- We expect the Fed to be on hold this week as markets await further clarity on tariffs. Last week, equity markets added to recent gains, erasing most of the tariff plunge from early April, as investors welcomed solid earnings results from the tech giants. Macro data continues to be mixed, with advance 1Q25 GDP falling into negative territory on a ramp-up of imports ahead of tariffs, while labor market indicators held up well. 1Q25 Advance GDP was -0.3%, compared to the estimate for -0.2% and 2.4% in 4Q24.
- Other global developments include an increase in production from OPEC+, driving down crude oil prices. Treasury rates continue to be volatile, with the policy-sensitive two-year moving significantly based on the market’s changing sentiment around recession and tariff impacts. Fed funds futures continue to price in three -25 bps cuts in 2025, but with increased odds of the first cut in September. As earnings season continues to unfold, we are somewhat cautious in the near-term given what we see as market enthusiasm despite elevated downside risks.
- Over the weekend, Warren Buffett announced that he would step down as the CEO of Berkshire Hathaway by the end of this year in a surprise announcement at Berkshire’s annual meeting. The legendary investor will hand the reins over to Greg Abel with a record amount of cash on hand.
- In “Magnificent 7” earnings, Microsoft (MSFT) and Meta (META) posting very strong beats, while Amazon (AMZN) and Apple (AAPL) posted rather in-line numbers. Microsoft’s revenue rose by 13% and EPS by 18% on an annual basis, driven by cloud, while Meta’s revenue grew 16% and EPS 36% YoY. Apple’s results were much tamer with 5% revenue and 8% EPS growth, and while CEO Tim Cook stated 2Q25 costs could be impacted by almost $1 billion due to tariffs even as the company plans to eventually have all U.S.-bound iPhone imports come from India thus avoiding higher Chinese tariffs. Lastly, Amazon posted sales growth of 8.6% YoY, and an EPS beat by 17%, but guided to a disappointing 2Q outlook.
- In other earnings, positive surprises were issued by Booking (BKNG), Seagate (STX), Robinhood (HOOD), Carrier (CARR), Roblox (RBLX), Howmet (HWM), Monolithic Power (MPWR) and Quant (PWR), while disappointments included Block (XYZ), PCCAR (PCAR), McDonalds (MCD), First Solar (FSLR), Starbucks (SBUX), Kellanova (K) and Motorola Solutions (MSI).
- Labor market data for April was rather resilient, with nonfarm payrolls expanding by 177,000, compared to the estimate for 138,000. However, March nonfarm payrolls were revised lower to 185,000 from 228,000. The unemployment rate held steady at 4.2%, and average hourly earnings rose by 3.8% YoY, slightly lower than expected.
- Last week, we also got spending and inflation data for March. Overall, the inflation picture was mildly encouraging, as core PCE month-over-month was flat. However, the data is from March and therefore does not reflect the imposition of tariffs. As noted above, we expect the Fed to remain on hold until there is better clarity about the ultimate impact of tariffs on inflation and the economy.
The Week Ahead
- Earnings this week will include Palantir (PLTR), Ford (F), DataDog (DDOG), Advanced Micro (AMD), Disney (DIS), Gartner (IT), Uber (UBER), DoorDash (DASH), AppLovin (APP), Carvana (CVNA), Trade Desk (TTD), Affirm (AFRM), Astera Labs (ALAB), Toast (TOST), Lyft (LYFT) and Pinterest (PINS).
- The Fed meets this week, and markets are pricing in a 97% chance for the FOMC to holding rates steady at a range of 4.25-4.50%. This meeting is not accompanied by an update to the Fed’s Summary of Economic Projections (SEP), but markets will be listening to Fed Chair Powell for comments on the committee’s tolerance for labor weakness in the face of stubborn inflation metrics.
Market Summary – Returns and Yields
- Last week, equities rose again although they are still down modestly for the year-to-date. Bonds were mixed while oil fell.
For additional insights, be sure to check out last week’s blog post.
Definitions, sources, and disclaimers
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 (SEC) 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:
- 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).
- 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.
- The Current Employment Statistics (CES) program produces detailed industry estimates of nonfarm employment, hours, and earnings of 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).
- 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).
- The national unemployment rate: Perhaps the most widely known labor market indicator, this statistic reflects the number of unemployed people as a percentage 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).
- 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.
- 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.
- 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.
- 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).
Financial Markets – Recent Prices and Yields, and Weekly, Monthly, and YTD (Table): Bloomberg, Weekly Market Data is in USD and refers to the following indices: Macro & Market Indicators: Volatility (VIX); Oil (WTI); Dollar Index (DXA); Inflation (CPI YoY); Fixed Income: All U.S. Bonds (Bloomberg Aggregate Index); Investment Grade Corporates (Bloomberg US Corporate Index); US High Yield (Bloomberg High Yield Index), Treasuries (ICE BofA Treasury Indices); Equities: U.S. Industrials (Dow Jones Industrial Average); U.S. Large Caps (S&P 500); U.S Tech Equities (Nasdaq Composite); European (MSCI Euope), Asia Pacific (MSCI AP), and Latin America Equities (MSCI LA); Sectors (S&P 500 GICS Sectors) Source: Bloomberg. Fed Funds Rate probabilities, Source: CME FedWatch Tool.
Important Disclosures:
The information provided here is for general informational purposes only and should not be considered a customized recommendation, personalized investment advice offer, or solicitation for the purchase or sale of any security or investment strategy. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own situation before making any investment decision.
This information is obtained by AMTI from third-party providers from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed. Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve. All expressions of opinion are subject to change without notice in reaction to changes in market conditions. By using such information, you release and exonerate AMTI from any responsibility for damages, direct or indirect, that may result from such use. Consult the issuer of any investment for the most up-to-date and accurate information.
All references to performance refer to historical data. There could be benchmarks used that do not reflect the performance of funds or other products with similar objectives
Presentation does not apply in jurisdictions where its use has not been approved. Some products or strategies may be complex or unusual. Make sure you have a clear understanding of the products before investing. Investments may have different tax consequences in different jurisdictions and will depend on the circumstances. AMTI does not offer legal or tax advice, please consult your legal, CPA, or other tax professional regarding your situation.
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Additional Risks:
- Past performance is no guarantee of future returns.
- There is no assurance the Fund will pay distributions in any particular amount, if at all. Any distributions the Fund makes will be at the discretion of the Fund’s Board of Trustees
- There can be no assurance that any Fund or investment will achieve it objectives or avoid substantial losses. Actual results may vary
- The value of the investments varies and therefore the amount received at the time of sale might be higher or lower than was originally invested. Actual returns might be better or worse than the ones shown in this informative material.
- Limited liquidity: Investors should not expect to be able to sell shares regardless of how the Fund performs. Investors should consider that they may not have access to the money they invest for an extended period of time.
- Volatile markets: Because an investor may be unable to sell its shares, an investor will be unable to reduce its exposure in any market downturn
- Funds may invest in securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Below investment grade securities, which are often referred to as “junk,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. They may also be illiquid and difficult to value
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