MAY 2025 CLIENT LETTER

May 7, 2025

Dear Valued Investor,

The latest recovery is another reminder that periods of turmoil can often create opportunities. Although stocks may pull back after their strong rally since the April 8 lows — especially if trade deals and tariff reductions don’t materialize soon — the lesson is clear: in our view, staying the course during downturns is almost always the best strategy.

Several factors are at play in the market’s recent recovery:

  1. Optimism about trade and tariffs. The White House has signaled progress on deals with several countries, including India, South Korea, Japan, and the U.K. President Trump has also hinted at reductions in China’s tariffs, while Treasury Secretary Scott Bessent will meet with senior Chinese trade officials in Switzerland this week.
  2. Resilient economic fundamentals. The U.S. economy added 177,000 new jobs in April, keeping unemployment low at 4.2%. Consumer spending grew 1.8% in inflation-adjusted terms in the first quarter, while business investment surged over 20% annually — bright spots that were overshadowed by concerns about the 0.3% dip in gross domestic product (GDP) caused by surging pre-tariff imports. A rebound in second-quarter GDP should prevent consecutive quarters of contraction.
  3. Easing inflation delayed but still coming. While tariffs may slow further improvement, we and the markets expect inflation to resume its downward trend toward the Federal Reserve’s (Fed) 2% target by 2026. Falling oil prices and declining long-term Treasury yields since January are also helping.
  4. Strong corporate profits. S&P 500 firms are on track for over 13% first-quarter earnings growth, roughly double expectations when earnings season began. Leading technology companies have reaffirmed or increased capital spending plans despite trade uncertainty, committing to a more than 30% increase in 2025 over 2024, underpinned by confidence in the potential payoffs of artificial intelligence.

Looking ahead, stocks may need a bit of a breather after making up so much ground quickly. Stagflation risks cannot be dismissed as growth slows and tariffs loom. While the U.S. economy and corporate America remain in excellent shape, we suggest investors maintain exposure to equities and fixed income in line with long-term targets. Better entry points to add equities may present themselves with trade uncertainty still very high.

Despite periodic short-term disruptions, markets are inherently resilient. History shows they may recover regardless of the threat. Stocks tend to reward disciplined, long-term investors. Few exemplify this discipline better than Warren Buffett, who stepped down as CEO of Berkshire Hathaway (BRK/A) this week after 60 years in that seat (he remains Chairman). His track record — 16% annualized return for BRK/A since November 1987 compared to 10.9% for the S&P 500 — will be tough to beat. We wish him well in his “retirement” at the age of 94.

Thank you for your continued trust.

Sincerely,

Wayne Rigney

 

Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of May 7, 2025.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All index data from FactSet.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Past performance does not guarantee future results.

Asset allocation does not ensure a profit or protect against a loss.

This research material was prepared by LPL Financial, LLC.

 

Not Insured by FDIC/NCUA or Any Other Government Agency Not Bank/Credit Union Guaranteed Not Bank/Credit Union Deposits or Obligations May Lose Value

 

RES-0004067-0425 | For Public Use | Tracking #7356571 | #735672 (Exp. 05/2026)

/by