The Week in Charts (5/6/25)

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The most important charts and themes in markets and investing…

1) Like the Tariffs Never Happened

The stock market is behaving as if the tariffs never happened, with the S&P 500 now above the “Liberation Day” announcement on April 2. The index has advanced 18% from the April lows, illustrating once again that the biggest rallies tend to occur after the biggest short-term declines.

The inverse can be said of Volatility, the most mean-reverting series in markets. After briefly crossing above 60 on April 7, the $VIX has moved down with incredible speed, closing below 23 last week.

The nearly 50% decline in the $VIX over the past 4 weeks is the 2nd biggest 4-week decline in history.

So are we out of the woods when it comes to the tariffs?

With no definitive resolution in place with any U.S. trading partner, it would hard to argue that with any confidence. But for now the markets seem to be saying that a series of deals will soon be reached and that those deals be favorable for all parties involved.

If that doesn’t turn out to be the case, we should expect renewed volatility ahead.

2) Positive Earnings With a Tariff Divide

With 55% of companies reported, S&P 500 1st quarter operating earnings are up 9% over the prior year, the 9th consecutive quarter of positive YoY growth.

Trailing 12-Month Earnings are on pace to hit another record high, up 10.5% over the past year.

Profit margins expanded to 12.3%, their highest level since Q4 2021.

While earnings overall were positive in Q1, the market seems to be dividing stocks on the basis of their anticipated tariff impact.

On the one side are companies like Netflix, a streaming media business viewed to be inconsequentially impacted by any tariffs.

Netflix rocketed to at all-time highs after earnings and is up 30% on the year. Its net income over the past 12 months hit $9.27 billion, a 44% increase over the prior year.

Similarly, Microsoft’s stock surged higher after reporting record net income of $96.6 billion over the last 12 months, a 12% YoY increase. Its software business is viewed as largely insulated from tariffs.

On the flip side are companies like Tesla, Apple, and Amazon, whose businesses would be much more impacted from any tariffs and whose share prices are all trailing the S&P 500 year-to-date.

Tesla’s revenue fell 9% over the last year, the biggest YoY decline in sales since 2012. And Tesla’s Net Income fell 71% over the past year to $409 million, the first sub-$1 billion quarter for Tesla’s bottom line in 4 years.

3) A Technical Recession?

As widely expected, real GDP in the US fell during the first quarter, with an annualized contraction of -0.3%.

Why did real output decline?

Due almost entirely to the enormous decline in net exports (-4.8%), with companies pulling forward their international purchases in advance of the expected tariffs. The Federal Government also a negative detractor (-0.3%), presumably due to the DOGE cuts.

While the financial markets are not currently behaving as if there will be typical recession in the US (with rising unemployment/declines in consumer spending), a technical recession (2 consecutive quarters of negative GDP growth) is certainly a possibility given the tariff impact. Betters on Polymarket are currently assigning a 57% probability of that happening at some point in 2025.

4) Positive Jobs Report to Keep the Fed on Hold

177,000 US jobs were added in April, well above expectations for 130,000 new jobs. This was the 52nd consecutive month of jobs growth in the US, the 2nd longest streak in history.

Here’s a breakdown of US job creation over the last 3 months…

The US Unemployment Rate held steady at 4.2% April and remains well below the historical average of 5.7%.

The better-than-expected jobs report solidified the market’s expectations for tomorrow’s FOMC meeting, with a 97% probability of the Fed remaining on hold for at least another month.

5) The Labor Market Is Cooling

While the April payroll report exceeded expectations, long-term trends continue to point to a cooling of the labor market:

• Total jobs in the US increased 1.2% over the last year, the slowest growth rate since March 2021 and below the historical average of 2%.

• There are now 110k more Job Openings than Unemployment Persons in the US. That’s the smallest differential since April 2021, down from a peak of over 6 million in March 2022.

• US employers have announced 602,493 job cuts so far this year, the highest year-to-date total since 2020 (Covid Recession) and before that 2009 (Global Financial Crisis). Of those, 282,227 cuts (47%) have come from the Federal Government (DOGE).

6) Will More Supply Unfreeze the Housing Market?

The frozen US housing market continues, with Existing Home Sales languishing near their lowest levels over the past 25 years. The 6% drop in March home sales was the largest monthly decline since 2022.

The biggest constraint continues to be affordability, with the median housing payment needed to afford the median priced home nearly doubling over the past five years.

What needs to happen to unfreeze the housing market?

More supply and lower prices.

On the supply front, active listings of new homes are increasing at the fastest pace we’ve seen in years, up 13.7% YoY. The “lock-in effect” seems to be abating as many homeowners looking to move are growing tired of waiting for mortgage rates to come down.

And while still higher than a year ago, US home price increases are now decelerating at a rapid clip, showing a 2% increase over the prior year. If supply continues to increase at the current rate, this could translate into YoY price declines by the summer.

7) A Few Interesting Stats…

a) Incredible: Amazon’s AWS revenue over the last 12 months ($112 billion) was higher than the revenue of 468 companies in the S&P 500.

b) 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.

c) The US Bond Market has now been in a drawdown for 57 months, by far the longest in history.

d) The combined revenue of the Big 4 US tech companies hit a record $1.68 trillion over last 12 months. That’s larger than the GDP of all but 15 countries.

• Amazon: $650 billion
• Apple: $400 billion
• Google: $360 billion
• Microsoft: $270 billion

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Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. Read our full disclosures here.

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