US stocks rebounded in May, posting the first monthly gain since January. The strong recovery lifted American shares to the top of the leaderboard for the major asset classes last month, based on a set of ETFs.
Macro Briefing: 2 June 2025
US consumer spending rose for a third month in April, matching expectations with a 0.2% monthly increase. Profiling consumption expenditures on a real (inflation-adjusted) year-over-year basis suggest the trend still looks resilient via a 3.2% increase (see chart below). Notably, the year-over-year change for real disposable income (DPI) continued to rebound, rising to a 2.9% pace. The pickup in DPI in recent months suggests that the consumer sector will continue to grow in the near term and provide timely support for the economy that’s facing tariff-related headwinds.
Holiday Interlude …
The Capital Spectator is decamping to Edinburgh and Lisbon for the next week. The usual schedule resumes on Tuesday, June 3. Meantime, please leave a light in the window for your wandering editor.
Book Bits: 24 May 2025
● Empire of AI: Dreams and Nightmares in Sam Altman’s OpenAI
Karen Hao
Interview with author via the Global and Mail
In her new book, Empire of AI: The Dreams and Nightmares of Sam Altman’s OpenAI, Hao follows the rise of OpenAI. She tracks how the company transformed from a non-profit that positioned itself as an idealistic underdog into the world’s largest AI company worth US$300-billion.
Alongside the fly-on-the-wall observations of OpenAI’s work culture, built from hundreds of interviews with employees, e-mails and Slack conversations, Hao pulls back the curtain on the departure of early investor Elon Musk, the reinstatement of charismatic Chief Executive Officer Sam Altman and reports from Colombia and Kenya, where she interviews low-wage contract workers who were tasked with categorizing the severity of graphic content used to train ChatGPT.
Inflation Anxiety And The “Big Beautiful Bill”
The mega spending bill that the House passed now awaits debate in the Senate. A key issue for markets is how, or if, the legislation will be amended with respect to projections that, if passed, the bill will deepen an already hefty federal deficit in the years ahead and thereby stoke inflation concerns as the government’s borrowing needs increase.
Macro Briefing: 23 May 2025
US economic activity slowed for second month in April, according to the Chicago Fed’s National Activity Index: “Three of the four broad categories of indicators used to construct the index decreased from March, and three categories made negative contributions in April. The index’s three-month moving average, CFNAI-MA3, was unchanged at +0.05 in April.”
Most US Treasury Prices Slide Since “Liberation Day”
The government bond market had been more or less flatlining since since President Trump on Apr. 2 announced “Liberation Day” and rolled out US tariffs, which sparked concern about inflation. But in recent days a new headwind is weighing on fixed income securities: a US government budget bill (that was approved by the House this morning), which is expected to significantly raise an already hefty federal deficit in the years ahead.
Macro Briefing: 22 May 2025
US 30-year Treasury yield jumps to 5.09%, the highest level since late-2023. “It goes without saying that if Trump is, in fact, looking to the Treasury market as a barometer of investors’ approval of the action in Washington [with regards to the current debate over the federal spending bill], then the recent sell-off that brought 30-year yields from as low as 4.65% earlier this month to 5.095% is without question a troubling development,” said Ian Lyngen, an interest rate strategist at BMO Capital Markets.
Markets Still Expect Fed To Keep Rates Steady For Near Term
Uncertainty about inflation, the economy, and trade policy continue to blur the macro outlook, which in turn supports expectations that the Federal Reserve will leave interest rates unchanged at the next several policy meetings.
Macro Briefing: 21 May 2025
Policy uncertainty has a ‘meaningful’ impact on the US economic outlook, said St. Louis Federal Reserve Bank president Alberto Musalem. “To the extent that the economy requires capital expenditure to continue to occur, that it requires hiring to continue to occur, and if all those decisions have been somewhat paused because of the uncertainty, it would affect the economic outlook I would expect.” An index tracking policy uncertainty has spiked recently, but is starting to fall, although it remains elevated vs. the pre-tariff period.
