SFM Observer- May 2025

Glenn Sweeney |

SFM OBSERVER

May 2025 Recap

A CONCISE REVIEW OF THE MONTH IN THE INVESTMENT MARKETS

Issued: June 4, 2025

 

The Dow closed the month of May at 42,270 for a monthly gain of 1,601 points or 3.9%.  The Trump Tariffs took center stage with the market rallying on news that the China/U.S. tariffs were greatly reduced for the next 90 days. The U.S, agreed to lower the tariff rate from 145% to 30% and China lowered their tariff rate from 125% to 10%.  The stock market has been steadily gaining ground since this announcement.  At some point, these negotiations and delays need to culminate in a legally binding agreement that the two parties agree to sign.  When does this happen?  A big question for investors and business leaders.

 

Some interesting events from the month just passed:

 

  • Warren Buffett announced his stepping down as CEO of Berkshire Hathaway at the youthful age of 94.  He started his business career in high school when he bought a 4o acre piece of farmland and figured out that farming is really hard.  He has had a storied business career and learned many lessons along the way that he openly shares with his stockholders.  He surpassed most of his peers and did it all working from his home town of Omaha, Nebraska.  He never felt the need to go to Wall Street or another financial center.  He often states that he made most of his billions after he attained the age of 60.
  • Microsoft reported strong quarterly earnings in their latest report allaying fears that artificial intelligence spending and maturing business lines would flat line the company.  Cloud computing grew at 35% year over year while total revenue came in at $70 billion.  The company also announced a 7,000 person layoff to reduce levels of management and streamline the company.
  • Diageo, the British maker of Johnnie Walker, Smirnoff and Guiness expects the 10% tariff will cost the company $150 million in their next fiscal year.  They are hoping to offset roughly half of the cost with a new cost cutting program but expect the other half will need to be recovered through price increases.
  • One of the changes in the Big Beautiful Bill is an increase on the tax paid on endowment earnings by major universities.  For the largest endowments, the current tax is 1.4% of income.  The Bill raises this tax to 21%.  If it goes through the Senate, it will mark a big shift in how endowments invest their money.  They will have to plan on much larger tax payments at the same time as they are trying to handle major cuts to research grants imposed by the administration.
  • The bond market is starting to signal the deficit is getting too big.  There have been a few trading days this year where the issuance of new government bonds to fund the deficit have not gone smoothly.  These trading sessions are marked by the interest rate on a particular series of bonds jumping up unexpectedly.

Thank you for reading this issue of the SFM OBSERVER.  If you have any comments or questions, please send us a reply.  If you have a friend or associate that might be interested in the SFM OBSERVER, feel free to forward this email.

 

Until next month,

 

Glenn Sweeney CFA