Circus Sideshow
By Crest Capital Advisors on June 9, 2025
Dow: 1.17% to 42,762.87
S&P 500: 1.50% to 6,000.36
Nasdaq: 2.18% to 19,529.95
Russell 2000: 3.19% to 2,132.25
Bitcoin: 104,800
10 Year Yield: 4.51%
Outperformers: Communication 3.19%, Technology 3.00%, Energy 2.17%
Underperformers: Consumer Staples (1.57%), Utilities (1.05%)
Stocks closed higher for a second-straight week. Believe it or not, but the S&P 500 finished this week +20% above the April 8th post-Liberation Day low on Friday, and is now just ~3% off the February record close. What a round trip. Big tech was mostly higher this week, leading the charge, though Tesla shares (14.7%) were a notable decliner. (More on this below)
Trade and tariffs remain the main story. President Trump and China’s Xi held a phone call Thursday, which ended with an agreement to a new round of trade talks as trade tensions linger. One key area of focus in the talks was rare earth magnets, where the US has complained China has not sped up export licenses fast enough, though China, perhaps in a show of good faith, later began issuing more export licenses for rare earths, including to the top three US automakers. Trump also announced Friday that Treasury Secretary Bessent, Commerce Secretary Lutnick, and USTR Greer will meet with Chinese negotiators in London on Monday for trade talks.
Turning to the economy, Friday’s Payrolls report showed headline payrolls better than expected, though the prior two months were revised down. The main emphasis is this report was deemed adequate, and also dispelled some mounting fears that job growth would come in worse than expected. Markets rallied on the news and generated the bulk of this week’s gains in the aftermath.
In politics, the reconciliation bill is the other big market focus. The bill is ultimately expected to pass, but there are some growing concerns that the Congressional GOP will not meet the target to have a bill for Trump to sign by July 4th. Debt and deficit concerns also remain a key overhang to reconciliation talks. And, the fallout between Elon Musk and Donald Trump took center stage on Thursday, adding some more uncertainty to the bill’s outlook given Musk’s criticism of the cost.
Some weeks, the narrative driving financial markets is very clear, and others, we struggle to find a common theme. Then there are weeks like this one, where everything seems to be overshadowed by one particular news event, no matter how trivial it is! Alas, we find ourselves (and our financial media) focused on that one particular news event, which is of course, the very public feud between President Trump and Elon Musk. Formerly best buddies, these two have now come out swinging at one another and as incredulous as it is, it has actually impacted financial markets. (Tesla for example declined in excess of -15% on Thursday as the feud erupted…and this in turn had a negative spillover effect into all of technology). If ever there was a reason to ignore the news and the subsequent market reaction, we’d argue this is it! But in the meantime, please enjoy our meme of the week, inspired by this week’s circus sideshow.
Tactical Update in Charts
After rallying significantly off the post-tariff April lows, the S&P 500 is now trending slightly sideways at elevated levels, burning off an overbought condition and potentially setting the stage for the next leg higher.
The move off the April low has been remarkably similar to the moves we saw in 2018, the last time we had tariff issues, a potentially slowing economy, and a President (the same one as today) and a Fed (the same one as today) that are at odds with one another in terms of interest rate policy and outlook.
The trend model utilized by our friends at Strategas Research Partners has gone from extreme negative to neutral, and as of Friday (with a new S&P 500 high)
The Nasdaq has led the S&P 500 since the bottom, and already flipped from negative to neutral to positive last week. Here’s the chart, and with Friday’s closing surge to end the week, the S&P 500 trend model has now formally flipped to positive as well.
And through it all, credit remains unbothered. The chart below shows credit spreads are back to the tighter levels (benign expectations for any credit related problems) we enjoyed prior to the tariff turmoil.
The Opposite of Stagflation…According to the Data
As the tariff policy was unveiled, the Fed, media analysts, and pundits voiced concerns about a potential resurgence of inflation, combined with sluggish (or even recessionary) growth, a troubling scenario known as stagflation. However, the reality appears to be unfolding in the opposite direction. At least according to the data we have today.
First, we take a look at what the inflation data is showing us, and here we see the Core PCE (The Fed’s favored measure of inflation) has broken lower to 4-year lows, and is likely pointing even lower in the months ahead.
