Wall Street on Friday posted its best monthly advance since November 2023. The benchmark S&P 500 index soared 6.2% for May, as markets recovered from Donald Trump’s tariff shock delivered on “Liberation Day” in April. In terms of economic data, the highlights of the week were an upward revision to the second estimate of the U.S. Q1 GDP growth and an inline reading for the April core inflation index. Nvidia also grabbed headlines with another blowout quarterly report, impressing again with its stronger than expected numbers and guidance that came despite export controls to China. For the week, the S&P advanced 1.9%, while the Nasdaq climbed 2.0%. The Dow added 1.6%.
US consumer confidence rebounded sharply in May from an almost five year low as perceptions of the economy and labor market improved as the Trump administration backed down from more extreme tariffs and tariff threats. In addition, most of Trump’s global tariffs were deemed illegal by a US trade court, which ordered the levies to be stopped within 10 days.
In the meantime, the “big and beautiful” tax bill passed the House and has made its way into the Senate. If it passes into a law, predicting the reaction from the stock market could be the next mystery for us to solve.
Future Wealth’s View
Jamie Dimon, CEO of JP Morgan Chase and one the smartest guys on Wall Street, summarized his views on the US economy this week at Reagan’s Economic Forum in California, by arguing that economic growth cannot be the government’s only concern. He noted that developments in defense, technology and other areas will have to help sustain U.S. global leadership. He then asked the million dollar question – “Are we gonna be the reserve currency? No. You know, if we are not the preeminent military and the preeminent economy in 40 years, we will not be the reserve currency.” “That’s a fact,” he added. “Just read history.”
Last week, our report was titled “Kicking the “deficit-can” down the road”. Our concern was that the profligate deficit spending by the government without any guardrails could put us into a fiscal cliff in the coming years. Jamie Dimon’s comments echo the adverse impact of such spending which eventually will take out the dollar as the reserve currency of the modern world.
In the meantime, the stock market is ignoring the impending fiscal crisis and continues to chug along – looking past the tariffs and looking ahead to the beneficial impact of the tax bill.
Crisis? What crisis?