Stocks Soar, Consumer Sentiment Slumps, Green Thumb

May 18, 2025

INFLATION DATA MOVES IN THE RIGHT DIRECTION: The Consumer Price Index (CPI) increased by 0.2% in April. Over the past twelve months, the inflation rate has been 2.3%, a slight decrease from last month when it was 2.4%. The 2.3% rate is the lowest the annual CPI has been since February 2021. The so called "core" CPI that excludes food and energy rose 0.2% in April, and has risen by 2.8% over the last twelve months, the same as it was last month.

MARKETS CLIMB HIGHER: U.S. stocks experienced a very positive week amidst optimism about international trade. The de-escalation of U.S./China trade sent stocks soaring on Monday to start the week. Thereafter, President Trump's deal-focused trip to the Middle east pushed stocks higher, sending the S&P 500 to positive, year-to-date territory. Tech stocks rallied (Nvidia was up 16% for the week) which caused the NASDAQ to rise by over 7% for the week. Better-than-expected inflation data (see above) pushed markets higher as well. I think it is safe to look at your 401(k) balances again.

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

U.S. HOUSING STARTS RISE, BUT NOT IN A GREAT PLACE: U.S. housing starts (meaning when the building of a new house begins) were up in April, which sounds good. However, they were up modestly after a steep drop in March. Also, the modest increase was entirely due to a 10.7% jump in multi-unit home building, a volatile category. Single-family home starts declined by 2.1% in April to a nine-month low. For the past year, single-family starts are down 12%. There is now more single-family home inventory than there was in 2009. Home prices are high with relatively high mortgage rates. Tariffs are causing uncertainty when it comes to costs. Despite these numbers, the amount of new homes being built each year since 2009 have not kept up with the annual need of new homes, and thus long-term demand should continue to be healthy.

DREARY CONSUMERS: According to the University of Michigan survey, consumers feel worse in May about the economy than they did in April due to the tariffs and concerns about higher prices. The index in May was down to 50.8 from 52.2 in April. This is the second lowest reading on this index. The lowest ever was 50.0 in June of 2022. This is the fifth straight month of declines in this index. Respondents to the survey expect prices to rise by 7.3% over the next year (that expectation was 6.5% in April).

U.S. RETAIL SALES UP IN APRIL: Retail sales rose by 0.1% in April compared to the prior month. Sales were up 5.2% compared to April of last year.

U.S. INDUSTRIAL PRODUCTION UNCHANGED IN APRIL: U.S. industrial production (manufacturing, mining, and utilities) was unchanged in April.

GOLDMAN SACHS RATE CUT PREDICTIONS: According to Goldman Sachs, the Federal Reserve will hold off on any rate cuts until December, and then begin a process of 0.25% cuts every other month for a bit. Goldman Sachs believes the Fed will target getting the Fed Funds rate to 3.5%-3.75% and leave it there. Because of the U.S./China trade deal, Goldman lowered its recession prediction from 45% to 35%.

GREEN THUMB: Several months ago, a dear friend of the family gave both my daughter and my wife Deb plants as a sympathy gift due to the passing of my mother in law. It was actually a little stonecrop plant, which is very appropriate for the MacGray family. My wife is not the greatest with proper care of plants, and she tried very hard to keep this one alive. You should not over water a stonecrop, so she watered it about once every two weeks. Last week she asked my daughter, "How is your stonecrop doing that we got from Sammy? Mine looks great!" Molly's response: "Mom, those plants are fake...they're plastic." And Molly was right. And it still looks 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

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dmacgray@stonecropadvisors.com

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"Buy truth, and do not sell it; buy wisdom, instruction, and understanding." Proverbs 23:23 (ESV)

SOURCES:

INFLATION DATA MOVES IN THE RIGHT DIRECTION: https://www.bls.gov/news.release/cpi.nr0.htm

MARKETS CLIMB HIGHER: https://www.wsj.com/finance/stocks/trade-progress-sparks-bullish-week-for-wall-street-c47798f3?mod=stocks_news_article_pos4

U.S. INDUSTRIAL PRODUCTION UNCHANGED IN APRIL: https://www.federalreserve.gov/releases/g17/Current/default.htm

U.S. RETAIL SALES UP IN APRIL: https://www.census.gov/retail/sales.html

GOLDMAN SACHS RATE CUT PREDICTIONS: https://www.gspublishing.com/content/research/en/reports/2025/05/12/b2086cbc-d5ce-4676-828e-5c547cfa9bb7.html

U.S. HOUSING STARTS RISE, BUT NOT IN A GREAT PLACE: https://www.ftportfolios.com/retail/blogs/economics/index.aspx

DREARY CONSUMERS: https://www.wsj.com/economy/consumers/early-read-on-consumer-sentiment-falls-to-second-lowest-on-record-8a5e995a?mod=economy_lead_story&mod=article_inline

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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.