May 9th, 2025: Weekly Market Review

1. This week’s economic data painted a mixed picture of resilience and uncertainty, with the Federal Reserve’s Federal Open Market Committee (FOMC) meeting on May 6–7, 2025, serving as the focal point.

As widely anticipated, the Fed maintained its benchmark interest rate at 4.25%–4.5%, reflecting a cautious stance amid tariff-driven inflationary risks and a Q1 GDP contraction of 0.3%. Fed Chair Jerome Powell emphasized a “wait-and-see” approach, citing increased risks of higher inflation and unemployment, with no clear signals on future cuts. Markets, expecting no change, showed muted reaction, with the Dow Jones Industrial Average gaining nearly 300 points despite the Fed’s cautious tone. My base case assumes the Fed may resume rate cuts in June, potentially at the June 17–18 meeting, but persistent tariff impacts and economic data will dictate the outcome. The ISM Services PMI rose to 51.6% in April, beating expectations and marking a 10th consecutive month of expansion, though its significance was downplayed due to front-loading activities ahead of April’s tariffs, limiting its influence on market sentiment.

Other economic indicators and consumer trends also drew attention. Investors are closely monitoring upcoming initial jobless claims and continuing claims, due later this week, as early signals of labor market health ahead of broader employment data, especially after April’s solid 177,000 job additions and a steady 4.2% unemployment rate. Meanwhile, Mother’s Day spending is projected to rebound modestly to $34.1 billion in 2025, just below the 2023 peak, with per-person outlays rising despite economic headwinds. This reflects cautious consumer optimism, though tariff-induced price pressures and a slowing economy—projected to grow at 1.9% in 2025 versus 2.8% in 2024—could temper spending. The interplay of these data points, alongside global trade tensions like the U.S.-China talks in Geneva and India-Pakistan conflict, underscores a complex economic landscape where labor and consumer trends will shape the Fed’s next moves.  REF: FOMC, NRF

2. This week, I feature Mr. Don Xiang of “Digging into China,” a YouTube channel exploring China’s history, culture, economy, and current affairs with a critical perspective on issues like economic challenges and government policies. 

I share many of Don’s views on China and find tremendous merit in his work. In his recent episode, “Misjudgments and Mayhem: The Unraveling of U.S.-China Trade,” he analyzes escalating trade tensions, attributing them to miscalculations and aggressive policies threatening global stability. He links the conflict to the U.S.’s 145% tariffs on Chinese imports, including a fentanyl levy, and China’s 125% retaliatory tariffs, disrupting supply chains and fueling inflation fears. Xiang notes both nations underestimated each other’s resolve, with the U.S. misjudging China’s pivot to markets like ASEAN and China ignoring U.S. protectionist pressures. He highlights economic fallout—China’s manufacturing PMI fell to 49.0 in April 2025, indicating contraction, and U.S. consumers face higher costs—but sees hope in U.S. tech exemptions and China’s openness to talks. Xiang warns that without concessions, the trade war could harm China’s export model and U.S. competitiveness, urging viewers to reflect on this economic mayhem.  Below are bullet points I gathered from this episode:

• China is undergoing our version of ‘2008’, citizens have been drained by a 20-year real estate bubble…
• Household savings are depleted and purchasing power is virtually non-existing…
• Top 2% of the Red Elite controls 82% of the nation’s wealth creating an unprecedented level of inequality…
• The Chinese government is trapped in a deficit spiral with annual fiscal deficit exceeding 10 trillion RMB and continue to grow rapidly…
• 40% of its finished industrial goods must be exported with a significant portion destined for the US…
• Chinese government may appear powerful controlling vast resources, but it has lost the capacity for societal mobilization, it can no longer rally its people to confront a crisis…
• The social unrest sparked by economic collapse is an inevitable reckoning, only through such turmoil can they reflect and from the ruins of brief chaos build a new order.  This may be the true turning point for a nation burdened by CCP’s decay…

Click onto picture below to access video.  REF: DonXiang

3. A powerful wave of industrial investment is reshaping the U.S. manufacturing landscape, led by global and domestic giants such as ABB, Nvidia, Hyundai, IBM, Siemens, Stellantis, Pratt Industries, Merck, Eli Lilly, Toyota, TSMC, Clarios, and many others. 

