Trump Says

By Crest Capital Advisors on May 26, 2025

Dow: (2.47%) to 41,603.07
S&P 500: (2.61%) to 5,802.82
Nasdaq: (2.47%) to 18,737.21
Russell 2000: (3.47%) to 2,043.05
Bitcoin: 108,920
10-Year Yield: 4.51%
Outperformers: No positive sectors for the week.
Underperformers: Energy (4.43%), Technology (3.46%), Real Estate (3.32%)

Major US equity indices were lower this week, trimming the prior week’s notable gains. The small-cap Russell 200 index dropped after six straight weekly gains. The S&P 500 slipped back into a YTD loss, though it is still up more than 16% from its April low.

The market opened the week processing last Friday’s downgrade of US government debt by Moody’s, citing the failure of successive administrations to address growing fiscal deficits and higher interest costs. However, investors seemed to largely shake off the event, likely because Moody’s was simply the last of the 3 major rating agencies to downgrade, and the US had been on watch since November 2023.

Deficits were also in the discussion mix around the House GOP’s version of Trump’s “big, beautiful bill,” which narrowly passed on Thursday and now heads to the Senate (where many of the same debates about spending cuts and tax benefits are likely to unfold).

Trade was not a big factor earlier in the week, but that topic stormed back into the narrative on Friday morning, with Trump posting that discussions with the EU were going nowhere and the bloc would see a 50% general tariff starting June 1st. Trump also threatened Apple with a 25% tariff on iPhones, saying on Truth Social unless iPhones that are sold in the US will be manufactured domestically, calling out India production specifically. Nevertheless, Treasury Secretary Bessent, in a likely effort to inject calm into the discussion, said he expects several large trade deals to be announced in the coming weeks, and that direct US-China talks will continue.

Either way, the tariff discussion came back to the forefront serving as inspiration for our meme of the week.

A Decade of Excellence

This week, we proudly recognize Amber Camargo for reaching an incredible milestone…her 10th anniversary with our firm! Over the years, she has been a cornerstone of our success, bringing unwavering dedication, insight, and professionalism to our team and clients alike. Her commitment to excellence and passion for financial solutions have made a lasting impact, and we are honored to have her as part of our family. Thank you, Amber, for a decade of outstanding contributions! We look forward to many more years of success together!

Rising Yields are a Global Phenomenon

The Republican sponsored tax bill passed the House of Representatives this week and the media is going crazy attributing the recent spike in the 30-year Treasury bond to “bond market vigilantes” expressing their dismay over the likelihood of ongoing budget deficits resulting from the cuts. It is most certainly true that yields on the 30-year government bond are now at an 18-month high (see first chart below), almost back to the highest of high levels we saw in 2023 when the Fed was aggressively hiking rates.

But, what is a bit murkier is the actual cause of rising yields. You see, the problem of rising yields on long-dated bonds has actually gone global…it’s happening nearly everywhere. Take a look at the charts below of the UK, Japan, Canada, and Denmark yields. We’re seeing breakouts to new highs in long-dated bonds across the board.

In our view, long-term bond yields are rising globally due to a combination of fiscal concerns, perceived inflationary pressures, and shifting investor sentiment. Governments are facing mounting deficits, leading to increased borrowing needs, while Central Banks are scaling back bond purchases, reducing demand. As a result, investors are demanding higher yields to compensate for the perceived risks associated with growing debt burdens and uncertain economic policies.

Why Inflation is Still Top of Mind for Consumers

The official inflation rates have fallen significantly since the peak in 2022, with the year-over-year headline rates now in the mid-to-high 2’s. This is practically all the way back to the Fed’s target of 2% and certainly well within what previous to the post-COVID spike was considered to be a ‘normal’ range. And yet, consumers are still feeling the inflationary pain. Why?

Well, the chart below answers that question. The average US consumer is still playing catch-up on earnings growth relative to mid-2020. In other words, wages have not kept pace and hence that ‘feeling’ we all have that prices are still too high. (Note: Remember when the Fed was concerned that wage growth is inflationary? Ridiculous.)

Q1 Earnings Season Update

With the first quarter earnings season nearly complete, earnings growth surprised to the upside, coming in at approximately 14%, well above the 8% expected at the start of the season. Revenue growth also exceeded expectations, coming in just under 5%. Despite concerns about tariffs during the quarter, corporate profits continued to advance. This marks the third time in the past four quarters that earnings have grown at a double-digit pace, suggesting that corporations remain in solid shape overall—even amid persistently low confidence levels.

Economic Funnies

Crazy Stat(s) of the Week

• Starting this week on May 20th through May 29th, every day will be the same forwards and backwards. A rare sequence called palindrome dates.

5/20/25

5/21/25

5/22/25

5/23/25

5/24/25

5/25/25

5/26/25

5/27/25

5/28/25

5/29/25

• The S&P 500 gapped lower every day this week, including 1% declines to start and end the week.
• According to the American Association of State and Provincial Lotteries, Americans spent $113.3 billion on lottery tickets in 2024. This is more than was spent on movies, books, concerts, and sports tickets…combined!

• Apple has bought back $693 billion in stock over the past 10 years, which is greater than the market cap of 488 companies in the S&P 500.

Quote of the Week

“Investing in the markets requires patience, discipline, and an ability to keep emotions in check.”

– Peter Lynch

Calendar of Events to Watch for the Week of May 26th

On the US Earnings Calendar next week, the main event will be AI market leader Nvidia reporting results after the close on Wednesday. We’d look for this report to have spillover effects on the broader tech ecosystem.

Turning to monetary policy, we note Fed officials continue to push the “patience” messaging. However, comments on Thursday of this week from Fed Governor Waller were in particular focus. Waller said if tariffs get down closer to 10% by sometime around July, the Fed is in a good position to move with rate cuts through the second half of the year.

On the US Economic calendar, the holiday-shortened week will primarily be focused on the Fed’s favored inflation indicator, the Personal Consumption Expenditure (PCE) report. On this front, we’re expecting another fairly benign reading indicating that inflation remains largely contained. Between now and then, we hope you enjoy the long weekend and have a safe Memorial Day. We honor those who sacrificed everything for this amazing land.

Monday 5/26 – US markets will be closed in observance of Memorial Day

Tuesday 5/27 – April Durable Goods is expected to show a sharp -8.1% contraction month-over-month from a 7.5% gain in the previous month. This is highly impacted by tariff related activity. The Ex-Transportation series is expected to be more benign at just 0.2% month-over-month. US Consumer Confidence for May is expected to be 89.5, up from 86.0 last month.

Wednesday 5/28 – The minutes from the latest FOMC meeting will be released with economists looking for clues as to when the Fed may resume cutting interest rates.  

Thursday 5/29 – The second preliminary reading of Q1 GDP is expected to be in line with the prior levels of 2.6% year-over-year. US Pending Home Sales for April are expected to decline by -1.0%. The Weekly Jobless Claims data will continue to get scrutiny but so far no signs of stress.

Friday 5/30 – The main event of the week will be the release of the Fed’s favored measure of inflation, the Personal Consumption Expenditure (PCE) for April. Economists are expecting a headline rate of 2.3%, in line with last month’s level. The Core (Ex-Food/Energy) is expected to remain slightly more elevated at 2.6% with a monthly growth rate of 0.12%.  

Source: MarketWatch / FactSet (May 2025)