Market Recap - Week of May 12 through May 16, 2025
- Gordon Achtermann, CFP®, CSRIC®, MBA
- May 19
- 3 min read
The S&P 500 index rose 5.3% this week in a broad climb that pushed the market benchmark back into positive territory for the year.
The market benchmark ended Friday's session at 5,958.38 and is now up 7% for the month and 1.3% for 2025.
The week started with a relief rally as the Trump administration unveiled a trade deal with China just days after announcing another such deal with the UK. The deal between the US and China calls for a 90-day suspension of reciprocal duties on each other's goods. The two sides had been in a trade war since President Donald Trump's announcement of sweeping new tariffs early last month.
On Friday, Trump said the US will unilaterally set tariffs for many other countries soon.
"We will be telling people what they will be paying to do business in the United States," he said.
The overall sentiment throughout the week was that the agreement would significantly lower the risks of a recession.
Meanwhile, a softer-than-expected CPI update provided potentially positive signals regarding the fight against inflation, further adding to the cautiously bullish sentiment.
A weak consumer sentiment index report on Friday ultimately failed to derail the week’s rally.
US Treasury yields rose early in the week following the US-China meeting, but fell later in the week on new data showing wholesale prices declined last month. Similarly, oil prices rose early in the week as recession fears cooled, but pulled back in the latter half of the week on news of a possible US-Iran nuclear deal.
Gold cooled off this week, falling 3.9% as investors shifted their focus to equities and other risk assets, while crypto held its big push higher from the previous week.
Last Week
· Core CPI rose 0.2% m/m
· Retail sales rose 0.1% m/m
· Housing starts increased 1.6% m/m
S&P 500 Sector and Stylebox Returns
Thought of the week
Last week, investors received data offering a first read on whether tariffs are starting to push prices higher. At first glance, they don’t seem to be, with headline CPI rising just 0.2% m/m (month over month)—as a surprisingly soft outcome given the inflationary nature of tariffs.
The softness, however, was largely driven by cooling services inflation, which accounts for most of the CPI basket. Goods, which are subject to tariffs, make up only a fifth. Core goods prices rose 0.2% m/m—again below expectations, but enough to turn the y/y (year over year) reading positive for the first time since Dec. 2023. Digging deeper, some tariff-induced price pressures emerged, though unevenly. While some import-heavy categories like audio import-heavy categories like audio equipment (8.8%) and auto parts (2.2%) saw sharp m/m gains, others, such as autos and apparel, showed surprising weakness.
Two factors help explain this uneven pass-through. First, many businesses appear to have built up inventory ahead of tariffs. As shown in the chart, categories like home furnishings, chemicals, and autos saw inventory growth in March well above 12-month averages, providing a buffer that has delayed price hikes. Second, producers are absorbing some costs. The Producer Price Index fell 0.5% m/m in April—the largest drop in five years—suggesting that despite higher input costs from tariffs, producers are holding back on price hikes.
Looking ahead, inventories will eventually run down. If tariffs persist, even at reduced levels, and goods inflation could rise into the summer. As a sooner-than-expected fiscal boost also presents an upside risk. All of this should keep the Fed patient. Meanwhile, international stocks continue to hold appeal, extending their lead over U.S. equities, where valuations once again appear stretched.
Source: JP Morgan
Up Next
Economic data will include April's leading economic indicators, existing home sales, and new home sales.
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All the Best,
Gordon Achtermann, CFP®
703-573-7325
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