Hope you are all doing well. Each of the major U.S. indexes rose around 2% for the week, although the gains weren’t quite enough to fully recover ground lost the prior week. Recent results have left the S&P 500, the NASDAQ, and the Dow little changed on a year-to-date basis, despite the market downturn from late February to early April. After a volatile and mostly negative April, the major U.S. stock indexes generated strongly positive results in May. The NASDAQ finished about 9.6% higher for the month while the S&P 500 gained 6.2% and the Dow added 3.9%. Information technology stocks led the broader market, with the S&P 500’s tech sector up more than 10%. The 100th annual National Spelling Bee took place this past week. I have broken down this week’s update using championship-clinching words.
Eudaemonic- conducive to happiness -1960
Rising markets are conducive to happiness. The key driver of stock-market performance is corporate earnings growth. Nvidia has been the largest driver of earnings growth and this week was the last big S&P 500 company to report earnings. It did not disappoint, delivering solid results in the first quarter of 2025. Nvidi›a confirmed strong demand for its artificial intelligence (AI) chips, despite the trade restrictions it faces in China.
The company exceeded revenue and earnings estimates and grew its data-center business by 73%. All of the mega-cap technology giants confirmed that they will continue to spend on AI this year. In the next few months I don’t think tech earnings will be enough to alleviate investor concerns over tariff uncertainty and the market may drop a bit over the summer. However, longer term companies remain committed to investing in AI and other innovations. This will help corporate earnings continue to rise and the stock market should eventually follow with it.
Éclaircissement – an enlightening explanation of something, typically someone’s conduct, that has been hitherto inexplicable. – 2025
The so-called “TACO trade,” which stands for “Trump always chickens out,” worked out again this week. Investors engage in “TACO trade” by buying stocks at lower costs after Trump announces new tariffs or increases them, then reap the benefits when the markets rebound as he delays or backs off of them. Do not get fooled by this. Trump is NOT chickening out. I believe he wants to put tariffs on and inflict as much financial pain as legally permitted on the countries that refuse to negotiate with him. However, he also wants to get his signature legislation, the big, beautiful, bill through Congress which is projected to pass by the 4th of July. He also does not want an economic recession (two consecutive quarters of negative GDP) which he will have if the economy does not have a positive second quarter. A recession and trade war hinder his ability to get his bill through the Congress. That is the main reason he walked back the tariffs. It is not coincidental that he is delaying things until July, it is obvious when you look at it through this lens. I am confident that if he is not able to get trade deals done by July and if his bill passes and the economy indeed avoids a recession then he will ramp up the tariff rhetoric. The reciprocal tariff (if legally allowed) or some other form of tariffs will be put on trading partners that don’t acquiesce to our trade demands.
Sycophant – a person who acts obsequiously toward someone important in order to gain advantage. -1964
Many of the people in the President’s orbit have been described by the media as sycophants. Federal Reserve Chair Jerome Powell does NOT fall into this category. Chair Powell told President Trump on Thursday that monetary policy decisions would be “based solely on careful, objective, and non-political analysis,” according to a brief statement by the central bank. Powell’s comments came in a meeting at the White House on Thursday “at the President’s invitation,” the Fed said in its statement. The statement underscores that the central bank chief sought to defend its independence. The President may still get his wish for rate cuts because the measure of inflation the Fed uses is trending towards their 2.0% long-term target. Friday’s reading from the Personal Consumption Expenditures Index showed that core inflation excluding food and energy prices rose at an annual rate of 2.5%, down from 2.7% the previous month.
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