Jamie McGeever
Orlando, Florida (Reuters) - Trading Day
Understand the power of driving global markets
Jamie McGeever, Marketing Columnist
If anyone wants a snapshot of the current U.S. economy and policy makers, they obtained Friday through the University of Michigan’s latest survey on consumer sentiment and inflation expectations.
The results are eye-catching: Consumer sentiment expectations are now at the lowest since 1980, with one year's inflation expectations being the highest since 1981, more than 6%.
Sentiment surveys are just “soft” data, and there is a lot of debate whether they will translate into “hard” activity data (such as retail and recruitment). Fed Chairman Jerome Powell said earlier this month that the link between the two has been "weak" in recent years, after he had previously downplayed data on U-Mich inflation expectations.
But the direction of travel is becoming increasingly difficult to ignore. President Donald Trump's trade war shocked consumers, fearing tariffs would raise prices and force them to reduce spending. If this soft data filters it into hard data, the economy may be under control of “stagnation” later this year.
This has raised questions, and after the U.S.-China trade armistice, it swept suddenly optimism in the financial market. It's hard to believe that it's been less than a week since the two largest economies in the world agreed to reduce reciprocity tariffs and keep them for 90 days.
Given that the damage from tariffs has not been felt and the uncertainty still pending, economists have improved their growth forecasts for alternatives and the scale of cross-financial markets in financial markets is remarkable.
But the market put all of this aside and ended an amazing week. The S&P 500 and the Nasdaq rose to 5% and 7%, respectively, the highest in two months, with the Nasdaq rising 30% since April 7. The Dow Jones Index's rebound means it has made up for its "Erection Day" losses and is now flat.
Other markets have also moved a lot. Germany's Dax set a record record and grew 30% from its April low, with the MSCI World Index rising 17 of the last 19 meetings, while safe gold fell 4%, the steepest weekly loss of the year.
The revenue season in the United States and Europe is coming to an end, although some big companies have triggered guidance or issued profit warnings due to tariff uncertainty, results and broad prospects.
Therefore, new growth optimism seems to be partly behind the rebound in bond yields. The Fed has lowered expectations and forecasts for further China stimulus and has cut bond yields in the two countries and beyond.
But U.S. fiscal concerns are also brewing, with Republicans rejecting President Donald Trump’s tax on Friday because it is not far enough in cutting spending. Watch this space.
Emphasizing how difficult it is to make economic forecasts during these highly uncertain times, this week brought some big data surprises – unexpectedly, strong growth in the first quarter of the UK GDP, weaker Japan’s GDP, and a sharp decline in U.S. producer prices since 2009.
You won't bet on similar surprises next week.
I would love to hear from you so please contact me in my comments. You can also follow me on @reutersjamie and @reutersjamie.bsky.social.
Major market transfers this week
*Nasdaq rose 7%, one of its most excellent recycling weeks. The biggest tech wave - Circular 'Mag 7' ETF rally almost 10%. *Gold fell 4%, its worst week since November. *The U.S. dollar index rose 0.8%, its fourth straight week since February.
Weekly Picture
I wrote earlier this week that the “Global South” could benefit if the era of “American Distinguishedism” and the end of the world economic order over the past few decades.
The Global South (formerly China) bears all investment risks associated with emerging markets, but has attractive demographics, strong growth rates, and is rich in natural resources. It is much lower than its weight in financial markets, so should investors increase their exposure?
A chart that surfaced this week shows that the ball is already rolling in stocks, at least. More importantly, the motivation behind it also looks very strong. Has the paradigm shifted?
Here are some of the best things I read this week:
1. The world economy now. May 2025. Putting Trump's trade table in its place - Adam Tooze 2. American exceptionalism meets its manufacturer-Barryeichengreen 3.
Can the market be transferred on Monday?
*China's fixed asset investment, industrial production, retail, housing prices, foreign direct investment (April) * Several Fed officials speak at various events, including: Chicago Fed President Ostan Goulsby, New York Federal Government Federal Government President John Williams, Atlanta Fed President Rafael Postic and Dallasf President Lori Lori Logan
The opinions expressed are the opinions of the author. They did not reflect the views of Reuters News, which is committed to integrity, independence and freedom from prejudice under the principle of trust.
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(Written by Jamie McGeever; Edited)