Calmer Markets, Inconclusive Economic Data, and "At Least" 50 Pounds

May 11, 2025

NO CHANGE: To no one's surprise, the U.S. Federal Reserve Bank met last week and announced no change to its key interest rate. Said the Fed:

"[R]ecent indicators suggest that economic activity has continued to expand at a solid pace."

"Uncertainty about the economic outlook has increased further."

"[T]he risks of higher unemployment and higher inflation have risen."

"[T]he committee decided to maintain the target range for the federal funds rate at 4.25% to 4.50%."

STOCKS TAKE A BREATHER: U.S. stocks were slightly negative in a calmer week. The Trump administration announced a trade deal with the United Kingdom and some progress with China talks. The trade deal was seen as a positive, but also an indication as to how long these deals are going to take. Also affecting the markets have been first quarter corporate earnings reports. 450 of the S&P 500 companies have now reported, and 76% have beaten estimates. It looks like overall earnings in the first quarter will be up by about 14%. The overall outlook by economists right now is that corporate earnings for the year will come out at about 9%, which is what the average annual growth rate has been over the last ten years.

LONGER-TERM PERFORMANCE: Below are the annualized three-year and five-year numbers for these same indices.

RAIL CARLOADS INCREASING: One sign of economic health is the amount of U.S. rail volumes. According to the Association of American Railroads, U.S. railroads originated 1.13 million total carloads in April. That is a 6.2% increase from April of a year ago, the largest such increase in 16 months and the third largest in the last four years. According to the AAR press release:

"Recent shifts in U.S. policies on trade and immigration have introduced volatility in financial markets and heightened uncertainty for firms. The ultimate outcomes and impacts of these policy changes remain unclear. Nevertheless, U.S. rail volumes have thus far remained stable..."

INITIAL UNEMPLOYMENT CLAIMS CONTINUE TO SHOW NO REAL TREND: For the week that ended May 3, there were 228,000 initial claims for unemployment, a decrease from the prior week. The 4-week moving average moved up by 1,000.

U.S. TRADE DEFICIT WIDENS: To beat potential tariffs, businesses have been rushing to import products before they take effect. As a result, the U.S. trade deficit widened in March as imports surged by $17.8 billion. The trade deficit was $140.5 billion in March, a record. Imports subtract from GDP, so this was a major reason why the U.S. GDP came in negative for the first quarter. China fell from our largest trade partner to third (behind Mexico and Canada) in March.

ODE TO PALAU: I lived in Palau for two years, and I have a special affection for the place and its people. One of my former students (I taught high school there) recently told me that I should post more about Palau because I might influence people to visit, and they want more tourism! For those who don't know about Palau, it is seven degrees north of the Equator and about 500 miles east of the southernmost point of the Philippines. I believe it is the most beautiful place on the planet. It is a group of nine inhabited islands almost completely encircled by coral reefs. It was the site of a major World War II battle (and remnants of that time can still be found). It has superior scuba diving (2nd best according to scubatravel.com and bluewaterdivetravel.com, 3rd best in the world according to Professional Ass'n of Diving Instructors, 4th best according to localadventurer.com). It has a lake where you can swim with non-stinging jellyfish.

It's history is ancient, dating back, most believe, for a few thousand years. Palau has a rich history of culture and myths being passed down using detailed, wood-carved story boards (I have a couple!). One of those storyboards was recently turned into a statue which you can see below. This is in Ngiwal State on the island of Babeldaob. Also pictured below is a picture my former student just sent of the pier in Melekeok state. I spent time in Melekeok when I lived there, and subsequently (and more recently) visited. These piers have to go out far enough so that when the tide is high, boats can navigate and dock as the coral reefs keep the water shallow for a long distance.

GRANDPARENTS' DAY: Friday was grandparents' day at Judah (grandson) and Lydia's (granddaughter) elementary school. It was a very well done affair, and I was thrilled to be there. After a musical presentation, we got to spend time in each of their classrooms. I sat on the floor in Lydia's class and played Uno with my wife, Lydia and one of her classmates. When we were done, I asked the two girls to each grab one of my hands and pull me up. Lydia said, "we can't do that; you must weigh at least 50 pounds!" (She's not wrong.)

PROFESSIONAL GOLF: My sons and I spent all day Saturday at the Philadelphia Cricket Club watching the Truist Championship. Below I shot a picture of Rory McIlroy (2025 Masters Champion) approaching a green, and the other picture is yours truly at the 18th as Shane Lowry, the leader at the time, walked up to the green to finish the last hole of the day. It was a beautiful, sunny day, and a lot of fun.

Have a great week!

Our purpose is to honor God by helping our clients see the objective, find the path, and navigate past the obstacles to a more prosperous future.

Douglas R. MacGray, J.D., C.F.P. ®

President

Stonecrop Wealth Advisors, LLC

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(610) 628 4545

dmacgray@stonecropadvisors.com

"That's another thing about my father. He made me very conscious of the fact I wasn't very good and I had to prove to him that I was good. And that hung with me, and I always wanted to play golf with him and show him. He said Never, Never tell anyone how good you are. Show them!" Arnold Palmer

"If anyone thinks they are something when they are not, the deceive themselves. Each one should test their own actions. Then they can take pride in themselves alone, without comparing themselves to someone else, for each one should carry their own load." Galatians 6:3-5 (NIV).

SOURCES:

NO CHANGE: https://www.federalreserve.gov/newsevents/pressreleases/monetary20250507a.htm

STOCKS TAKE A BREATHER: https://myweeklystock.substack.com/p/weekly-market-recap-may-5-9-s-and?utm_campaign=email-half-post&r=s86er&utm_source=substack&utm_medium=email AND https://www.wsj.com/finance/stocks/stocks-get-a-break-from-trade-chaos-5e6583b8?mod=stocks_news_article_pos3

ODE TO PALAU: https://blog.padi.com/the-10-best-dive-sites-in-the-world/ AND https://localadventurer.com/best-dive-sites-in-the-world/ AND https://www.scubatravel.co.uk/topdives.html AND https://www.bluewaterdivetravel.com/article/best-scuba-diving-world AND https://palauconsulate.be/index.php/en/about-palau/history-of-palau

RAIL CARLOADS INCREASING: https://www.aar.org/data-center/

INITIAL UNEMPLOYMENT CLAIMS CONTINUE TO SHOW NO REAL TREND: https://www.dol.gov/ui/data.pdf

U.S. TRADE DEFICIT WIDENS: https://www.ftportfolios.com/retail/blogs/economics/index.aspx

(c) 2025 Anno Domini, Stonecrop Wealth Advisors, LLC, All Rights Reserved

Investment advisory services offered through Stonecrop Wealth Advisors, LLC, a Registered Investment Advisor with the U.S. Securities and Exchange Commission.

SDG

*S&P 500: This is a measure of the performance of the 500 largest companies in the United States, and it a common index to track the performance of U.S. equity markets, especially the large cap markets.

*MSCI All Country World Index X US: This is a broad measure of the performance of worldwide equity markets excluding the United States.

*Bloomberg U.S. Aggregate: This is a measure of the U.S. bond markets.