The May FOMC rate decision and press conference is Wed (May 7th) at 2pm ET. The S&P 500 has recovered >50% of its losses since falling 20% and is hovering near the 200-dma of 5,747. This is reminiscent of 2022 when the S&P 500 fell 20%-ish and recovered to near 200-dma on the eve of Jackson Hole. But in 2022, Fed Chair Powell gave a hawkish speech around the need for more rate hikes and stocks then spiraled down 20% into those Oct 2022 lows. Investors are generally wary that this May Fed meeting could also mark the “top” for stocks in 2025. While we understand the analog seems similar, the high level of existing investor skepticism today, in our view, suggests the risk/reward is better today than in 2022.
- In the last 2 public appearances, Fed Chair Powell comments about the near-term path of monetary policy has been interpreted hawkishly — Powell stated that Fed cannot respond to tariffs until impacts on both inflation and employment are more evident, which means Fed on hold near-term. Thus, investors are bracing for a “hawkish” Fed at the post-meeting press conference.
- But a lot of this may already be priced in. As shown below, since the April jobs report (last Friday), the number expected rate cuts in 2025 has fallen from 4.3 to 3.2. And anecdotally, we have not spoken with anyone who expects the Fed to be anything but hawkish post-May meeting.
- Additionally, sentiment remains visibly bearish. This is evident by the many commentaries from macroinvestors and strategists who warn of declines ahead. And is evident in the AAII sentiment surveys:
– in latest AAII survey, the percent bears stood at 59.3%
– this is the highest bearish percentage since April 2, 61.9%
– this has not fallen below 55.6% in the past 8 weeks
– a long string of negative sentiment - There is possibly some positive news on the tariff war and other news front. On Tuesday evening:
– Lin Jian 林剑, Spokesperson of Ministry of Foreign Affairs of China
– announced Vice Premier He will meet with the Treasury Secretary Scott Bessent
– in Switzerland sometime between May 9-May 12
– Premier He is the Chinese lead person for China-US economic and trade affairs - This is a positive development on the trade front.
- Moreover, on Tuesday afternoon, President Trump announced:
“We have a big announcement to make, not about trade but something else but it’s going to be a truly earth shattering and a positive development for this country and for the people of this country.” - This is supposed to be announced before the end of the week.
- In our view, the de-escalation of trade tensions remains the most important development to watch near term. As 1Q25 earnings has shown, US companies are managing to produce solid results in the face of treacherous economic conditions. And the US economy is still ok. But the longer this drag on trade continues, the greater the risk this has spiraled into a contraction.
- How are we comfortable we have not reached this breaking point yet?
- It is the high-yield market. High yield spreads (BofA HY options-adjusted spread) sits at 360bp wide:
– this was a low of 259bp on 1/22/25
– surged to 459bp wide by mid-April
– recovering to past 50% widening is a positive sign - If the economy were barreling towards a recession, we would expect these spreads to widen to 600bp or more. Keep in mind HY is not a market impacted by QE, or Treasury refunding, etc, and in our view represents true signal.
Bottom line: Hang in there, but there may be bumps ahead
Equity markets staged a substantial rally since April 7th, and are nearing the 200 day moving average. Thus, we expect investors to be wary and for markets to churn for a bit. But we believe risk/reward has improved a lot since early April. And the Nasdaq advance/decline line making a new high is a positive development as well.




