In a significant development, President Trump unveiled a trade agreement between the US and UK yesterday, indicating a potential easing of the ongoing global trade tensions. Anticipation is building regarding the forthcoming discussions between China and the US this weekend, which could yield further positive outcomes. However, the continuation of tariffs is contributing to a sense of caution within US equity markets, as indicated by an analysis of various equity sectors through the close of trading on May 8.
Recent data indicates a decline in US jobless claims last week, suggesting a robust labor market and a subdued risk of recession. Michael Pearce, deputy chief US economist at Oxford Economics, mentioned, “Last week’s spike in claims was effectively reversed in the week ending May 3, and current data supports the Federal Reserve’s view that employment conditions are stable.”
The leading cryptocurrency, bitcoin, has exhibited remarkable performance across global markets since President Trump declared “Liberation Day” on April 2, during which substantial tariffs on imports were introduced. Gold has also shown strong gains in parallel. Meanwhile, US Treasuries have experienced only modest increases, and US stocks have lingered slightly in negative territory since the significant trade developments emerged over a month ago, as indicated by ETF analyses through the close on May 7.
The US 2-year Treasury yield remains stable at 3.78% as the Federal Reserve maintains its target rate. This yield is currently trading at 55 basis points below the median 4.33% Fed funds rate, indicating market expectations of a potential rate cut. Fed Chairman Powell stated that due to the heightened uncertainty surrounding inflation and economic performance linked to tariffs, the bank does not feel an urgent need to adjust its policies while waiting for a clearer economic outlook.
Early predictions regarding US economic activity for the second quarter suggest a rebound after a mild contraction in GDP during the first quarter. However, it’s important to note that Q2 data is still limited, and there is significant uncertainty regarding the quarter’s progression as the impacts of tariffs begin to permeate the economy in the coming weeks.
The decline in US exports this year has affected nearly all American ports, according to trade analytics firm Vizion. The consultancy evaluated US export container bookings from the five weeks preceding the implementation of President Trump’s tariffs compared to the five weeks following. Kyle Henderson, CEO of Vizion, commented, “This decline is unprecedented since the supply chain disruptions of summer 2020. Current tariffs are driving up costs and causing small businesses to reconsider orders. Reliable products are now facing doubled expenses, leading importers to difficult choices.”
The year began with optimism as the market continued the rally from 2024. However, as the specifics of the significant shift in US tariff policies unfolded, market sentiment experienced a downturn throughout 2025. The current defensive outlook is underscored by analyses of ETF pairings tracking investor risk appetite through May 5.
The US services sector showed an uptick in growth in April, as revealed by the ISM Services PMI. The index increased to 51.6, indicating a modest growth rate, surpassing the neutral threshold of 50. However, the rise in the prices paid component to a 27-month high raises concerns about inflation.
President Trump reassured that he would not dismiss Federal Reserve Chairman Powell, yet the call for rate cuts persists. In the meantime, the market remains optimistic that the central bank will maintain its current target rate during the upcoming policy announcement.
In April, the US unemployment rate held steady at 4.2% with a seasonally adjusted increase of 177,000 in nonfarm payrolls. Seema Shah, chief global strategist at Principal Asset Management, remarked, “We can push back recession concerns for now. Job figures are strong, illustrating resilience in the economy prior to the tariff disruptions. While a slowdown is likely in the upcoming months, this underlying momentum gives the US a fair chance of avoiding a recession, provided it can retreat from the tariff brink in time.”
