#TradeWarEases #USeconomy #Fed #TrumpTariffs
What's happening in the U.S. financial markets? Recently, it resembles an amusement ride: one moment it's thrilling with the successes of tech giants, especially in the world of artificial intelligence, the next it becomes unsettling with news of economic slowdown and murkiness in trade policy. Let's analyze key events and trends, relying on fresh data, to understand where one of the world's largest economies is heading and what investors should prepare for.
What do the numbers and facts say?
If we consolidate recent economic reports and market movements, several hotspots emerge:
Housing market: clouds are gathering. Rising mortgage rates hit wallets and dampen buying enthusiasm.
Stock market: not everything is straightforward. Technology, especially anything related to AI (hello, Nvidia!), is pulling the market up. But the overall economic picture and uncertainties regarding trade rules do not allow for relaxation.
U.S. economy: are turns decreasing? GDP has dropped, company profits too, and the number of unemployment claims is rising – it looks like the first alarms of cooling.
Trade policy: an eternal source of headaches. Legal disputes over tariffs provide a temporary respite, but clarity remains elusive.
What drives the markets? A flight analysis
Let's go through each point and see what forces are at play:
Housing market:
Main culprit: 30-year mortgage rates. They have risen to 6.89% (as of May 29, 2025), which is almost a four-month record.
What's happening: Expensive mortgages mean fewer buyers. Pending Home Sales collapsed by 6.3% in April 2025. Such a sharp drop hasn't been seen in a year. Experts like Lawrence Yun from NAR state plainly: until mortgages become cheaper, the market will not revive.
Conclusion: The housing market is very sensitive to the cost of money. No cheap credit – no excitement for homes.
Stock market:
What influences:
Reports and promises from tech giants (Nvidia is the star of the show).
Overall economic figures (GDP, corporate incomes).
Decisions regarding trade tariffs.
Overall investor sentiment: optimism or panic.
What's happening: Nvidia's shares soared by 4-6% following strong reports and rosy AI prospects. This lifted the S&P 500 (up 0.4-0.8%) and Nasdaq (up 0.7-1.4%). However, the Dow Jones was stagnant. The news that the court found Trump's tariffs illegal initially pleased, but then everyone remembered that the administration could appeal.
Conclusion: The stock market is trying to straddle two chairs: on one side – faith in technology, on the other – economic problems. Successes in certain sectors, like AI, might push indices up, but the overall weakness of the economy and political games create nervousness.
Slowdown of the American economy:
What influences:
Consumers have started to spend less (spending growth has slowed to 1.2%).
The government has also tightened its belt (spending fell by 4.6%).
Company profits have dipped (down 3.6% in the first quarter of 2025 – the worst result since the end of 2020).
Unemployment is rising (jobless claims spiked to a monthly peak).
What's happening: The U.S. GDP in the first quarter of 2025 decreased by 0.2%. Yes, this is slightly better than expected (-0.3%), but it's the first decline in three years. Companies were actively stocking up on imported goods (a 42.6% increase!) in anticipation of new tariffs, which hit the trade balance. The drop in profits and rising unemployment are clear signals that the economy is cooling. The yield on 10-year U.S. government bonds has started to decline (below 4.5%) as investors expect the Fed to start cutting rates. The dollar (DXY index) has also given up ground, falling to 99.4.
Conclusion: It seems that the American economy is entering a phase of mild turbulence, possibly even a slight recession. How serious and long-lasting it will be depends on many factors, including how consumers behave and what decisions the authorities make.
Trade policy:
What influences:
Presidential decrees (impose tariffs, lift tariffs).
Court rulings.
What's happening: The court ruling against Trump's tariffs caused a brief sigh of relief in the futures market. But the White House immediately stated that it would continue the fight. So the uncertainty hasn't gone away.
Conclusion: Trade policy is like a powder keg. Courts can temporarily ease the situation, but the general tendency to protect domestic markets and the risk of new trade wars create a lot of problems for businesses.
In brief, the main points
Housing market: Expensive mortgages are the main brake. Without a reduction, buyers will not return.
Stock market: Technologies (especially AI) are pulling up, but economic problems and trade wars are pulling down. It will be shaky.
U.S. economy: Clearly slowing down. GDP is falling, profits too, and unemployment is rising.
Trade policy: Still a minefield, despite some court victories.
Putting the puzzle together: what does all this mean?
So, what do we have at the end of May 2025? The U.S. economy right now is a mystery with many unknowns.
On the one hand, the tech sector, led by Nvidia and the widespread obsession with artificial intelligence, is showing miraculous growth and infecting investors with optimism. Nvidia's stocks are soaring, and its CEO confidently predicts "exponential growth" for the AI market. This is pushing up the S&P 500 and Nasdaq indices. Even some industrial giants, like Boeing, are managing to grow, reaching 15-month highs.
But a closer look reveals that the picture is not so rosy. The U.S. economy in the first quarter of 2025 fell by 0.2%. This is the first quarterly decline in three years. Company profits also fell – by 3.6%, the strongest decline since late 2020. The labor market is sending alarming signals: the number of unemployment claims is rising, and those who have lost their jobs are taking longer than usual to find new ones. It seems that companies are finding it harder to hire, while the unemployed are struggling to find a place in the sun.
The housing market is also experiencing tough times. Rates on 30-year mortgages have jumped nearly to 6.89% – close to a four-month peak. As a result, the number of prospective homebuyers has noticeably decreased. Experts unanimously say: until mortgages become more affordable, the market won't revive.
The situation with trade policy is also adding fuel to the fire. The U.S. Court of International Trade's decision to overturn Trump's tariffs sparked only a brief euphoria. The presidential administration plans to challenge this decision, meaning uncertainty and the risk of trade wars remain with us. This nervousness is putting pressure on the dollar, which has already weakened amid bad economic news.
It seems that U.S. markets have been in a zone of heightened turbulence for some time, especially considering the policy since Trump took office. On the one hand, AI opens up fantastic prospects; on the other hand, the specter of recession and ongoing political instability keep investors on edge. As they say, forewarned is forearmed. Or, if you want a bit of humor, fasten your seatbelts; the ride promises to be unforgettable!
