Anchored in Strength - U.S. Markets Rebound Amid Global Progress

Despite being a short week due to the Memorial Day holiday on Monday, the U.S. faced an intense flow of economic, business and political news. Despite the swings, the stock market closed the week with the S&P and Nasdaq up. On the economic front, revised first quarter GDP data showed an annualized contraction of -0.2%, slightly better than the initial -0.3%. However, private consumption -the key driver of growth- disappointed with an advance of only 1.2% (vs. 1.8% previously), suggesting greater caution on the part of households. Inflation, as measured by the PCE index, declined in April to 2.1% y-o-y (from 2.3%) and core PCE fell to 2.5% (from 2.7%). Personal income rose 0.8% month-on-month, but spending slowed to 0.2%. At the same time, the trade deficit narrowed by a resounding 46% in April, driven by a 20% drop in imports, which could improve the second quarter figures.

On monetary policy, Fed Chairman Jerome Powell met with Donald Trump at the White House. Powell reaffirmed the central bank's independence and maintained that policy decisions will depend on economic data. Trump, for his part, reiterated that high rates hurt US competitiveness vis-à-vis countries such as China. The minutes of the May FOMC meeting reflected a cautious stance, emphasizing that it is prudent to wait for more clarity on the economic outlook before making adjustments.

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