Week in Review: May 9, 2025

May 12, 2025

Recap & Commentary

Markets ended the week little changed as investors awaited the Federal Reserve’s Federal Open Market Committee (FOMC) meeting, further trade developments, and additional first quarter earnings reports.

Investors took a measured approach towards trade developments during the week. An announcement that the US and UK had reached a trade agreement was initially met with excitement which cooled as the details became available. Despite proclamations that the deal was a “maxed out deal”, it left the baseline 10% tariff in place on all UK goods entering the US, though it did reduce tariffs on UK-made vehicles, along with steel and aluminum imports. In exchange, the UK lowered trade barriers for certain US agricultural exports. Overall, the deal appeared limited, with many details unclear.

Investors also took a measured approach towards the announcement of trade talks between the US and China. Though the administration has admitted that current tariff levels between the two countries are “unsustainable” it is unclear how quickly the two countries will be able to normalize trade relations. In addition, President Trump said an 80% tariff on Chinese goods “seems right” which would still represent a significant tax on a wide range of consumer goods.

As expected, the Fed left rates unchanged following its May FOMC meeting. Speaking afterwards, Chair Jay Powell said the Fed is currently in a “good positions to wait and see” how Trump’s tariffs potentially impact the economy. Though Powell described current labor market conditions as “solid” and inflation as having eased “significantly” from mid-2022 levels, he indicated tariffs could create a “challenging scenario” for the Fed in which its dual mandate goals are “in tension.”

Through Friday, 90% of S&P 500 companies had reported 1Q25 earnings. Thus far, 78% have exceeded their consensus forecast. According to industry group FactSet, consolidated earnings growth is expected to be 13.4%, up from the 7.2% forecast on March 31.

Economic Commentary

Service sector activity improved slightly in April, according to industry group ISM. New orders, rose to a four-month high, suggesting improving demand, though employment contracted for a second consecutive month. Reflecting the impacts of tariffs, prices rose to their highest level since February 2023.

The trade deficit swelled to a record $140.5B in March, up from $123.2B in February, reflecting a large surge in imports as business sought to build inventories ahead of President Trumps April 2 tariff announcement.

Weekly jobless claims fell 13K to 228K. The current level remains consistent with a relatively healthy labor market.

Of Note

Warren Buffett, age 94, announced he will step down as CEO of Berkshire Hathaway at the end of 2025, after 60 years. Buffett will be succeeded by his hand-picked successor Greg Abel who has been with the company for 25 years. After announcing the news, Buffett received a standing ovation from the 40,000 individuals in attendance leading Buffett to joke that “The enthusiasm shown by that response could be interpreted in two ways.” Buffett will remain as Chairman of the Board, serving as an advisor to new CEO Abel.

Market Indices   (As of 05/09/2025)

• Consumer Inflation (CPI)
• Producer Inflation (PPI)
• Retail Sales
• Consumer Sentiment
• Housing Starts
• Industrial Production
• Initial Jobless Claims