Weekly Newsletter 05/09/25

Good afternoon,

We wish all you mothers a very wonderful and relaxing Mother’s Day this Sunday.

The major stock market indexes finished the week with mixed results, however, fairly notable sector dispersion. Industrials were the best performer while healthcare, energy and communication services have all come under pressure.

Trade continues to dominate the headlines with more reports about the potential for US-China tariff de-escalation following weekend talks in Switzerland. Multiple reports noted Trump administration considering plan to cut China tariffs below 60%. De-escalation trend the big driver of the meaningful bounce in equities over the last few weeks, with upside exacerbated by bearish positioning dynamics related to earlier worries about a tariff-driven ramp in recession odds and the related additional dents in the US exceptionalism trade narrative. Earnings another tailwind with Q1 growth at 13.5%+, heightened macro uncertainty only leading to softer demand in select industries, tariff mitigation efforts and AI capex/monetization. However, some concerns a lot of good news has been priced in, particularly with the S&P 500 back at 21x forward earnings (and still looking for LDD% growth in 2025 and 2026) and onerous tariff rates expected to remain in place even after trade deals. Also, some heightened scrutiny surrounding the complications facing the Republican reconciliation bill. This week has seen another flurry of headlines highlighting divisions over Medicaid benefits, SALT deduction cap, tax cuts and overall deficit reduction dynamics. In addition, market continues to dial back Fed easing expectations as central bank stresses the patience mantra. Market currently pricing in less than 70 bp of Fed easing this year, down from 100 bp+ before the release of the April employment data.

Market notes from Raymond James equity advisor group:

Avoid the “Sell in May and Go Away” Adage: It remains paramount to avoid complacency as the tariff situation remains fluid. In the short term, prices may consolidate or retrace as backing and filling develop, so the old adage could hold true. However, longer-term, our bias remains positive, and we recommend scaling in as risk/reward improves if weakness transpires, suggesting that keeping an eye on the market remains important.

Additionally, the old adage “sell in May and go away” hasn’t held up well in recent years, with 11 of the past 12 years seeing gains during the month. Equities Climbing the Wall of Worry: Our base case remains that equities, given the strong buying conviction and bullish rebound off the 50% retracement level, are likely to continue climbing the wall of worry. The S&P 500 has seen several rare and positive signals that continue to be bullish for the market. However, following the 9-day winning streak that was snapped on Monday, the S&P 500 is back into a band of resistance just shy of the 200-DMA and near the levels seen just before the April 2nd "Liberation Day" tariff announcement. Additionally, many factors could disrupt the market mood, so we can't rule out a retest (or even a slight undercut) of the recent low. Watch for overhead resistance from 5747 up to 5773. If the market slides, we see technical support at the 21-DMA, currently at 5406. A move below this level could close the gap at 5309.

Sector Rotation: Despite the defensive bias year-to-date (YTD), there has been some rotation towards growth and cyclical areas since the market bottom, with Technology leading the charge, followed by Industrials and Communication Services. While there is still work to do, we view growth and cyclical leadership in the market rebound as a positive signal to displace some of the defensive bias that has driven the market YTD.

Grind Rather Than a Sprint: Even if the U.S. economy avoids a recession (though the tariff situation remains fluid), we see the near-term market as more of a grind with potential for back-and-forth trading. We believe a quick move back to highs in short order may prove difficult given the high degree of uncertainty—unless there is a major shift in the perception of tariffs. While we expect tariff relief over time, the headwinds are unlikely to go away quickly. The net effect leaves us with expectations for a choppy grind in the short term, while remaining positive on the longer term.

Fed on Pause: While the Fed has the opportunity to provide a boost with faster rate cuts, it is not in a hurry to shift, remaining on pause for the third consecutive meeting. Tariff uncertainty and the risk of higher inflation keep the Fed from moving hastily, but the expectation remains for more accommodative actions to begin mid-year. The positive is the Fed can remain data-dependent, buying itself time to evaluate the impact of increased tariffs on GDP growth, jobs, and inflation. On the other hand, the Fed is offering little support for the market at this point in time (although it remains a backstop if economic conditions worsen significantly).

As a father to 3 school aged children, I don’t need a thermometer to tell me summer is coming. The collective is ready for the school year to be done. High school seniors will graduate soon and that will make my junior a senior…I will have 2 girls in high school. What? How? Huh? With the recent market tribulation, I have been very kindly asked how I am holding up. The question and sentiment is very much appreciated, however, my initial reaction has always been, “It’s the client’s money, I feel for them (you)” and even more of a relative stress, “I have 2 teenage daughters, the markets have nothin’ on me.”

The link below contains additional financial topics and articles.
https://www.raymondjames.com/evangelista/resources

"If at first you don't succeed, try doing it the way mom told you to in the beginning."

Thank you,

Kyle

KYLE CHRISTIANSON, CFP^®
Financial Advisor
Raymond James & Associates, Inc.
1421 Pine Ridge Rd, Ste 300
Naples, FL 34109
Toll Free (800) 843-2025 | Direct (239) 513-6525 | Main (239) 513-6500 | Fax (239) 596-5474
Kyle.Christianson@RaymondJames.com

Any opinions are those of Kyle Christianson and not necessarily those of RJA or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. This is not a recommendation to purchase or sell the stocks of the companies mentioned. Leading Economic Indicators are selected economic statistics that have proven valuable as a group in estimating the direction and magnitude of economic change. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stocks of companies maintained and reviewed by the editors of the Wall Street Journal. The NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Sector investments are companies engaged in business related to a specific sector. They are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification. Investing in oil involves special risks, including the potential adverse effects of state and federal regulation and may not be suitable for all investors. Bond prices and yields are subject to change based upon market conditions and availability. Gold is subject to the special risks associated with investing in precious metals, including but not limited to: price may be subject to wide fluctuation; the market is relatively limited; the sources are concentrated in countries that have the potential for instability; and the market is unregulated.