Next, we turn to the Atlanta Fed GDP Now calculation for Q2 which is showing that economic growth is now breaking out to levels above what we saw all through 2024.
This condition of lower prices and higher economic activity is the exact opposite of stagflation.
Sentiment Check
Since plunging to an extremely low reading of 4.76% on April 8th, coinciding with the bottom in major stock indexes, the SentimenTrader Risk-On/Off Indicator, a composite of 21 diverse sentiment and breadth-based measures, has steadily climbed, signaling a broad recovery in investor appetite for risk.
Same As It Ever Was
The Mag 7 names (Nvidia, Microsoft, Amazon, Google, Meta, Apple, and Tesla) stepped up with nearly 27% earnings-per-share growth this quarter vs just 9.4% for the other 493 names in the S&P 500 index. There’s a reason they call these names “magnificent”. The chart below shows the recent quarterly performance of the Mag 7 (blue bars) v. the remaining 493 (orange bars) for the past few quarters, as well as what analysts expect for the next 4 quarters ahead.
Economic Funnies
Crazy Stat(s) of the Week
- According to a survey performed by BFM Business in France, 79% of French people think the lottery is less risky than the stock market. Yes, you read that right. Let us break this down for you. The lottery gives you a 1 in 139 million chance of winning. Meanwhile, French stocks have delivered an average annual return of 6.9% over the past 50 years. Yet people still think “scratching tickets” is safer than buying shares. There is a reason why US markets are more robust and consequential than any other, and this type of thinking is a big part of that.
- According to Yahoo Finance, this week’s very public Twitter/X spat between Elon Musk and Donald Trump cost Tesla more than $152 billion in market capitalization!!! If anything meets the definition of crazy, this is it!
Quote of the Week
“The key to making money in stocks is not to get scared out of them.”
– Peter Lynch
Editor’s Note: Never more relevant than what we just went through over the past few months.
Calendar of Events to Watch for the Week of June 9th
Moving forward from here, earnings will be largely inconsequential as almost the entirety of the S&P 500 has reported for Q1 at this point. Instead, markets will remain focused on important macro trends around trade and tariffs, “Fedspeak” (to glean information about when the Fed might actually cut again), and economic data on inflation (on deck again next week) that might inform on both of the aforementioned market concerns.
With respect to monetary policy, we expect a fair amount of Fed governor comments before we head into the following week’s blackout period (ahead of the June FOMC meeting on the 17th -18th). So far, all of the Fed officials continue to sing from the same hymnal as they call for “patience,” given ongoing uncertainty around trade tensions. Until we have clarity and actual final deals, they are likely to remain frozen in the headlights.
On the US Economic Calendar, as we noted, we get important data readings on inflation via the CPI and PPI reports on Wednesday and Thursday, respectively. No other economic reports will carry as much market weight as these reports, particularly leading into the Fed meeting later this month.
Monday 6/9 – No major US economic reports today. Looking overseas, China will be reporting Export/Import data for the month of May.
Tuesday 6/10 – The NFIB Small Business Sentiment Index for May will be out. Last month’s reading was 95.8.
Wednesday 6/11 – The May Consumer Price Index (CPI) is expected to post a 0.2% month-over-month increase (in-line with 0.2% prior) and a headline rate of 2.5% (up from 2.3% on base effects). The Core (ex-Food/Energy) is expected to post a 0.3% monthly increase (up from 0.2%) and a 2.9% yearly rate (up from 2.8% last month).
Thursday 6/12 – The May Producer Price Index (PPI) is expected to post a 0.25% month-over-month increase (up from a -0.5% deflationary print last month). The Core (ex-Food/Energy) is expected to post a 0.3% monthly increase (from -0.4% last month). The weekly jobless claims data will also be closely watched for signs of ongoing labor market deterioration.
Friday 6/13 – No major US economic reports due today. However, we will get the preliminary reading of the University of Michigan Consumer Sentiment Poll for June (where economists expect a reading of 50.7, down from 52.2). Nevertheless, as we’ve written in various past editions of the CMD, this particular poll has gotten so politically partisan, we fail to see the relevance of any conclusions presented from this report. That said, the headline results do still have some impact in the immediate trading aftermath as the algorithms trading on this news have yet to be de-programmed by their hedge fund masters.
Source: MarketWatch / FactSet (June 2025)