These companies are committing substantial capital to build and expand production facilities across critical sectors including semiconductors, pharmaceuticals, electric vehicles, packaging, and energy storage. This broad-based manufacturing revival is fueled by a combination of strategic reshoring, national security considerations, supply chain resilience, and recent US tariff mandates. Altogether, the estimated total value of these planned and active investments approaches $5 trillion, marking one of the largest coordinated industrial buildouts in U.S. history.

If this investment scale is realized, it presents a massive growth opportunity for the domestic automation and robotics industry. Modern manufacturing depends heavily on automation to address rising labor costs, enhance productivity, and maintain global competitiveness. These new facilities will require advanced robotics systems for everything from assembly and quality assurance to logistics and material handling. As a result, U.S. automation and robotics firms are well-positioned to benefit through equipment sales, software integration, and long-term service contracts. The convergence of policy support, technological innovation, and historic capital flows is setting the stage for a generational expansion of America’s high-tech industrial base—with automation at the core of this transformation.  Below are some of the ETFs I find interesting in this space.

• ARKQ – ARK Autonomous Technology & Robotics ETF – REF: ARKQ
• IBOT – VanEck Robotics ETF – REF: IBOT
• ROBO – Global X Robo Global Robotics & Automation ETF – REF: ROBO

NOTE: Not investment advice or recommendations. Investor should consider the investment objective, risks, charges and expenses carefully before investing.  For prospectus or summary prospectus with information about these Funds (ETFs), please visit referenced links listed above.  Read carefully before investing.

With the current macro-economic backdrop, below are areas we currently favor:

• Fixed Income – Short-term Corporates (Low-Beta)
• Fixed Income – Corporates High Yield as Opportunistic Allocation (Low-Beta)
• Businesses that contribute to and benefit from AI & Automation (Market-Risk)
• Cyber-Security & Software (Market-Risk)
• Biotechnology (Market-Risk)
• Financials (Market-Risk)
• Digital Asset – Bitcoin (Market-Risk/Hedge)
• Cloud Computing (Market-Risk)

4. World Watch

4A. ​ Reuters reported that U.S. Treasury Secretary Scott Bessent and trade negotiator Jamieson Greer will meet China’s He Lifeng in Geneva on Saturday, May 10, for “ice-breaker” trade talks to ease a trade war disrupting global markets. 

With U.S. tariffs on Chinese imports at 145% and China’s retaliatory 125% duties, described as a near trade embargo, the talks aim to negotiate tariff reductions, product exemptions, U.S. export controls, and the de minimis rule. Prompted by unsustainable tariff levels, the announcement lifted U.S. equity futures and Chinese markets, though analysts like Bo Zhengyuan from Plenum warn that progress depends on mutual tariff rollbacks and follow-up talks.

The Geneva meeting is pivotal as China faces potential job losses of 16 million (per Nomura) and has launched stimulus to offset tariff impacts, while the U.S. contends with a record trade deficit and Q1 2025 GDP contraction. Despite mixed signals from the Trump administration, which is reviewing deals with 17 trading partners, Bessent stressed sustainable “fair trade” over decoupling. China’s commerce ministry demands no coercion, opposing U.S. tariff policies. Though trust deficits may hinder outcomes, the talks signal a potential thaw, impacting global markets and firms like Rockwell Automation, which face tariff costs but could gain from U.S. onshoring trends.  Click onto picture below to access video.  REF: REUTERS

4B. India executed “Operation Sindoor,” launching missile strikes (5/7/25) on nine alleged terrorist sites in Pakistan and Pakistan-administered Kashmir, retaliating for a militant attack on April 22 in Pahalgam, Indian-administered Kashmir, that killed 26 people, mostly Hindu tourists.

 India claimed the strikes targeted bases of Jaish-e-Mohammed, Lashkar-e-Taiba, and Hizbul Mujahideen, accusing Pakistan of supporting terrorism, a charge Islamabad rejected. Pakistan reported 31 civilian deaths, asserting civilian sites, including a mosque, were hit, and claimed its Chinese-supplied J-10C jets shot down five Indian jets, including Rafales, though India has not confirmed these losses. The deepest strikes since the 1971 war followed India’s suspension of a water-sharing treaty and border closures, intensifying bilateral tensions. Pakistan’s Prime Minister Shehbaz Sharif denounced the strikes as a violation of sovereignty, vowing retaliation, while India described them as “measured.”

This escalation threatens a nuclear-armed conflict, with Pakistan’s reliance on Chinese jets signaling Beijing’s growing regional influence, potentially complicating U.S.-India relations. The strikes disrupted global markets, prompting airlines to reroute flights and Pakistan to close airspace and schools. Cross-border shelling along the Line of Control killed additional civilians (15 in India, 6–13 in Pakistan), and Pakistan’s authorization of military retaliation heightens the risk of further violence. International calls for de-escalation face hurdles due to mutual distrust and conflicting narratives—India’s unverified claims of targeting terrorists versus Pakistan’s reports of civilian casualties. The conflict’s trajectory depends on Pakistan’s response and India’s readiness for counterstrikes, with the potential for broader regional instability looming.  Click onto picture below to access video from Firstpost.  REF: Bloomberg

4C. Below is an updated snapshot of the current global state of economy.

According to TradingEconomics as of 5/5/2025 (REF: TradingEconomics):

• The U.S. economy contracted at an annualized rate of 0.3% in the first quarter of 2025, marking the first decline since the first quarter of 2022. 
• Germany’s economy grew by 0.2% in the first quarter of 2025, matching market expectations and recovering from a 0.2% contraction in the previous quarter, according to a preliminary estimate.
• Germany’s consumer price inflation eased for a second consecutive month to 2.1% in April 2025, the lowest since October 2024, though it remained slightly above market forecasts of 2.0%, according to a preliminary estimate.
• Japan’s unemployment rate edged up to 2.5% in March 2025, slightly above both February’s figure and market expectations of 2.4%.

5. Quant & Technical Corner – a selection of quantitative & technical data we monitor on a regular basis to help gauge the overall financial market conditions and the investment environment.

5A. Most recent read on the Fear & Greed Index with data as of 5/5/2025 – 8:00PM-ET is 56 (Greed).  Last week’s data was 35 (Fear) (1-100).  CNNMoney’s Fear & Greed index looks at 7 indicators (Stock Price Momentum, Stock Price Strength, Stock Price Breadth, Put and Call Options, Junk Bond Demand, Market Volatility, and Safe Haven Demand).  Keep in mind this is a contrarian indicator!  REF: Fear&Greed via CNNMoney

5B. St. Louis Fed Financial Stress Index’s (STLFSI4) most recent read is at –0.2767 as of May 1, 2025.  Previous week’s data was -0.2104.  A big spike up from previous readings reflecting the turmoil in the banking sector back in 2023.  This weekly index is not seasonally adjusted.  The STLFSI4 measures the degree of financial stress in the markets and is constructed from 18 weekly data series: seven interest rate series, six yield spreads and five other indicators. Each of these variables captures some aspect of financial stress. Accordingly, as the level of financial stress in the economy changes, the data series are likely to move together.  REF: St. Louis Fed

5C. University of Michigan, University of Michigan: Consumer Sentiment for February [UMCSENT] at 57, retrieved from FRED, Federal Reserve Bank of St. Louis, April 25, 2025.  Back in June 2022, Consumer Sentiment hit a low point going back to April 1980.  REF: UofM

5D. The Chicago Fed National Activity Index (CFNAI) decreased to –0.03 in March from +0.24 in February. Two of the four broad categories of indicators used to construct the index decreased from February, and three categories made negative contributions in March. The index’s three-month moving average, CFNAI-MA3, decreased to –0.01 in March from +0.12 in February. REF: ChicagoFed, March’s Report

