Let's Make A Deal
US stocks closed near the flatline on Friday as investors looked ahead to high-stakes trade negotiations between the US and China in Geneva this weekend.
The S&P 500 edged lower by 0.1%, the Dow Jones fell 119 points, while the Nasdaq 100 finished mostly flat.
Adding to the cautious mood, President Trump floated the idea of reducing tariffs on Chinese imports to 80% from the current 145%, while claiming that “many trade deals” are underway.
On the earnings front, Pinterest jumped 4.8% on strong ad revenue forecasts, while Expedia slid 7.3% after missing revenue expectations, and Affirm sank 14.5% on weak fourth-quarter guidance.
The mixed corporate results underscored broader investor wariness amid trade headwinds.
Passive investing requires optimism - a belief that, despite turbulence, the journey yields rewards. Since 1970, stocks have delivered the strongest returns, outpacing other assets.
Over the past 56 years, inflation-adjusted (inflation erodes purchasing power, making it critical to invest ahead of it) annualised returns tell the story:
stocks +6.5%,
Treasury bonds +2.1%,
gold +4.1%,
U.S. dollar -4.1%.
Oil Prices Hit New Lows
West Texas Intermediate (WTI) crude oil fell to its lowest level since before Russia’s 2022 Ukraine invasion. Basic supply-demand dynamics are at play: OPEC recently boosted supply to discipline non-compliant members. Lower oil prices (-52% since Q2 2022, -24% since President Trump’s inauguration) offer a disinflationary counterweight to tariff-driven price pressures.
AI Fuels Energy Demand
Mega-cap tech giants (Google, Microsoft, Meta) raised their AI capital spending plans in Q1 2025 earnings, signalling unwavering confidence in AI’s potential. Company leaders highlighted AI-driven cost savings and productivity gains, with applications like re-shoring manufacturing on the horizon. Former Google CEO Eric Schmidt, testifying before Congress on April 9, 2025 (link to hearing), called AI’s impact “under-hyped,” spotlighting its massive energy needs.
This AI-driven energy demand is sparking opportunities in renewable and non-renewable sources, particularly natural gas. After plunging -82% from 2022 to 2024, natural gas prices are rebounding, fuelled by AI data centres, electric vehicles, and manufacturing growth.
Fed Holds Steady, Sentiment Stays Cautious
The Federal Reserve left rates unchanged, as expected. Chair Jerome Powell noted tariffs could drive both inflation and unemployment higher - a delicate balance. Yet, investor sentiment remains bearish: the AAII survey shows over 50% bearish responses for 11 straight weeks, a record surpassing the 1990’s 7-week streak. Stocks, however, are climbing this “wall of worry,” rewarding those who stay the course.
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