Week ended May 9, 2025: Trump says "buy stocks" (again)

From a financial markets perspective, the week was rather uneventful, which I consider positive given what has been going on the last few weeks.  There were plenty of corporate earnings, the end of the Berkshire Hathaway era, two central bank decisions (including the Fed), and announcements of US-UK and UK-India trade agreements.  However, just as I was about to hit “send” this morning, I read that Mr Trump said the following after signing the new trade agreement with the UK late yesterday afternoon: “You better go out and buy stock now”….The economy “will be like a rocket ship that goes straight up.”

In fact, the US-UK trade agreement is a sideshow to the main event this weekend: discussions in Geneva between trade representatives of the US and China. And it is clear that the Trump Administration is prepared to once again climb down, with Bloomberg headlines this morning saying: “Trump Team Seeks Tariff Cuts, Rare Earths Relief in China Talks”. As wrong as this is in so many different respects coming from the leader of the free world as the administration enters into discrete trade negotiations with the world’s second largest economy, these comments from Mr Trump scream "BUY" as far as risk assets to his legion of dedicated followers.

As far as markets so far this week, risk assets generally including global stocks and Bitcoin were better bid and moved slightly higher, with the US Treasury bond market and many other asset markets trading sideways.

Warren Buffett to step down 

It’s impossible for me not to start this update without noting the event last Saturday that mattered most to my own portfolio: Warren Buffett’s announcement that he would be stepping down as CEO (but will remain Chairman) of Berkshire Hathaway at age 94 (actually 95 when he steps down).  I have written

about Mr Buffett and his “partner-in-crime” – the late Charlie Munger – on many occasions in the past (here and here, for example), and was extremely fortunate to have attended one of Berkshire Hathaway’s annual meetings in Omaha in 2018.

The annual meeting has been described as the “Woodstock for Investors”, and it is indeed a weekend-long party for very devoted Berkshire Hathaway fans, some of which might own only a few shares of the company’s stock.  Rather than go on-and-on about my respect for both Messrs Buffett and Munger, the graphic below from #Bloomberg (via #Unhedged) says all you need to know as to why this dynamic duo will leave an investment legacy that will be difficult to match.

If you want to know more about Mr Buffett, there is a good albeit dated (April 2019) article from the #FT here(for free) in which Robert Armstrong interviews Mr Buffett and discusses his legacy to that time.

Central bank decisions

Both the Federal Reserve and the Bank of England had monetary policy meetings this week, with outcomes as expected – the Fed left its monetary policy intact, and the Bank of England lowered its policy rate 25bps. 

The first paragraph of the Fed’s monetary policy decision (here) explains why the Fed did not change its monetary policy approach:

“Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated.”

In his formal comments and the press Q&A after the official decision was released, Mr Powell was clear in noting that there is de facto a chance of stagflation, meaning both above-target inflation and rising unemployment.  Naturally, this presents a dilemma for the Fed as far as its next policy step, and the FOMC decided to wait before altering its monetary policy to get a better feel of what the effect of the Trump Administration’s trade policies will be on the US economy.  If you want to listen to Mr Powell’s comments and the press Q&A, you can find this on YouTube (Federal Reserve website) here.  Investors’ reactions were muted, with no real movement in stocks or bonds, with the former hanging on to its gains during the day.  As expected, President Trump again lashed out at the Fed chair, saying on Truth Social "’Too Late’ Jerome Powell is a FOOL, who doesn’t have a clue."  Lovely decorum as usual from Mr Trump, although time will tell if the Fed is doing the right thing. 

The Bank of England reduced its policy rate by 25bps as expected, although the decision was a three-way split that surprised economists.  Of the nine member committee, five voted for a 25bps reduction, two voted for a 50bps reduction, and two voted for no change.  Investors considered this a hawkish cut,

with Bank of England Governor Bailey noting in his commentary after the decision that the BoE would be “gradual and careful” as far as future monetary policy easing.  Although inflation is easing towards target in the UK, the global trade war is likely to affect UK economic growth, which has been relatively poor even before the trade war started.

The graphic to the right shows the direction of travel of policy rates of the world's major central banks since 2020 (which excludes yesterday's reduction of 25bps in the UK of the Bank Rate).

Trade agreements

Mr Trump announced with great fanfare a trade agreement with the UK on Thursday afternoon. To frame the US-UK agreement, I read that the US actually ran a trade surplus with the UK in 2024 of $11.9 billion, with the US importing $68 billions of goods (2% of total imports) from the UK in 2024.  Chew on that before getting too excited.  You can read more about the trade deal on the #BBC: “What is in the UK-US tariff deal?”   

Much more importantly to the US and global economies, US officials are meeting with their counterparts from China in Geneva as I write this, in hopes that the ridiculous tariffs going both ways – effectively resulting in a trade embargo between the countries – can be reduced to more reasonable levels.  The existing tariffs are negatively effecting both countries, although arguably the export-driven Chinese economy is being hit harder.  Finally, it is worth mentioning that the UK also struck a trade deal with India this week (a couple of days before the agreement was announced between the US and UK).

MARKETS LAST WEEK

US stocks were again volatile during the week, ultimately losing ground – albeit modest – for the first time in three weeks.  European stocks chalked up gains for the week, and remain the best performing market so far YtD.  The best weekly gains though came in Asia, with Japanese stocks cheering the BoJ’s decision not to raise their monetary policy rate the week before, and Chinese stocks rallying following better-than-expected economic data, as the US and China enter into trade negotiations in Geneva starting today.

US bond yields were a few basis points wider across the curve, as ongoing concerns persist regarding longer-term tariff-induced inflation.  However, corporate credit spreads inched back in both in investment grade and high yield.  The US Dollar and Yen were relatively stable on the week.  Gold was better on the week, but Bitcoin chalked up a solid weekly gain, surging back above $100,000, as appetite returned for risk assets.  Oil prices were also slightly higher on the week. 

You can find updated tables at the bottom of this update in the "Market Tables" section.

WHAT’S AHEAD

From an economic perspective, US CPI for April (Tues) and US retail sales for April (Thurs) will be released this week.  The new consumer sentiment indicator from University of Michigan will also be released Friday, a telling sign for how American consumers view the path ahead following the recent stabilisation of markets, and optimism over trade / tariff discussions .  Both the UK and Eurozone will release 1Q2025 GDP mid-week. 

Earnings for S&P 500 companies have largely wound down, with only 11 companies reporting earnings this coming week.  However, these include some widely held names such as CSCO, BABA, WMT and DE.  You can get the full earnings calendar for S&P 500 companies at earningswhispers.com.

Upcoming central bank policy meetings are as follows:

• ECB: June 5 (have to get closer but odds are 25bps reduction in policy rates)

• Bank of Japan: June 16-17

• FOMC: June 17-18

• Bank of England: June 19

MARKET TABLES

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