Executive Summary
Last week, the markets closed on a cautious note, with both stocks and bonds fluctuating amid anticipation of renewed trade negotiations between the world’s two largest economies. Investors showed restraint, avoiding riskier positioning amid speculation that, while the upcoming discussions between Chinese and American officials might mark a diplomatic thaw, a meaningful agreement will likely require several rounds of dialogue. Midweek, markets received a temporary boost—stocks, Treasuries, and the dollar all rose—after Federal Reserve Chair Jerome Powell reassured that the U.S. economy remains resilient and emphasized the central bank’s independence from political pressure, despite President Donald Trump’s aggressive trade stance.
From a fundamental perspective, we are completing first-quarter earnings season, where ~90% of S&P 500 Index companies have already reported. Earnings results have largely been in line with expectations. Forward guidance from U.S. companies, however, reflects heightened uncertainty. Many businesses have so far refrained from issuing negative earnings per share guidance, and mentions of recession during earnings calls have climbed sharply since last quarter. Mentions of layoffs, however, haven’t moved materially higher.
On Monday, May 12th, equity markets rallied under the temporary 90-day truce; the U.S. will cut extra tariffs the U.S. imposed on Chinese imports last month from 145% to 30% for the next three months, the two sides said, while Chinese duties on U.S. imports will fall to 10% from 125%. The front-end U.S. Treasury yields spiked on the belief that tariff relief would spur growth and that Fed rate cut hopes would dissipate. The temporary pause did little to address the underlying differences that led to the dispute, including the U.S. trade deficit with China and U.S. President Trump’s demand for more action from Beijing to combat the U.S. fentanyl crisis.
Equities
The S&P 500 returned -0.4% as markets marked time in anticipation of trade talks with China over the weekend. The FOMC meeting turned into a non-event, with the Fed holding rates steady as anticipated and Chair Powell reiterating the Fed’s policy stance of “patience.” Industrials (+1.1%) and consumer discretionary (+0.8%) were the best performing sectors in the S&P500; healthcare (-4.2%) and communication services (-2.4%) were the laggards. EAFE markets returned -0.1%, with gains in Japan (+0.9%) dragged down by Australia (-1.5%) and Europe (-0.4%). EM markets returned +0.5%, with India weighing on returns due to military actions with Pakistan.
From a valuation perspective, only U.S. large caps trade above +1 standard deviation based on historical forward P/E ratios with the S&P 500 at +1.5. The NASDAQ is at +0.7. For the next 12 months, EPS growth for S&P 500 is expected to be 7.4% (vs. 6.9% annualized over the last 20 years). For the next 12 months, EPS growth for NASDAQ is expected to be 14.1% (vs. 10.7% annualized over the last 20 years). Equities across market caps in the U.S. and in non-U.S. developed and emerging markets trade at or above their 20-year averages based on forward P/E ratios.
Fixed Income
Investment grade fixed income sectors had mixed returns as yields rose across the curve. Municipals returned +0.2%, U.S. AGG returned -0.2%, and US IG returned -0.1%. HY bond returned +0.2% as spreads compressed 9bps while bank loans returned +0.4%. EM debt returned +0.6% as the U.S. dollar rose 0.3%.
Rates
Rates rose across the curve as the Fed held interest rates and traders dialed back slightly bets on rate cuts. The recession-watch 3M-10Y spread widened 7bps and has tipped back to positive at +5. The 2Y-10Y spread was unchanged at +49. Rates rose in other developed markets as well. The BTP-Bund spread is at 1.05%. 5-year breakeven inflation expectations rose 8bps to 2.40% (vs. low of 1.88% on Sept 10); 10-year breakeven inflation expectations rose 4bps to 2.31% (vs. recent low of 2.03% on Sept 10); the 10Y real yield rose 2bps to 2.06%. The market now expects two cuts in 2025 vs the Fed’s guidance of two cuts. At year-end 2025, the market expects the Fed Funds rate to be 3.75% vs. the Fed’s guidance of 3.75%-4.00%.
Currencies/Commodities
The dollar index rose 0.3%. The commodities complex rose 2.2%, while energy prices rose 4.3% for the week. Brent prices rose 4.3% to $64/bbl. US natural gas prices rose 4.5%, while European gas rose 3.7%.
Market monitors
Volatility fell for equities and for bonds (VIX = 22, MOVE = 100); the 10-year average for each is VIX=18, MOVE = 78. Market sentiment (at midweek) improved slightly from -38 to -22.
Weekly Commentary
Investment Commentary – May 12, 2025
Stuart Katz
Executive Summary
Last week, the markets closed on a cautious note, with both stocks and bonds fluctuating amid anticipation of renewed trade negotiations between the world’s two largest economies. Investors showed restraint, avoiding riskier positioning amid speculation that, while the upcoming discussions between Chinese and American officials might mark a diplomatic thaw, a meaningful agreement will likely require several rounds of dialogue. Midweek, markets received a temporary boost—stocks, Treasuries, and the dollar all rose—after Federal Reserve Chair Jerome Powell reassured that the U.S. economy remains resilient and emphasized the central bank’s independence from political pressure, despite President Donald Trump’s aggressive trade stance.
