Markets were little changed Friday after a framework trade agreement was announced with the UK on Thursday, and hopeful that some progress can be made with China when Treasury Secretary Bessent meets with representatives this weekend. The S&P 500 finished the week down 0.47%, while the Nasdaq fell 0.27%. The 10-Year Treasury yield, an interest rate indicator, closed at 4.38%, up 6 bps from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, fell 1 bps to 4.24%.

The Federal Reserve met this week and Chairman Powell expressed a continued “wait-and-see” approach to adjusting rates this year. We continue to expect two rate cuts this year and ultimately see the Fed Funds rate nearing 3.50% in 2026.

On the fixed income side, we have been “buying the dip” on big bank preferreds. Our favorites have been mega-cap banks like JP Morgan, Bank of America and Wells Fargo. We expect strong price appreciation over the next 12 months as the Fed continues to cut rates. The current yield on these top banks is +6.0% and the securities are priced below 80 cents on the dollar.

In equity portfolio news, body-camera manufacturer Axon reported strong revenue (+31% y/y) and EPS (+23%) growth, and raised its full-year guidance. The company hasn’t slowed down in signing new contract wins and is shifting more public safety officers to premium subscription plans with additional features. The stock responded accordingly to the good news, with shares rising 14% on Thursday. Non-portfolio company Disney also boasted a beat-and-raise quarter, showing strong growth in its streaming subscriptions as well as at domestic theme parks. Softness was seen amongst its Chinese consumers.

Looking ahead to next week, it quiets down on the earnings front while economic data flow picks up. Cisco Systems reports results on Wednesday and Walmart reports on Thursday. On Tuesday, the CPI inflation report for April will be released, with the PPI report out on Thursday. Both will be watched closely to determine what the initial effects of recent tariff policies are having on prices. Retail sales for April will be published Thursday and housing starts on Friday, with other data points sprinkled in throughout the week.

Here in MN the Summer weather has arrived. Get outside and enjoy the sunshine. And of course, Happy Mother’s Day!

The S&P 500 posted its longest winning streak in 20 years, led by strong reports from major tech companies and hopes for a trade deal with China. The S&P 500 finished the week up +2.85%, while the Nasdaq rose +3.37%. The 10-Year Treasury yield, an interest rate indicator, closed at 4.32%, up 6 bps from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, ended up 4 bps at 4.25%.

The initial first-quarter GDP estimate negatively surprised, showing -0.3% growth; however, a 40%+ surge in imports (ahead of tariffs) dragged the figure down by 5 percentage points. Not only could this dynamic reverse the next couple quarters, but it also masked healthy underlying economic growth, with personal consumption expenditures growing at a respectable 1.8% pace. On the labor front, job openings (JOLTS) for March remain above 7 million, and the employment report Friday showed that 177,000 jobs were filled in April, 44,000 more than expected.

On the fixed income side, securities prices continue to rebound from the April slide. We have rotated the vast majority of our fixed income portfolios towards fixed-rate securities that are trading below par, where we can lock in +6.0% yields and expect continued price appreciation as the market stabilizes. In our view, it is a great time to buy these deeply discounted preferreds.

In equity portfolio news, Facebook (META) reported impressive first-quarter results, growing revenues by 16% y/y and operating profits by 27%. Despite having over 3 billion daily users across its family of apps, the company continues to find ways to expand its user base, increase ads viewed, and better monetize user eyeballs. Microsoft also posted strong numbers, with their Azure cloud growth accelerating from 31% to 35% in Q1. Management dispelled the notion that they were cutting back on AI investments and data center capacity, noting continued capacity constraints and re-iterating guidance for $85 billion in capital expenditures.

This week brought the jobs report and Big Tech earnings. Looking ahead to next week, Axon is the major earnings report we will be watching on Wednesday evening, while Disney’s report that same morning may shed some light on changes in consumer behavior. Also on Wednesday, the Federal Reserve will release their updated policy statement at midday, with Chair Powell speaking in the afternoon. The Fed is not expected to change benchmark rates this month, but is expected to cut rates three times later this year, including once during the summer. We believe those cuts should benefit fixed income securities.