5E. (4/21/2025) The Conference Board Leading Economic Index (LEI) for the US declined by 0.7% in March 2025 to 100.5 (2016=100), after a decline of 0.2% (revised up from –0.3%) in February. The LEI also fell by 1.2% in the six-month period ending in March 2025, a smaller rate of decline than its –2.3% contraction over the previous six months (March–September 2024). The composite economic indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle. The indexes are constructed to summarize and reveal common turning points in the economy in a clearer and more convincing manner than any individual component. The CEI is highly correlated with real GDP. The LEI is a predictive variable that anticipates (or “leads”) turning points in the business cycle by around 7 months. Shaded areas denote recession periods or economic contractions. The dates above the shaded areas show the chronology of peaks and troughs in the business cycle. The ten components of The Conference Board Leading Economic Index® for the U.S. include: Average weekly hours in manufacturing; Average weekly initial claims for unemployment insurance; Manufacturers’ new orders for consumer goods and materials; ISM® Index of New Orders; Manufacturers’ new orders for nondefense capital goods excluding aircraft orders; Building permits for new private housing units; S&P 500® Index of Stock Prices; Leading Credit Index™; Interest rate spread (10-year Treasury bonds less federal funds rate); Average consumer expectations for business conditions.  REF: ConferenceBoard, LEI Report for March  (Released on 4/27/2025)

We have experienced a “rolling recession” since June 2022 and are only now emerging from it. However, authorities are not labeling it a recession due to high employment data.

5F. Probability of U.S. falling into Recession within 3 to 4 months is currently at 75.4% (with data as of 04/27/2025 – Next Report 05/12/2025) according to RecessionAlert Research.  Last release’s data was at 46.74%.  This report is updated every two weeks. REF: RecessionAlertResearch

5G. Yield Curve as of 5/5/2025 is showing Normal.  Spread on the 10-yr Treasury Yield (4.34%) minus yield on the 2-yr Treasury Yield (3.83%) is currently at 51bps.  REF: Stockcharts   The yield curve—specifically, the spread between the interest rates on the ten-year Treasury note and the three-month Treasury bill—is a valuable forecasting tool. It is simple to use and significantly outperforms other financial and macroeconomic indicators in predicting recessions two to six quarters ahead.  REF: NYFED

5H. Recent Yields in 10-Year Government Bonds.  REF: Source is from Bloomberg.com, dated 5/5/2025, rates shown below are as of 5/5/2025, subject to change.

The 10-Year US Treasury Yield… The 10-Year Yield is indirectly related to inflation. I expect the 10-Year Yield to drop further as dis-inflation kicks in.  REF: StockCharts1, StockCharts2

10-Year Real Interest Rate at 1.66841% as of 4/10/25.  Last month’s data was 1.86151%.  REF: REAINTRATREARAT10Y

ICE BofA US High Yield Index Option-Adjusted Spread (BAMLH0A0HYM2) currently at 3.6 as of May 5, 2025.  This is a key indicator of market sentiment, particularly regarding risk and economic health.  At its core, the spread reflects the extra return investors demand to hold riskier corporate debt over safer government securities. High-yield bonds are issued by companies with lower credit ratings (below investment grade, like BB or lower), meaning they carry a higher chance of default. The spread compensates for this risk. When the spread is narrow—say, around 2.5% to 3%, as seen recently—it suggests investors are confident, willing to accept less extra yield because they perceive lower default risk or a strong economy. Narrow spreads often align with bullish markets, where cash is flowing, growth is steady, and fear is low.   REF: FRED-BAMLH0A0HYM2

5I. (5/5/2025) Today’s National Average 30-Year Fixed Mortgage Rate is 6.90% (All Time High was 8.03% on 10/19/23).   Last week’s data was 6.82%.  This rate is the average 30-year fixed mortgage rates from several different surveys including Mortgage News Daily (daily index), Freddie Mac (weekly survey), Mortgage Bankers Association (weekly survey) and FHFA (monthly survey).  REF: MortgageNewsDaily, Today’s Average Rate

The recent spike in the 30-year fixed-rate jumbo mortgage to 6.9%, compared to Freddie Mac’s rate at 6.76% and the Mortgage Bankers Association (MBA) rate at 6.89%, highlights key differences in the mortgage market. Jumbo mortgages, which exceed the conforming loan limits set by government agencies like Freddie Mac, typically carry higher interest rates because they are riskier for lenders. These loans are not backed by government entities, which increases the risk for lenders and, consequently, leads to higher rates. In contrast, Freddie Mac and MBA provide averages for conforming loans, which meet federal guidelines and have lower risk due to government backing, keeping their rates lower.