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Key Incoming Data May:
5/1 9:45 AM ET: Apr F S&P Global Manufacturing PMITame5/1 10:00 AM ET: Apr ISM Manufacturing PMITame5/2 8:30 AM ET: Apr Non-Farm PayrollsTame5/2 10:00 AM ET: Mar F Durable Goods Orders MoMTame5/5 9:45 AM ET: Apr F S&P Global Services PMITame5/5 10:00 AM ET: Apr ISM Services PMITame5/6 8:30 AM ET: Mar Trade BalanceTame- 5/7 9:00 AM ET: Apr F Manheim Used Vehicle Index
- 5/7 2:00 PM ET: May FOMC Decision
- 5/8 8:30 AM ET: 1Q P Unit Labor Costs
- 5/8 8:30 AM ET: 1Q P Non-Farm Productivity QoQ
- 5/8 11:00 AM ET: Apr NY Fed 1yr Inf Exp
- 5/13 6:00 AM ET: Apr Small Business Optimism Survey
- 5/13 8:30 AM ET: Apr Core CPI MoM
- 5/15 8:30 AM ET: May Philly Fed Business Outlook
- 5/15 8:30 AM ET: Apr Core PPI MoM
- 5/15 8:30 AM ET: May Empire Manufacturing Survey
- 5/15 8:30 AM ET: Apr Retail Sales
- 5/15 10:00 AM ET: May NAHB Housing Market Index
- 5/16 10:00 AM ET: May P U. Mich. Sentiment and Inflation Expectation
- 5/16 4:00 PM ET: Mar Net TIC Flows
- 5/19 9:00 AM ET: May M Manheim Used Vehicle Index
- 5/22 8:30 AM ET: Apr Chicago Fed Nat Activity Index
- 5/22 9:45 AM ET: May P S&P Global Services PMI
- 5/22 9:45 AM ET: May P S&P Global Manufacturing PMI
- 5/22 10:00 AM ET: Apr Existing Home Sales
- 5/22 11:00 AM ET: May Kansas City Fed Manufacturing Survey
- 5/23 10:00 AM ET: Apr New Home Sales
- 5/27 8:30 AM ET: Apr P Durable Goods Orders MoM
- 5/27 9:00 AM ET: Mar S&P CoreLogic CS home price
- 5/27 10:00 AM ET: May Conference Board Consumer Confidence
- 5/27 10:30 AM ET: May Dallas Fed Manuf. Activity Survey
- 5/28 10:00 AM ET: May Richmond Fed Manufacturing Survey
- 5/28 2:00 PM ET: May FOMC Meeting Minutes
- 5/29 8:30 AM ET: 1Q S GDP QoQ
- 5/30 8:30 AM ET: Apr Core PCE Deflator MoM
- 5/30 10:00 AM ET: May F U. Mich. Sentiment and Inflation Expectation
4/1 9:45 AM ET: Mar F S&P Global Manufacturing PMITame4/1 10:00 AM ET: Mar ISM Manufacturing PMITame4/1 10:00 AM ET: Feb JOLTS Job OpeningsTame4/2 10:00 AM ET: Feb F Durable Goods Orders MoMTame4/3 8:30 AM ET: Feb Trade BalanceTame4/3 9:45 AM ET: Mar F S&P Global Services PMITame4/3 10:00 AM ET: Mar ISM Services PMITame4/4 8:30 AM ET: Mar Non-farm PayrollsHot4/7 9:00 AM ET: Mar F Manheim Used Vehicle IndexTame4/8 6:00 AM ET: Mar Small Business Optimism SurveyTame4/9 2:00 PM ET: Mar FOMC Meeting MinutesMixed4/10 8:30 AM ET: Mar Core CPI MoMTame4/11 8:30 AM ET: Mar Core PPI MoMTame4/11 10:00 AM ET: Apr P U. Mich. 1yr Inf ExpHot4/14 11:00 AM ET: Mar NYFed 1yr Inf ExpMixed4/15 8:30 AM ET: Apr Empire Manufacturing SurveyTame4/16 8:30 AM ET: Mar Retail SalesTame4/16 10:00 AM ET: Apr NAHB Housing Market IndexTame4/16 4:00 PM ET: Feb Net TIC FlowsTame4/17 8:30 AM ET: Apr Philly Fed Business OutlookTame4/17 9:00 AM ET: Apr M Manheim Used Vehicle IndexMixed4/23 9:45 AM ET: Apr P S&P Global Services PMITame4/23 9:45 AM ET: Apr P S&P Global Manufacturing PMITame4/23 10:00 AM ET: Mar New Home SalesTame4/23 2:00 PM ET: Apr Fed Releases Beige BookMixed4/24 8:30 AM ET: Mar P Durable Goods Orders MoMHot4/24 8:30 AM ET: Mar Chicago Fed Nat Activity IndexTame4/24 10:00 AM ET: Mar Existing Home SalesTame4/25 10:00 AM ET: Apr F U. Mich. 1yr Inf ExpMixed4/28 10:30 AM ET: Apr Dallas Fed Manuf. Activity SurveyTame4/29 9:00 AM ET: Feb S&P CS home price 20-City MoMTame4/29 10:00 AM ET: Apr Conference Board Consumer ConfidenceTame4/29 10:00 AM ET: Mar JOLTS Job OpeningsTame4/30 8:30 AM ET: 1Q A GDP QoQTame4/30 8:30 AM ET: 1Q ECI QoQTame4/30 10:00 AM ET: Mar Core PCE MoMTame
Economic Data Performance Tracker 2025:

Economic Data Performance Tracker 2024:

Economic Data Performance Tracker 2023:
