Weekly Market Update

Weekly Market Review

Global Markets
• US stocks managed to eke out gains on Monday despite Moody's downgrade of the US credit rating from AAA to AA1.
• The Dow Jones Industrial Average (^DJI) edged up 0.3%, while the S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) also rose slightly.
• Investors digested developments in President Trump's tariff salvos, including warnings that countries will face Liberation Day hikes if they don't negotiate deals in good faith.

Economy
• The economy is showing signs of cooling down, with industrial production activity flatlining in April and manufacturing output decreasing 0.4%.
• Consumer spending remains positive, supported by healthy consumer and business balance sheets.
• Initial jobless claims fell to 229,000 during the week ending May 10, unchanged from the previous week.

Politics
• President Trump's tax bill continues to face challenges moving through the US House, with Republicans trying to appease all factions of their splintered caucus.
• The legislation could add trillions to the existing $36 trillion deficit, which has intensified attention on discussions around Trump's tax-and-spending bill.
• Moody's directly cited the proposal in downgrading the US credit rating.

Markets
• Stock prices have pulled back from recent rallies amid growing warnings that investor relief over a cooling in trade tensions and US inflation may be misplaced.
• The S&P 500 snapped its six-day run of gains, while bitcoin (BTC-USD) reached new record highs.
• Longer-dated bond yields continue to climb, putting pressure on equities.

Investment Outlook
• Despite the risks, the long-term outlook for the stock market remains favorable, bolstered by expectations for years of earnings growth.
• Demand for goods and services remains positive, supported by healthy consumer and business balance sheets.
• However, growth is cooling down, and investors should be cautious about the potential impact of Trump's tariff blitz on the economy.

Key Takeaways
• The market is closely watching developments in President Trump's tariff policy and its potential impact on the economy.
• The economy is showing signs of cooling down, with industrial production activity flatlining in April and manufacturing output decreasing 0.4%.
• Despite the risks, the long-term outlook for the stock market remains favorable.