Daily Newsletter 5/28/25
Big picture:
The market appears to have discounted President Trump’s tariff threats and seems willing to absorb a 10% increase, which is perceived more as a strategy to boost federal revenues—potentially to support a tax cut—rather than a genuine effort to address trade imbalances.
While Trump publicly emphasized the goal of "fairness in trade" and reducing deficits, he also highlighted the revenue-raising potential of these tariffs, which could be used to support other policy goals such as tax cuts. Right now, the market appears to be aligned with his perspective.
While it’s technically “doable” to implement and absorb a 10% tariff increase, the real-world consequences—market instability, economic drag, and international pushback—make it a risky and potentially costly strategy over the longer term.
We see a potential fiscal risk here. If things don’t go as planned, there may not be sufficient fiscal capacity to stave off a recession. As always, when making forecasts, we aim to balance optimism with a healthy dose of realism.
Hardly anyone these days believes a few tweets alone could trigger a recession. The market has moved beyond headline noise and is focusing on deeper economic signals.
We’ve typically viewed sweeping tariff threats as little more than rhetoric—aside from those aimed at China—but we believe a broad 10% tariff would be enough to slow the economy and potentially set the stage for a future growth recession. The recession risk isn’t exactly flying off the shelves—if there’s a discount, we sure haven’t spotted it yet!
Yesterday, the 30-year U.S. Treasury bond saw its yield drop sharply, marking its largest single-day decline since March. The yield fell back below the psychologically important 5% level, settling just under 4.98%. It was like a sudden calm in the storm, sparked by global bond moves and strong demand in a big Treasury auction. But don’t get too comfy; the bond market’s rollercoaster ride isn’t over yet!
NVIDIA’s first quarter earnings will be released today after the market closes. This is a highly anticipated report that could have a major impact on tech stocks and the broader market.
NVIDIA’s earnings are a big deal because the company is the poster child for AI and chip innovation. A blowout report can supercharge tech stocks and lift the whole market, while a miss could send shockwaves through Wall Street.
NVIDIA’s earnings aren’t just a tech stock event—they’re a sneak peek into the next chapter of global trade. With China still a massive but increasingly tricky market, all eyes are on how NVIDIA navigates regulatory roadblocks and fierce local rivals. This time, what the company says about the road ahead could matter even more than last quarter’s headline numbers. For anyone watching the intersection of Wall Street and world trade, NVIDIA’s guidance is the real story to watch.
Which Consumer Pulse Should You Trust?
Conference Board confidence rebounded sharply from a significant low.
Consumer sentiment took an unexpected turn this month: the Conference Board’s Consumer Confidence Index surged to 98, up from 85.7 in April, marking its first increase since November.
With the next Michigan reading set for release this Friday, it’s worth considering which survey offers a more accurate read on the economy.
It’s crucial to keep in mind that these surveys aren’t carbon copies—they each capture consumer sentiment through their own unique lens.
The Conference Board survey casts a wider net, capturing a broad cross-section of consumers and zeroing in on current and future business conditions along with the state of the job market.
In contrast, the Michigan survey takes a more personal approach, homing in on household finances and consumers’ perceptions of buying conditions—offering a closer look at the economic realities people feel in their wallets.
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Tactical Porfolio
Market momentum remains strong, and we believe markets are overlooking the risks of a downturn or recession—a misstep, in our view.