5/13/25 Charts & Ideas: What Markets Are Telling Us

05/14/2025 | Unsubscribe

Good Morning!

Here are some important charts and ideas capturing the latest trends in US markets to help you understand what is happening from multiple different perspectives:

🔍 Tariff Cuts: Symbolic, Not Structural

• 📉 Minimal Impact Expected:
  Goldman sees effective tariff rate dropping <2 percentage points — modest relief vs current burden.

• 📊 Tariffs Still Elevated:
  Levels remain higher than 2025 expectations and historically broad in coverage.

• 🌐 Macro Effects Are Limited:
  Change is more diplomatic than economic — won’t shift inflation or trade trajectory.

💼 What This Could Mean for You

• 📦 Supply Chains Still Strained:
  China-exposed sectors (electronics, retail, machinery) get little cost relief.

• 💵 Margins Stay Pressured:
  Most firms already passed on costs — tariff cuts won’t reverse that.

• 📉 Rethink “Tariff Relief” Trades:
  US-China exposed names and Chinese ADRs may see limited upside follow-through.

🔁 Alternative Perspectives to Consider

• 🟢 Step Toward De-escalation:
  Even symbolic moves may ease tensions or reopen dialogues.

• 🟠 Political Reversal Risk:
  Tariff rhetoric may intensify if permanent deal not in place.

• 🔴 Slow Normalization Likely:
  Deglobalization, national security, and IP concerns mean tariffs may persist longer than markets hope.

📊 Labor Market Tension: Wage Growth Stalls Despite Low Unemployment

🔍 What the Chart Shows

• Dark Blue: % of workers with zero wage change (13.4% — highest since COVID rebound)

• Light Blue: Headline unemployment (~4%)

📈 Key Observations

• 📉 Hidden Slack: Wage freezes rising despite low unemployment — signals weak labor demand.

• 📊 Historic Pattern: Flat wages = early sign of bargaining power loss, soft income momentum.

• 🧮 Misleading Metrics: Unemployment may look strong, but wage stagnation = underlying stress.

💼 What This Could Mean for You

• 🧊 Pay Freezes Over Pay Cuts: A subtle shift toward employer caution — tightening without layoffs (yet).

• 🕵️‍♂️ Layoffs May Follow: Wage stagnation often precedes job cuts, especially if revenue softens.

• 🧮 Rethink Labor Strength: Don’t rely on unemployment alone — watch wage growth as a health gauge.

🔁 Alternative Views to Consider

• 🟢 Structural Shift?: Post-COVID job rebalancing may explain wage freezes — not pure weakness.

• 🟠 Inflation Normalization Impact: Raises may be paused, not abandoned.

• 🔴 Consumer Risk Ahead: If wages stay flat, spending and GDP may slow by late 2025.

📉 S&P 500 Corrections: Diverging Paths Based on Recession Risk

🔍 What the Chart Shows

• Median 10% correction paths since 1950, comparing:

  • 🟦 No Recession (N=23): Strong recovery over 12 months

  • 🟥 Recession (N=12): Prolonged weakness or further declines

  • 🟧 Current Cycle: Started sharply, now tracking non-recession path

• X-axis: Months post-peak

• Y-axis: % drawdown from peak

💼 What This Could Mean for You

• ✅ Stay Invested if No Recession:
  Historically, non-recession corrections rebound fully within 12 months.

• 🔄 Don’t Confuse Volatility with Crisis:
  Many 10% drops are market resets, not economic breakdowns.

• 📈 Patience is a Strategy:
  Long-term holders in non-recession drawdowns typically earn positive returns.

🔁 Alternative Views to Weigh

• ⚠️ Recession Still Possible:
  Weak earnings, job losses, or macro deterioration could shift the path to prolonged pain.

• 💸 Liquidity & Margins Matter:
  Recovery needs credit flow + earnings stability, not just GDP growth.

• 🤷‍♂️ This Cycle is Unique:
  The initial drawdown was sharper than historical norms, and uncertainty remains elevated.

🧠 Diverging Recession Expectations: Markets vs. Bettors

📊 What the Chart Shows

• 🖤 Polymarket:
  Crowdsourced betting odds place recession probability at 57.5% in 2025.

• 💚 S&P 500 Implied Odds:
  Based on drawdown size vs historical recessions, equity prices have only a 24.8% chance.

• 🧩 Big Gap = Strategic Signal

💼 What This Could Mean for You

• ⚠️ Stocks May Be Complacent:
  Markets may underprice risk — especially given trade/geopolitical tension.

• ⏳ Rebalancing Window:
  The recent rally offers a tactical chance to trim exposure to high-beta assets.

• 🔄 Betting Markets Leading in 2025:
  Unusual dynamic — worth tracking if it persists.

• 📦 Recession Hedges Look Inexpensive:
  Use the odds gap to explore tail-risk hedging with favorable risk/reward.

🔁 Alternative Perspectives to Consider

• 🟢 Equity Market May Be Correct:
  Buybacks, Fed flexibility, and growth resilience support a soft-landing narrative.

• 🤔 Polymarket May Be Skewed:
  Low liquidity, rules (e.g., 2-quarter recession trigger) may bias outcomes.

• 🌍 Policy Shock Risk Remains:
  Escalating tariffs or global shocks could rapidly shift odds toward recession.

📈 Inflation Expectations Spike — Consumer Anxiety Resurfaces

📊 What the Chart Shows

• Conference Board 1-Year Inflation Expectation:
  Jumped to 6.0% in early 2025 — fastest 3-month rise since the 2020–21 inflation surge.

• 🔺 Sharp, not gradual: Suggests growing consumer unease with near-term price pressures.

💼 What This Could Mean for You

• 🚨 Rising Consumer Caution:
  May drive slower spending, stronger wage demands, and lower discretionary retail flows.

• 🔄 Sticky Inflation Risk:
  Expectations can become self-reinforcing, making the Fed’s job harder.

• 🏦 Hawkish Tilt Likely:
  If expectations remain high, the Fed may pause or delay rate cuts into late 2025.

• 🛒 Retail & Credit Impact:
  Pressured margins, real incomes, and higher credit delinquency risk.

🔁 Alternative Views to Weigh

• 🟢 Transitory Spike:
  It could fade if driven by temporary food/fuel prices.

• 🟡 Expectations ≠ CPI:
  Consumers often overshoot inflation — headline prints may stay tame.

• 🔵 Fed Watching Closely:
  Signs of de-anchoring = potential for stronger policy messaging.

That’s it for today!

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Best Regards,

Ultimate Alerts Team

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