread reports of contacts expecting costs and prices to rise at a faster rate going forward. … All District reports indicated that higher tariff rates were putting upward pressure on costs and prices. However, responses to these higher costs varied, including increasing prices on affected items, increasing prices on all items, reducing profit margins, and adding temporary fees or surcharges. Contacts that plan to pass along tariff-related costs expect to do so within three months.”

Monthly and YTD returns

Source: Morningstar asset class screening total return 1 month USD and total return YTD as of May 31^st, 2025 ⁽¹¹⁾

This content is being published by Amerant Investments, Inc (Amerant Investments) a dually registered broker-dealer and investment adviser registered with the Securities and Exchange Commission and member of FINRA/SIPC. Registration does not imply a certain level of skill, endorsement, or approval. Amerant Investments is an affiliate of Amerant Bank

Definitions:

• ⁽¹⁾ Gross Domestic Product (GDP): A comprehensive measure of U.S. economic activity. GDP is the value of the goods and services produced in the United States. The growth rate of GDP is the most popular indicator of the nation’s overall economic health. Source: Bureau of Economic Analysis (BEA).
• ⁽²⁾ GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available economic data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model. In particular, it does not capture the impact of COVID-19 and social mobility beyond their impact on GDP source data and relevant economic reports that have already been released. It does not anticipate their impact on forthcoming economic reports beyond the standard internal dynamics of the model.
• ⁽³⁾ The Current Employment Statistics (CES) program produces detailed industry estimates of nonfarm employment, hours, and earningsof workers on payrolls. CES National Estimates produces data for the nation, and CES State and Metro Area produces estimates for all 50 States, the District of Columbia, Puerto Rico, the Virgin Islands, and about 450 metropolitan areas and divisions. Each month, CES surveys approximately 142,000 businesses and government agencies, representing approximately 689,000 individual worksites. Source: Bureau of Labor Statistics (BLS).
• Initial Claims: An initial claim is a claim filed by an unemployed individual after a separation from an employer. The claimant requests a determination of basic eligibility for the UI program. When an initial claim is filed with a state, certain programmatic activities take place and these result in activity counts including the count of initial claims. The count of U.S. initial claims for unemployment insurance is a leading economic indicator because it is an indication of emerging labor market conditions in the country. However, these are weekly administrative data which are difficult to seasonally adjust, making the series subject to some volatility. Source: US Department of Labor (DOL).
• ⁽⁴⁾ The Consumer Price Index (CPI):Is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas. Average price data for select utility, automotive fuel, and food items are also available. Source: Bureau of Labor Statistics (BLS).
• ⁽⁵⁾ The national unemployment rate: Perhaps the most widely known labor market indicator, this statistic reflects the number of unemployed people as a %age of the labor force. Source: Bureau of Labor Statistics (BLS).
• The number of people in the labor force. This measure is the sum of the employed and the unemployed. In other words, the labor force level is the number of people who are either working or actively seeking work. Source: Bureau of Labor Statistics (BLS).
• ⁽⁶⁾ Advance Monthly Sales for Retail and Food Services:Estimated monthly sales for retail and food services, adjusted and unadjusted for seasonal variations. Source: United States Census Bureau.
• ⁽⁷⁾ Federal Open Market Committee (FOMC): Responsible for implementing Open market Operations (OMOs)–the purchase and sale of securities in the open market by a central bank—which are a key tool used by the US Federal Reserve in the implementation of monetary policy. Source: Federal Reserve.
• ⁽⁸⁾ The Federal Funds Rate: Is the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight. When a depository institution has surplus balances in its reserve account, it lends to other banks in need of larger balances. In simpler terms, a bank with excess cash, which is often referred to as liquidity, will lend to another bank that needs to quickly raise liquidity. Source: Federal Reserve Bank of St. Louis.
• ⁽⁹⁾ The “core” PCE price index: Is defined as personal consumption expenditures (PCE) prices excluding food and energy prices. The core PCE price index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying inflation trends. Source: Bureau of Economic Analysis (BEA).

Sources: U.S. Bureau of Economic Analysis (BEA), Bureau of Labor Statistics (BLS), U.S. Department of Labor (DOL), Federal Reserve, Federal Reserve Economic Database (FRED), Federal Reserve Bank of Atlanta, U.S. Census Bureau, Department of Housing and Human Development (HUD), U.S. Department of Agriculture, U.S. Energy Information Administration (EIA), U..S Department of the Treasury, Office of the United States Trade Representative (USTR), U.S. Department of Commerce, data.gov, investor.gov, usa.gov, congress.gov, whitehouse.gov, U.S. Securities and Exchange Commission (SEC), Morningstar, The International Monetary Funds (IMF), The World Bank (WB), European Central bank (ECB), Bank of Japan (BOJ), European Parliament, Eurostats, Organization for Economic Co-operation and Development (OECD), National Bureau of Statistics of the People’s Republic of China, Organization of the Petroleum Exporting Countries (OPEC), World health organization (WHO). The White House, Tariff FactSheet.

⁽¹¹⁾ Financial Markets – Monthly and YTD returns (Table): Asset class performance is in USD and refers to the following indices: Equities: US Large Caps (S&P 500), Emerging Markets (MSCI EM), Europe (MSCI Europe), Japan (MSCI Japan). Fixed Income: 10-Yr. US Treasuries (BofAML US Treasury Current 10-Yr.), Emerging Markets Sovereign (USD) (JPM EMBI Global), US High Yield (BofAML US HY Master II), US Investment Grade (BarCap US Aggregate Bond), and Developed Markets Sovereign (excl. US) (JPM GBI Global Ex US). Source: Morningstar.

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