Carnegie Investment Counsel Blog

Monthly Market Commentary: May 2025 (Clone)

Posted by Carnegie Investment Counsel on May 2, 2025 9:28:27 AM

What We’re Watching in May

As the first quarter of 2025 experienced relative calm in the financial markets, April surprised investors with sharp pullbacks, increased volatility, and rising investor worries. While market swings are nothing new, the reemergence of tariffs, one of the Trump administration’s policy tools, has added uncertainty in the minds of investors and business leaders. For many, this month felt less like a typical bump in the road and more like a sudden derailment.

At Carnegie, we see this moment as a valuable reminder that staying grounded in the face of short-term noise is critical to long-term investing success.


Take Advantage of Volatility

Much of April’s market volatility was driven by economic headlines, specifically by the administration’s aggressive push to reimpose and expand tariffs on key trade partners. The renewed tariff strategy, which largely targets China, Mexico, and Canada, but with ripple effects across Europe and smaller trading nations like Vietnam, has caused market concern.

Tariffs don’t just affect trade flows. Tariffs can cause inflationary pressure, disrupt supply chains, and make long-term corporate planning decisions difficult to make. However, this is not a new problem. It’s a new version of an old one, exactly what markets dislike most, uncertainty.

We are also watching the growing disconnect between the Trump administration and the Federal Reserve. For the first time in decades, we’re seeing a stark policy divergence between the White House actively intervening in trade and the Fed which is trying to stay the course on inflation and rates. The result adds an additional layer of complexity to an already challenged market environment.

We’ve said in the past that volatility isn’t the enemy, it’s part of the journey. From pandemic shocks to trade wars, from interest rate hikes to political infighting, markets always find a reason to react. What matters isn’t the news cycle, it’s how you respond.

Fear is Natural, but Not Always Rational

As volatility rose over the past month, we frequently took calls from clients asking the same question: “Am I going to be okay?” Fear is a natural response to the information people consume in the financial media, particularly when they closely monitor their investment account balances on a daily basis.

At the end of the day, the answer is a resounding ‘yes'. You will be okay, given you stay true to your investment strategy. The benefit of thoughtful portfolio construction is that it accounts for times like this. Many clients hold a year or more of cash or fixed income reserves, which means they aren’t forced to sell stocks in down markets. That buffer provides time and flexibility, reducing the pressure to make rash decisions.

As seen in the chart below, with the exception of the two longest recessions of 1973 and 2008, markets recovered almost fully by the time the recession ended, strengthening the argument that emotion-driven reactions during peak panic lead to worse outcomes for investors.

Navigating Corporate Earnings

We’re more than halfway through Q1 earnings season, and if there’s a theme, it’s uncertainty. Some companies are offering dual forecasts, while others are holding guidance steady but with heavy caveats.

Large financial institutions, such as JPMorgan and Goldman Sachs, have held up thanks to strong trading activity. However, this may be a year where earnings are a ‘throwaway’, with more attention now shifting toward expectations for 2026. In an environment shaped by tariffs and rate speculation, near-term guidance can only go so far.


The Fed’s May Meeting

The Federal Reserve is scheduled to meet in early May, and investors are focused on what the FOMC will do with interest rates. Despite the tariff-induced inflation risk, the market still expects the Fed to hold steady this month, with rate cuts likely deferred to June or later.

If you consider one of our favored indicators, the CME FedWatch, the forecast hasn’t wavered much. Even with the recent noise, inflation expectations remain the same. The 5-year forward inflation rate, a Fed indicator, continues to trend lower.

At the same time, the policy gap between fiscal stimulus and monetary restraint is widening, and that tension is likely to persist.

Conclusion: Revisiting the “Why”

April’s market turbulence offers investors a moment of pause, not panic. The markets will always cycle through phases of uncertainty. What allows investors to weather those phases is clarity: knowing why you’re invested the way you are and trusting in the discipline behind that strategy.

At Carnegie, we remain committed to helping you navigate short-term storms without losing sight of long-term goals. Whether it’s volatility, politics, or policy surprises, our approach remains grounded in research, discipline, and a deep understanding of your financial priorities.

Chart of the Month

For every single recession, the stock market tends to recover by the time the recession ends. About half the time the market is back above breakeven by the end of the recession.

