May 19, 2025
What You Need to Know Today:
Consumer sentiment drops again as inflation fear soar
Maybe Wall Street and the Federal Reserve are still cranking the numbers to see the effects of the Trump tariffs on U.S. inflation, but consumers have apparently already made up their minds. A big increase in expectations for future inflation was key in driving today’s drop in preliminary May Consumer Sentiment Index from the University of Michigan to 50.8 from 52.2 a month earlier. That reading was the second lowest on record and lower than all but one estimate in a Bloomberg survey of economists.
Saturday Night Quarterbacks says, For the week ahead expect…
Look for a flood of earnings news from retailers. After last week’s guidance from Walmart (WMT) that it would be raising prices because if the Trump tariffs, investors–and the Federal Reserve–will be waiting to see if retailers without Walmart’s pricing and logistics clout will paint an even more dire picture on price increases–and thus future inflation.
Moody’s downgrades U.S. credit rating–we’re no longer AAA anywhere
Yesterday, Friday, May 16, Moody’s downgraded the United States’ credit rating from the highest Aaa rating to one notch below at AA1. This downgrade means the United States no longer maintains a triple A rating from any of the three major credit rating companies. Standard & Poor’s downgraded the United States in 2011. Fitch Ratings issued its downgrade in 2023.
Trump will send tariff letters over next few weeks: what happened to those negotiations?
Remember all those tariff negotiations that were supposed to take place during the 90-day pause of the April 2 higher global tariffs Not going to happen in most cases.
Bill with Trump tax cuts fails in House Committee
Today, the GOP-controlled House Budget Committee voted to reject the Trump Administration’s Big Beautiful Bill, which includes President Donald Trump’s $4.5 billion tax cut. The committee voted 16–21 against advancing the bill, with five conservative Republicans joining all Democrats in opposition. These Republicans voted against the bill because it failed to cut enough from spending and would add more that $2.5 trillion to the Federal debt over the next 10-years. Republican supporters in swing districts, on the other hand, argued that deeper cuts to safety net programs such as Medicaid would send the party to defeat un the 2026 mid-term elections.
Consumer sentiment drops again as inflation fear soar
Maybe Wall Street and the Federal Reserve are still cranking the numbers to see the effects of the Trump tariffs on U.S. inflation, but consumers have apparently already made up their minds. A big increase in expectations for future inflation was key in driving today’s drop in preliminary May Consumer Sentiment Index from the University of Michigan to 50.8 from 52.2 a month earlier. That reading was the second lowest on record and lower than all but one estimate in a Bloomberg survey of economists.
Special Report: 10 Picks from the Rest of the World–today adding a sixth pick
Now you need to own more besides U.S. stocks. But what? With my answer, here’s my Special Report: 10 Picks from the Rest of the World
Live Market Report (20 minute delay)
Saturday Night Quarterbacks says, For the week ahead expect…
Look for a flood of earnings news from retailers. After last week’s guidance from Walmart (WMT) that it would be raising prices because if the Trump tariffs, investors–and the Federal Reserve–will be waiting to see if retailers without Walmart’s pricing and logistics clout will paint an even more dire picture on price increases–and thus future inflation.
Moody’s downgrades U.S. credit rating–we’re no longer AAA anywhere
Yesterday, Friday, May 16, Moody’s downgraded the United States’ credit rating from the highest Aaa rating to one notch below at AA1. This downgrade means the United States no longer maintains a triple A rating from any of the three major credit rating companies. Standard & Poor’s downgraded the United States in 2011. Fitch Ratings issued its downgrade in 2023.
Trump will send tariff letters over next few weeks: what happened to those negotiations?
Remember all those tariff negotiations that were supposed to take place during the 90-day pause of the April 2 higher global tariffs Not going to happen in most cases.
