Our commentary last quarter was understandably focused on tariff initiatives put forth by President Trump. While the stock market’s negative reaction to those announcements in early April became quickly ameliorated, we once again have new tariff announcements. Investors are becoming savvy to the lesser impact of these initiatives on corporate earnings and thus the stock market recovery has been historically swift.
The most important factors remain the following: 1) we are unlikely to have a recession this year, 2) corporate earnings are coming through better than expected, and 3) the Federal Reserve is likely to lower rates sometime in the second half of the year because inflation has been coming down and productivity has exceeded expectations.
The other positive development worth noting is that finally the stock market has broadened out as we had been expecting for over a year. Sectors such as Financials and Industrials are at new highs and small-cap stocks have begun to recover.
