Stock and GDP Outlook, for Week Ending 06/06/2025
More Glimmers of Hope
Stock prices and the mean expected NGDP growth rate rose sharply last week, shaking off concerns about the continued erratic handling of US trade policy in the wake of the striking down of Trump’s entire reciprocal tariff “plan”.
This threatens to mostly end Trump’s tariffs on countries other than Canada and Mexico, though other legal avenues for imposing such tariffs might be explored. Some tariff increases on Mexico, Canada, and China, said to be releated to drug trafficking concerns, were also ruled illegal due to being deemed as failing to address the purported problem. For now, the tariffs will remain in effect, pending an appeal. Unaffected were tariffs on steel and aluminum, which were announced to be doubled late Friday to 50%. S&P 500 futures are down about a quarter percent late as I write this on Sunday night.
Inflation expectations were mostly unchanged as the YoY core PCE figure for April was published. It came in at the lowest rate since the prior to the pandemic recovery, but it is still well-above the Fed’s 2% target. In context the decline, while welcome, isn’t much to write home about.
The second estimate of YoY NGDP growth for the 1st quarter was also published very much in line with the original estimate, and the market-based forecast offered to premium subscribers.
Overall, while inflation continues to very gradually decline, longer-term expected inflation remains near the Fed’s target, which will continue to limit stock price appreciation sans positive real shocks. The crumbling of Trump’s trade war, while good news for growth, must nonetheless be considered in the context of the regime that started it. As Lars Christensen once wrote, Trump is a “negative real shock waiting to happen.” And of course, the fiscal situation is still a growing problem in the US. Hence, it isn’t possible for me to feel comfortable with optimism, increasing a bit though it is.
Note: This post, as is the case with all my posts, should not be construed as offering investment advice. Such advice should be tailored to the individual investor by qualified professionals who, ideally, are fiduciaries.
Links to Data:
Economic Data Sources:
https://fred.stlouisfed.org/series/SP500
https://www.wsj.com/market-data/stocks/peyields
https://www.barchart.com/futures/quotes/ES*0/futures-prices
https://ycharts.com/indicators/sp_500_earnings_per_share_forward_estimate#:~:text=Basic%20Info-,S&P%20500%20Earnings%20Per%20Share%20Forward%20Estimate%20is%20at%20a,28.27%25%20from%20one%20year%20ago.
https://www.cnbc.com/quotes/.VIX
https://fred.stlouisfed.org/series/DTWEXBGS
https://fred.stlouisfed.org/graph/?g=Ee9i
https://fred.stlouisfed.org/series/T10Y3M#0
https://fred.stlouisfed.org/series/DGS10
https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
https://tradingeconomics.com/commodity/crb?user=nunote
https://www.cnbc.com/quotes/@CL.1
https://www.cmegroup.com/trading/en
https://www.spglobal.com/spdji/en/documents/additional-material/sp-500-eps-est.xlsx
https://www.cmegroup.com/markets/interest-rates/stirs/30-day-federal-fund.quotes.html