Bill with Trump tax cuts fails in House Committee
Today, the GOP-controlled House Budget Committee voted to reject the Trump Administration’s Big Beautiful Bill, which includes President Donald Trump’s $4.5 billion tax cut. The committee voted 16–21 against advancing the bill, with five conservative Republicans joining all Democrats in opposition. These Republicans voted against the bill because it failed to cut enough from spending and would add more that $2.5 trillion to the Federal debt over the next 10-years. Republican supporters in swing districts, on the other hand, argued that deeper cuts to safety net programs such as Medicaid would send the party to defeat un the 2026 mid-term elections.
Consumer sentiment drops again as inflation fear soar
Maybe Wall Street and the Federal Reserve are still cranking the numbers to see the effects of the Trump tariffs on U.S. inflation, but consumers have apparently already made up their minds. A big increase in expectations for future inflation was key in driving today’s drop in preliminary May Consumer Sentiment Index from the University of Michigan to 50.8 from 52.2 a month earlier. That reading was the second lowest on record and lower than all but one estimate in a Bloomberg survey of economists.
Putting my VIX volatility options trade back on tomorrow, Friday
The CBOE S&P 500 Volatility Index (VIX) dropped another 4.24% today to 17.84. I think, once again, the financial markets have become way too complacent about risk. And so it’s time to buy Call Options on the Vix “fear index,” betting that at least one of the many potential volatility events on the horizon puts some fear back into the markets.
Tariffs made us do it: Walmart says it will almost certainly raise prices; that’s really bad news for other retailers
Walmart warned Thursday that price increases look certain–possibly within weeks–even after President Donald Trump announced a deal to reduce tariffs on Chinese exports to “just” 30%.
“We’re positioned to manage the cost pressure from tariffs as well or better than anyone, but even at the reduced levels, the higher tariffs will result in higher prices,” Walmart chief executive Doug McMillon said
New downward pressure on the dollar
The dollar erased this week’s gains on speculation that the Trump Administration favors a weaker dollar and will make promises to let currencies appreciate part of any trade deal with the United States.
U.S. oil inventory levels rise again, but is worse still to come?
U.S. crude stockpiles rose by 3.45 million barrels, the biggest gain since March, the Energy Information Administration said Wednesday. And this comes before the latest round of production increases from OPEC Plus have kicked in. In April. OPEC and its allies added just 25,000 barrels a day of production, a fraction of the scheduled 138,000 barrels a day production increases. A further boost to production quotas is expected at OPEC’s June 1 meeting.
Please watch my new YouTube Video: Hot Money Moves NOW–the weak dollar
Today’s Hot Button Moves NOW video is: Dollar Down, Yen and Euro Up. Recently, the market has bounced back from the dip after April’s tariff announcements, but there’s something people might be overlooking: if the Fed cuts rates due to an economic slowdown, the dollar will likely weaken. That’s not all bad—it could mean cheaper U.S. exports and lower gas prices globally (tariffs permitting). But it’s surprising how few investors are factoring this in. A while back, I added the Invesco Japan Yen Currency Shares Trust (ETF) to my volatility portfolio, and it’s already up about 10% year-to-date as the yen strengthens against the dollar. Similarly, the Invesco CurrencyShares Euro Trust (FXE) has gained 9.38% this year. (All those performance figures are from before the China tariff deal. Since then the dolor was up on Monday then down on news that the U.S. had signaled to South Korea that it would like a weaker dollar.) Living in Venice, I’ve noticed the euro’s strength firsthand—great for investments, not so great for my daily espresso budget! If you’re looking for a relatively safe play in uncertain times, shifting some dollar-denominated assets into yen or euro ETFs could give you a solid 3-6% return while the dollar softens. The U.S. Dollar Index (DXY) was (before Monday) already down nearly 8%, so diversifying could be a smart move.
What we know about the effect of current tariffs on the economy: #2 From Wall Street
To generalize, reading the current tariff situation after the China tariff “deal,” Wall Street sees less chance of a recession but still forecasts weaker growth, and strategists have pared back their expectations for Federal Reserve interest rate cuts to two or maybe just one in 2025 with the first cut not coming until December.