From a fundamental perspective, we are completing first-quarter earnings season, where ~90% of S&P 500 Index companies have already reported. Earnings results have largely been in line with expectations. Forward guidance from U.S. companies, however, reflects heightened uncertainty. Many businesses have so far refrained from issuing negative earnings per share guidance, and mentions of recession during earnings calls have climbed sharply since last quarter. Mentions of layoffs, however, haven’t moved materially higher.
On Monday, May 12th, equity markets rallied under the temporary 90-day truce; the U.S. will cut extra tariffs the U.S. imposed on Chinese imports last month from 145% to 30% for the next three months, the two sides said, while Chinese duties on U.S. imports will fall to 10% from 125%. The front-end U.S. Treasury yields spiked on the belief that tariff relief would spur growth and that Fed rate cut hopes would dissipate. The temporary pause did little to address the underlying differences that led to the dispute, including the U.S. trade deficit with China and U.S. President Trump’s demand for more action from Beijing to combat the U.S. fentanyl crisis.
Equities
The S&P 500 returned -0.4% as markets marked time in anticipation of trade talks with China over the weekend. The FOMC meeting turned into a non-event, with the Fed holding rates steady as anticipated and Chair Powell reiterating the Fed’s policy stance of “patience.” Industrials (+1.1%) and consumer discretionary (+0.8%) were the best performing sectors in the S&P500; healthcare (-4.2%) and communication services (-2.4%) were the laggards. EAFE markets returned -0.1%, with gains in Japan (+0.9%) dragged down by Australia (-1.5%) and Europe (-0.4%). EM markets returned +0.5%, with India weighing on returns due to military actions with Pakistan.
From a valuation perspective, only U.S. large caps trade above +1 standard deviation based on historical forward P/E ratios with the S&P 500 at +1.5. The NASDAQ is at +0.7. For the next 12 months, EPS growth for S&P 500 is expected to be 7.4% (vs. 6.9% annualized over the last 20 years). For the next 12 months, EPS growth for NASDAQ is expected to be 14.1% (vs. 10.7% annualized over the last 20 years). Equities across market caps in the U.S. and in non-U.S. developed and emerging markets trade at or above their 20-year averages based on forward P/E ratios.
Fixed Income
Investment grade fixed income sectors had mixed returns as yields rose across the curve. Municipals returned +0.2%, U.S. AGG returned -0.2%, and US IG returned -0.1%. HY bond returned +0.2% as spreads compressed 9bps while bank loans returned +0.4%. EM debt returned +0.6% as the U.S. dollar rose 0.3%.
Rates
Rates rose across the curve as the Fed held interest rates and traders dialed back slightly bets on rate cuts. The recession-watch 3M-10Y spread widened 7bps and has tipped back to positive at +5. The 2Y-10Y spread was unchanged at +49. Rates rose in other developed markets as well. The BTP-Bund spread is at 1.05%. 5-year breakeven inflation expectations rose 8bps to 2.40% (vs. low of 1.88% on Sept 10); 10-year breakeven inflation expectations rose 4bps to 2.31% (vs. recent low of 2.03% on Sept 10); the 10Y real yield rose 2bps to 2.06%. The market now expects two cuts in 2025 vs the Fed’s guidance of two cuts. At year-end 2025, the market expects the Fed Funds rate to be 3.75% vs. the Fed’s guidance of 3.75%-4.00%.
Currencies/Commodities
The dollar index rose 0.3%. The commodities complex rose 2.2%, while energy prices rose 4.3% for the week. Brent prices rose 4.3% to $64/bbl. US natural gas prices rose 4.5%, while European gas rose 3.7%.
Market monitors
Volatility fell for equities and for bonds (VIX = 22, MOVE = 100); the 10-year average for each is VIX=18, MOVE = 78. Market sentiment (at midweek) improved slightly from -38 to -22.
Disclosure and Source
Investment Commentary Sources: Bloomberg. Investment advisory services offered through Robertson Stephens Wealth Management, LLC (“Robertson Stephens”), an SEC-registered investment advisor. Registration does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. This material is for general informational purposes only and should not be construed as investment, tax or legal advice. It does not constitute a recommendation or offer to buy or sell any security, has not been tailored to the needs of any specific investor, and should not provide the basis for any investment decision. Please consult with your Advisor prior to making any Investment decisions. The information contained herein was carefully compiled from sources believed to be reliable, but Robertson Stephens cannot guarantee its accuracy or completeness. Information, views and opinions are current as of the date of this presentation, are based on the information available at the time, and are subject to change based on market and other conditions. Robertson Stephens assumes no duty to update this information. Unless otherwise noted, any individual opinions presented are those of the author and not necessarily those of Robertson Stephens. Indices are unmanaged and reflect the reinvestment of all income or dividends but do not reflect the deduction of any fees or expenses which would reduce returns. Past performance does not guarantee future results. Forward-looking performance targets or estimates are not guaranteed and may not be achieved. Investing entails risks, including possible loss of principal. Alternative investments are only available to qualified investors and are not suitable for all investors. Alternative investments include risks such as illiquidity, long time horizons, reduced transparency, and significant loss of principal. This material is an investment advisory publication intended for investment advisory clients and prospective clients only. Robertson Stephens only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of Robertson Stephens’ current written disclosure brochure filed with the SEC which discusses, among other things, Robertson Stephens’ business practices, services and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov. © 2025 Robertson Stephens Wealth Management, LLC. All rights reserved. Robertson Stephens is a registered trademark of Robertson Stephens Wealth Management, LLC in the United States and elsewhere.
Talk To Us