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Mixed Signals, Climbing Stocks, and Piano Prodigies

  • Writer: Doug MacGray
    Doug MacGray
  • May 5
  • 4 min read

May 4, 2025


U.S. ECONOMY CONTRACTED IN THE FIRST QUARTER: In the first quarter of 2025, the U.S. economy contracted at a rate of -0.3%. The last time we experienced a contraction was 2022. Personal spending rose in the first quarter, but government spending fell. The biggest driver of the contraction was trade. If net exports decrease, it affects GDP, and net exports were way down in the first quarter as companies rushed to import goods ahead of potential tariffs. Net exports subtracted nearly 5% from the U.S. GDP in the first quarter. That is the biggest drag trade has been on GDP in any quarter since 1947.


APRIL JOBS REPORT SURPRISES TO THE UPSIDE: In April, the U.S. economy added 177,000 new jobs. Bloomberg conducted a survey of economists prior to this report, and the most optimistic projections were not this high, so this was an upside surprise. The unemployment rate remained the same at 4.2%.



TECH STOCKS MOSTLY SURPRISE TO THE UPSIDE: The Magnificent Seven had a mostly positive week as first quarter earnings reports rolled in. Alphabet (Google), Meta, Microsoft, Apple and Amazon all exceeded expectations.


STOCKS CLIMB AGAIN IN A MIXED SIGNALS ECONOMY: Stocks experienced another week of gains due largely to the positive jobs report and signs of the beginning of a potential thaw in China/US trade. Late in the week, it was reported that China was seeking ways to address President Trump's demands regarding its role in the Fentanyl trade. Earlier in the week, China finally admitted that it was seeking to hold talks to end the trade dispute with the U.S. The S&P 500 closed higher on Friday for the ninth trading day in a row. From the GDP report early in the week to the labor reports later in the week, and several other reports in between, we are getting mixed signals about where this economy is going, but investors clearly thought the recent market decline was too much and stock prices have climbed back.



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



THE PCE PRICE INDEX: The Personal Consumption Expenditures Price index is closely followed by the Fed as its key measure of inflation in the U.S. economy. In March, the PCE price index decreased by 0.1%, and for the year the increase is 2.3%, down from 2.7% in February. The "core" PCE Price index (which excludes food and energy) increased by 0.1%, and for the year is up 2.6%. It was up 3.0% in February.


PERSONAL INCOME: In March, personal income in the U.S. rose by 0.5%. In January and February, personal income rose at similar rates, but the data was strongly affected by government factors (Social Security increase in January, Affordable Care Act adjustment in February). March's gain was entirely based on growth in private sector wages and salaries.


MANUFACTURING INDEX DECREASES IN APRIL: The ISM Manufacturing Index declined to 48.7 from 49.0 in April. Any measurement below 50 means contraction. This index was showing contraction every month during all of 2023 and 2024. April data reflects tariff uncertainties as orders are being delayed, causing hiring to slow and production to slow.


A DIFFERENT WAY TO CELEBRATE A WEDDING: Earlier this year, my wife and I went to a wedding of the son of good friends. Several couples with whom we have been friends for many years attended. It was a wonderful wedding. The reception was in a well-appointed but relatively compact room, and so it was loud. The DJ started playing songs, and the dancing began. At one point, one of the friends who was sitting at my table, I'll call him 'Mel,' excused himself, and I saw him walk to an exit. I was suspicious because he took his jacket. About an hour later, some of us decided to leave, including Mel's wife, who didn't know where Mel had gone. Some one said we needed to get a picture of all the couples before we left, and so we rounded everyone up, except Mel. Where was Mel? Mel's wife had a hunch and went out to her car. Mel was sleeping.


GRANDCHILD PIANO RECITAL SEASON!: They did great!



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

Direct | Cell | Fax

(610) 628 4545



"Too many people spend money they haven’t earned, to buy things they don’t want, to impress people that they don’t like." Will Rogers


"For the love of money is a root of all kinds of evil." I Timothy 6:10


SOURCES:

APRIL JOBS REPORT SURPRISES TO THE UPSIDE: https://www.bls.gov/news.release/empsit.nr0.htm AND 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.

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