What we know about the effect of current tariffs on the economy: #1 From the Yale Budget Lab
All estimates of the effect of the Trump tariffs and foreign retaliation are obviously shots at a moving target. But here’s how the Budget Lab at Yale sees the picture now. (This forecast includes all tariffs implemented in 2025 through May 12. It includes the effects of the lower rates with China, the deal with the UK, and the recently announced auto tariff rebate. The analyses assumes that the May 12 rates stay in effect indefinitely.)
Good CPI inflation news for April, but does it mean anything?
Consumer Price Index (CPI) inflation ticked up month to month in April from March. but the annual rate of inflation fell. The all-items CPI rose 0.2% in April. that reversed a slight decline in March. The annualized rate of inflation fell to 2.3%. The annual rate of headline inflation is the lowest since early 2021. Core inflation, which excludes food and energy, rose at an annual rate of 2.8%. That was the same annual rate as in March. The Federal Reserve watches core inflation, rather than all-items inflation.
Adding this international government bond ETF to Jubak Picks Portfolio
Buying the iShares International Treasury Bond ETF (IGOV) for my Jubak Picks Portfolio tomorrow, May 13. Let’s be clear here–with this ETF you’re giving up some current yield for safety. But with the strong possibility that in 2025 investing in safety can produce decent capital gains.
What’s this China-U.S. tariff deal mean?
The United states and China have agreed to pause higher tariffs for 90 days. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer said Monday, after weekend talks in Geneva with a Chinese delegation led by Vice Premier He Lifeng, that U.S. tariffs on Chinese goods would be reduced from 145% to 30%. Beijing said it would cut its blanket tariffs on American products from 125 to 10 percent. Both reductions will take effect on Wednesday. What’s it all mean?
Gold is probably at a temporary peak after Sunday news on China deal
With the news on Sunday from Treasury Secretary Scott Bessent that U.S. and China negotiators have reached a trade deal, I expect that we’ve seen a short-term peak in gold.
More evidence of slowing trade volumes across the Pacific
West Coast port officials reported Friday that no cargo vessels had departed from China bound for the two major ports in Southern California—Los Angeles and Long Beach—over the previous 12 hours, according to CNN. Just six days earlier, 41 ships had been scheduled to leave China for the San Pedro Bay port complex. On Friday morning, that number was zero.
Saturday Night Quarterback says, For the week ahead expect…
I expect inflation fears and hopes to move back to the top of the Wall Street agenda. The Bureau of Labor Statistics will release the Consumer Price Index inflation report for April on Tuesday, May 13 before the New York market opens. Economists surveyed by Bloomberg are projecting that core inflation–that is the rate of inflation excluding more volatile energy and food prices–rose 0.3% in April. In March, core consumer prices inched up just 0.1%.
What do you know–China is cheating on tariffs
China has offset plummeting shipments to the United States with a surge in sales to Southeast Asia. And where do you think those Chinese exports are headed–eventually? Why to the United States, of course. What this massive tariff workaround will do to expectations for a big increase in U.S. inflation is anyone’s guess. But I’d bet it takes much of the urgency for China out of reaching a quick deal with the United States in the trade talks that begin in Switzerland this weekend.
VIX drops back to 22.53–I’m looking to replay my January volatility trade
22.53. That was the close on the CBOE S&P 500 Volatility Index (VIX) today. It’s safe to say that stock market volatility is way down. Back on April 21, the “fear index” was at 34.21. On April 8, at the bottom of the turmoil that followed on the April 2 tariffs, the index hit 52.33. But even before that spike, fear had been climbing among investors to 27.86 on March 10 from the very complacent 16.43 on January 31. That was substantially below the 10-year average for the VIX at 18.66. So now the question is how low the VIX will go. And when will it be time to buy VIX Call Options again on a bet that volatility will return.
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