 

Conclusion: Revisiting the “Why”

April’s market turbulence offers investors a moment of pause, not panic. The markets will always cycle through phases of uncertainty. What allows investors to weather those phases is clarity: knowing why you’re invested the way you are and trusting in the discipline behind that strategy.

At Carnegie, we remain committed to helping you navigate short-term storms without losing sight of long-term goals. Whether it’s volatility, politics, or policy surprises, our approach remains grounded in research, discipline, and a deep understanding of your financial priorities.

 

Carnegie in the Media

Halter: ‘Big Believer’ in JPMorgan (JPM), Bank Earnings Breakdown
Schwab Network | Greg Halter

Trump Wants RFK Jr. To 'Go Wild' On Health Care. What This Means For Biotech Stocks. 
Investor's Business Daily | Shams Afzal

The Impact of Tariffs on the Global Auto Industry
Bloomberg | Shams Afzal

 


Disclosures: For general informational purposes only. Opinions referenced are as of the date of the email and may be modified due to changes in the market or economic conditions and may not necessarily come to pass. Forward-looking statements cannot be guaranteed. Past performance is not a guarantee of future results. The information has been obtained from sources we believe to be reliable, but Carnegie has not independently verified the accuracy or authenticity of the information. The discussions, outlook, and viewpoints featured are not intended to be investment advice and do not consider specific investment objectives or risk tolerance you may have. All investments involve risks, including the loss of principal.

Reference to Indexes: An index is a group of specific securities (such as the S&P 500, Dow Jones Industrial Average, and Nasdaq composite), the performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Indexes are unmanaged portfolios and investors cannot invest directly in an index. Past performance is neither a guarantee nor indicative of future results.

Carnegie Investment Counsel (“Carnegie”) is a registered investment adviser under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply a certain level of skill or training. For a more detailed discussion about Carnegie’s investment advisory services and fees, please view our Form ADV and Form CRS by visiting:

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Topics: Market

Monthly Market Commentary: April 2025

Posted by Carnegie Investment Counsel on Apr 1, 2025 8:30:00 AM

What We're Watching in April 2025

 

Tariffs: A Familiar Headwind with New Implications

Tariffs are once again making headlines — and history offers important perspectives. In 2018, during the first Trump administration, when tariffs were first introduced on a wide scale, markets reacted with caution but quickly digested the implementation once the total amount was clearly defined. Today, a similar narrative is unfolding, though this time the effects are more pronounced — not because tariffs have been enacted, but because of the uncertainty on the final outcome this past month.

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Topics: Market

A Brief History of Tariffs in the US

Posted by Lynn Najman on Mar 25, 2025 9:32:09 AM

The current on-again/off-again conversation about tariffs on imported goods is not new. In fact, before the general income tax was passed in 1913, tariffs were one of the few ways our government had to raise money, often comprising up to 95% of federal revenue. To some extent, tariffs in the developing American economy were part of the rivalry between the agricultural-based economy of the South and the developing industrial-based economy of the North. Some historians have pointed to the Tariff of 1828 (called The Tariff of Abominations), meant to aid small Northern industry, as the starting point for talk of Southern secession, eventually leading up to the Civil War. 

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Topics: Market

Monthly Market Commentary: March 2025

Posted by Carnegie Investment Counsel on Mar 3, 2025 9:30:00 AM

One of the most anticipated aspects of President Trump’s proposed tax policies is curtailing taxes on Social Security earnings, tips, and overtime pay. The proposed budget makes no mention of these structural taxation changes for these income streams, and it remains to be seen if it is addressed in the upcoming negotiations related to the extension of the Tax Cuts & Jobs Act provisions.

President Trump’s tax plan proposes favoring specific forms of income. Initial projections from the Institute on Taxation and Economic Policy (ITEP) group show the upper two brackets of earners will benefit, as these households are more likely to take full advantage of the carve-outs. Meanwhile, lower- and moderate-income households may see little benefit due to existing exemptions and the progressive tax structure. While details remain subject to legislative negotiations, these potential changes will be closely watched to assess their long-term implications. Source: https://itep.org/a-distributional-analysis-of-donald-trumps-tax-plan-2024/ 

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Topics: Market

The Current Market Environment

Posted by Brent Luce on May 4, 2022 8:54:25 AM

READ: Stocks on Track for Worst Start Since 1942

The first quarter was unusual in that both stocks and bonds were down.  In fact, government bonds experienced their worst quarter in nearly forty years, so even the usual protection that bonds provide in turbulent times did not play out well this time around.  Starting in November, the markets have experienced draconian internal sector and style rotations as, or more extreme than anything I have seen in my 25-year career. Some indices experienced one of their worst starts to a year since the Great Depression, after already experiencing significant drawdowns in the months prior.  Long-duration stocks, which are those where expected earnings and dividends are further in the future – this includes forward looking growth and disruptive innovation stocks – have been strongly sold off.  As of this writing, the well-known ARK Innovation ETF, a proxy for the long-duration disruption innovation space, is down over 49% year-to-date after declining almost 25% in 2021.  