(4/15/25) Housing Affordability Index for Feb = 102.2 // Jan = 100.7 // Dec = 100.7 // Nov = 99 // Oct = 102.3 // Sep = 105.5 // Aug = 98.6. Data provided by Yardeni Research.  REF: Yardeni

5J. Velocity of M2 Money Stock (M2V) with current read at 1.383 as of (Q1-2025 updated 4/30/2025).   Previous quarter’s data was 1.387.  The velocity of money is the frequency at which one unit of currency is used to purchase domestically- produced goods and services within a given time period. In other words, it is the number of times one dollar is spent to buy goods and services per unit of time. If the velocity of money is increasing, then more transactions are occurring between individuals in an economy.  Current Money Stock (M2) report can be viewed in the reference link.   REF: St.LouisFed-M2V

M2 consists of M1 plus (1) small-denomination time deposits (time deposits in amounts of less than $100,000) less IRA and Keogh balances at depository institutions; and (2) balances in retail MMFs less IRA and Keogh balances at MMFs. Seasonally adjusted M2 is constructed by summing savings deposits (before May 2020), small-denomination time deposits, and retail MMFs, each seasonally adjusted separately, and adding this result to seasonally adjusted M1. Board of Governors of the Federal Reserve System (US), M2 [M2SL], retrieved from FRED, Federal Reserve Bank of St. Louis; Updated on April 22, 2025.  REF: St.LouisFed-M2

Money Supply M0 in the United States increased to 5,775,200 USD Million in March from 5,613,800 USD Million in February of 2025. Money Supply M0 in the United States averaged 1,183,266.29 USD Million from 1959 until 2025, reaching an all-time high of 6,413,100.00 USD Million in December of 2021 and a record low of 48,400.00 USD Million in February of 1961.   REF: TradingEconomics, M0

5K. In March, the Consumer Price Index for All Urban Consumers fell 0.1 percent, seasonally adjusted, and rose 2.4 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.1 percent in March (SA); up 2.8 percent over the year (NSA). April 2025 CPI data are scheduled to be released on May 13, 2025, at 8:30AM-ET.  REF: BLS, BLS.GOV

 5L. Technical Analysis of the S&P500 Index.  Click onto reference links below for images.

• Short-term Chart: Trend Bearish to Bullish on 5/5/2025 – REF: Short-term S&P500 Chart by Marc Slavin (Click Here to Access Chart)

• Medium-term Chart: Trend Bullish to Bearish on 5/5/2025 – REF: Medium-term S&P500 Chart by Marc Slavin (Click Here to Access Chart)

• Market Timing Indicators – S&P500 Index as of 5/5/2025 – REF: S&P500 Charts (7 of them) by Joanne Klein’s Top 7 (Click Here to Access Updated Charts)

• A well-defined uptrend channel shown in green with S&P500 broke away from the uptrend.  REF: Stockcharts

• S&P500 and CBOE Volatility Index (VIX) as of 5/5/2025.  REF: FRED, Today’s Print

5M. Most recent read on the Crypto Fear & Greed Index with data as of 5/5/2025 is 50 (Neutral).  Last week’s data was 53 (Neutral) (1-100).  Fear & Greed Index – A Contrarian Data.  The crypto market behavior is very emotional. People tend to get greedy when the market is rising which results in FOMO (Fear of missing out). Also, people often sell their coins in irrational reaction of seeing red numbers. With the Crypto Fear and Greed Index, the data try to help save investors from their own emotional overreactions. There are two simple assumptions:

• Extreme fear can be a sign that investors are too worried. That could be a buying opportunity.
• When Investors are getting too greedy, that means the market is due for a correction.

Therefore, the program for this index analyzes the current sentiment of the Bitcoin market and crunch the numbers into a simple meter from 0 to 100. Zero means “Extreme Fear”, while 100 means “Extreme Greed”.  REF: Coinmarketcap.com, Today’sReading

Bitcoin – 10-Year & 2-Year Charts. REF: Stockcharts10Y, Stockcharts2Y