A Positive Return

The major averages finished the week down fractionally. Even though the major averages remain in the red year to date. They have recovered all of their post Liberation Day losses. The question remains can the markets recover their year to date losses and generate a positive return this year. It usually boils down to earnings.

Where’s The Money

The latest earnings update from FactSet Research show some promising results. With 90% of the S&P 500 companies having reported so far. 78% have beaten the earnings number. Pushing aggregate earnings growth for the first quarter to 13.4% an impressive figure nearly double the anemic 7.1% figure originally expected. As the S&P 500 is tracking a second consecutive quarter of double digit earnings growth. As shown in the chart below compliments of FactSet Research.

Powell Hits The Pause Button Again

As was widely expected, the Fed left rates unchanged this week. Guidance was toned down a bit. The markets expect just 2 .25% rate cuts later this year. Chairman Powel noted continued uncertainty with respect to tariffs. Ongoing weakness in the soft economic or survey data as his rationale for continuing his “wait and see” posture. He went on to note that the actual hard economic data remains robust. Something reflected in the strong first quarter earnings data.

Please Buy Our Treasuries

The mainstream media has made much of the tariffs with numerous sensational headlines about how the economy, and more, was doomed. In particular noting that foreigners held literally trillions in Treasury Bonds, Notes and Bills, they do. That these would be sold off in retaliation for Trumps trade tariff indiscretions. With sales and holdings data starting to trickle out in the post Liberation Day period. The short answer is very little if any retaliatory selling or refusing to buy new issues has occurred so far. With recent Treasury auctions showing aggressive bidding by foreign and domestic investors alike. Per the following quote from Deputy Treasury Secretary Faulkender’s perspective, on the latest auctions: “went fantastic… we are not seeing any issues in Treasury markets, and our auctions continue to go very strongly.” The mainstream media pushes another doom and gloom narrative only to be proven wrong again.

Rising Prices And Inflation

Despite stubbornly high 10-year inflation expectations, aka weak survey data. The hard data, in this case the oil price, slipped significantly in April and should put considerable downward pressure on the various inflation metrics due out later this month. Largely through reduced prices at the gas pump. These two series usually follow each other quite closely. Just not right now. The latest reminder that the trend is your friend, until it isn’t. As the chart below compliments of Bloomberg illustrates.

Last Week’s Post: Another Huge Week

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