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Topics: Market

Video: Behind the Numbers, Demystifying Noise in the Market Place

Posted by Carnegie Investment Counsel on Aug 25, 2021 9:21:19 AM

Recently, Carnegie Investment Counsel Portfolio Manager/Regional Director Scott Inglis was a guest of Behind the Numbers, which is a podcast about the “real stories” behind business performance and valuation. Inglis talked with the host, valuation expert and bestselling author Dave Bookbinder. Scott provided detailed insights around demystifying noise in the market place”. Here’s an overview of the conversation.

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Topics: Financial Planning, Stocks, Market, Economy, Investment Management

The Paris Climate Accord – A Friend to American Business?

Posted by William Anderson on Jun 22, 2021 1:30:00 PM

The U.S. rejoined the 197-nation Paris Climate Accord. Under the accord, the U.S. has committed to reducing greenhouse gas emissions by 50% of 2003 levels. President Biden has also stated that his administration wishes to move the U.S. to net zero emissions by 2050.

There is a great deal of trepidation about the potential economic consequences surrounding this matter. The concern is that it will require a lowering of consumption in the U.S. and even our standard of life.

If these targets are not just posturing but serious goals, they may portend both large government spending and tax incentives. Rejoining the Paris Climate Accord may signify a historical capital spending boom by both government and private businesses.

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Topics: Market, Economy, ESG

Let’s Talk Inflation: Transitory or the Great Inflation 2.0?

Posted by Shams Afzal, AIF® on Jun 10, 2021 1:30:00 PM

Inflation is on the minds of many and there is no shortage of price increase anecdotes around the country. From commodities like iron ore and copper doubling in price, to paying MSRP for a year-old car, these observations of rising prices are coloring perceptions about general affordability, the dollar, the central bank and investments.

Whether we are experiencing inflation is not up for debate, however, the prospect of sustainable inflation is definitely debatable. Is it the ‘80s all over again? Can we objectively look at the pandemic-induced supply disruptions, a confluence of weather anomalies, lean manufacturing driven supply chain decisions and a Texas freeze, and call it a structural and sustainable inflation? Not really. At least, not yet.

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Topics: Stocks, Market, Economy, Interest Rates

What to Do in Times of Looming Inflation (Or Perceived Looming Inflation)

Posted by Greg Halter, CFA on Apr 27, 2021 1:30:00 PM

Are we headed into a time of inflation? Many people and economists are debating this issue right now. In the “real world,” we’ve seen inflation in interesting areas such as Pokémon and NBA Top Shots trading “cards,” which had seen a spike up in prices earlier in the year. Housing prices are certainly rising. Plus, inflation is finding its way into commodities such as food inputs like soybeans, corn and more. Certainly, gas prices are higher at the pump than a year ago. And does it mean inflation is coming because of crazy high auction prices for things such as Jack Dorsey selling his first tweet ever as an NFT (non fungible token) for over $2.9 million?

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Topics: Stocks, Market, Economy, Interest Rates

Third Quarter Commentary 2015

Posted by William Anderson on Oct 23, 2015 11:00:00 AM

The markets moved dramatically up and down in the third quarter, ending down.  The volatility and decline seems out of sync with the U.S. economy which has continued to show growth, albeit without much in the way of animal spirits.  The U.S. has a historically low unemployment rate, exhibits decent growth in consumer spending and shows improved housing prices and low inflation.  

But, investors do not like uncertainty.  A combination of factors and fears of the unknown appear to be at play.  It is noted that the most dangerous times for financial markets is when “stories” become broken.  A whole crop of stories broke down in the third quarter from “Invincible China” to “Energy Demand Always Growing Faster than Supplies.”   This in turn has resulted in multiple levels of uncertainty:

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Topics: Market

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