Category: Economy

Consumer Inflation Expectations Cool in May as Tariff Fears Subside

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– Consumers now expect inflation to rise 3.2% over the next year, down from 3.6% in April, signaling easing price concerns.
– President Trump’s decision to pause aggressive tariff plans appears to have calmed inflation fears.
– Fewer Americans expect job losses or missed debt payments, and optimism about the stock market has ticked up.

Americans appeared more optimistic about inflation in May, as expectations for rising prices declined across the board, according to a new report from the Federal Reserve Bank of New York. The improvement coincides with President Donald Trump’s decision to ease back on his sweeping tariff threats, providing some relief to consumers and policymakers alike.

The Fed’s Survey of Consumer Expectations, released Monday, showed that the anticipated inflation rate one year from now fell to 3.2%, down from 3.6% in April. It marks one of the sharpest monthly drops in recent years and suggests Americans are growing more confident that inflation may not spiral out of control.

Longer-term inflation outlooks also improved. The three-year expectation ticked down to 3%, while the five-year projection eased to 2.6%. While still above the Federal Reserve’s 2% target, the declines point to a growing belief among households that price pressures could be moderating.

The shift comes after the White House softened its stance on some of its more aggressive trade proposals. In April, President Trump announced sweeping 10% tariffs on all U.S. imports and floated the idea of “reciprocal” duties on specific countries. But by early May, the administration introduced a 90-day negotiation period and paused additional tariff hikes, calming fears of an escalating trade war.

The easing rhetoric appears to have had a measurable effect on consumer sentiment, at a time when officials at the Federal Reserve are closely monitoring expectations to determine the future path of interest rates.

“The inflation outlook is coming down, even as tariff collections rise,” said National Economic Council Director Kevin Hassett in an interview Monday. “It runs counter to the narrative that tariffs automatically lead to higher inflation.”

April’s core Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation measure, remained at 2.5% — stable, but not accelerating. Headline PCE, which includes food and energy, dipped slightly to 2.1%, one of the lowest levels in over three years.

The New York Fed’s survey also found that inflation expectations declined across several major spending categories. While Americans still expect food prices to climb by 5.5% over the next year — up slightly from April — they foresee smaller increases in gas, rent, medical care, and college tuition.

In addition to inflation, the report included promising data on labor market confidence and household finances. The percentage of respondents who believe they’ll lose their job in the next 12 months dropped to 14.8%, a slight but notable improvement. Meanwhile, fewer Americans expect to miss a minimum debt payment in the near term, with that figure falling to 13.4%, the lowest since January.

Consumers also seem to be gaining confidence in the markets. The share of respondents expecting stock prices to be higher a year from now rose to 36.3%, reflecting optimism despite geopolitical uncertainty.

As policymakers weigh inflation, tariffs, and rate decisions, these improving expectations may offer a signal: Americans are cautiously optimistic that the worst inflation fears could be fading.

U.S. Labor Market Adds 139,000 Jobs in May as Unemployment Holds Steady at 4.2%

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– U.S. added 139,000 jobs in May, topping forecasts; unemployment steady at 4.2%.
– Hourly earnings up 0.4% monthly, 3.9% annually.
– Job revisions and rising claims point to cooling momentum.

The U.S. labor market showed continued resilience in May, adding 139,000 nonfarm payroll jobs as the unemployment rate remained unchanged at 4.2%, according to data released Friday by the Bureau of Labor Statistics. The job gains exceeded economists’ expectations of 126,000, offering a modest sign of strength in an economy still grappling with new trade tensions and broader signs of slowing momentum.

While job growth in May beat forecasts, revisions to previous months suggest some underlying softness. April’s job gains were revised down to 147,000 from an initially reported 177,000, while March’s total was also lowered. Combined, the two-month revisions show the economy added 95,000 fewer jobs than previously thought.

“We’re seeing a softening in the labor market,” said Gregory Daco, chief economist at EY, in an interview with Yahoo Finance. “That’s undeniable. But it’s not a retrenchment in the labor market. And that’s what was feared.”

Despite the mixed signals, Wall Street responded positively to the report. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite each rose about 1% in early trading, as investors took comfort in the continued job growth and the prospect of stable interest rates from the Federal Reserve.

Wages continued to show strength in May, with average hourly earnings rising 0.4% month-over-month and 3.9% from a year ago. Both figures came in above economist expectations, suggesting that inflationary pressure from wage growth may persist. At the same time, the labor force participation rate dipped slightly to 62.4% from 62.6% in April, indicating fewer Americans are actively looking for work or are available to work.

The jobs report covered the week of May 12, capturing the early economic reaction to President Trump’s recently enacted 10% baseline tariffs on imports from various countries, as well as the initial phase of a 90-day pause in U.S.-China trade escalation. While the immediate labor market impact appears muted, economists warn that the inflationary effects of tariffs may begin to surface in the coming months.

“The May employment report was mixed but doesn’t alter our assessment of the labor market or the economy,” wrote Ryan Sweet, chief U.S. economist at Oxford Economics, in a research note. “We also remain comfortable with the forecast for the Federal Reserve to wait until December before cutting interest rates as the inflation impact of tariffs is still coming and will be more visible this summer.”

Other indicators released earlier in the week point to a labor market under increasing strain. ADP reported that the private sector added just 37,000 jobs in May—the lowest total in more than two years. In addition, initial weekly unemployment claims rose to their highest level since October 2024, while continuing claims hovered near a four-year high.

Taken together, the data suggest a labor market that, while no longer red-hot, remains stable for now. However, with trade policy uncertainties and inflation concerns on the horizon, economists will be closely watching for further signs of cooling in the months ahead.

Trump Pressures Fed for Deep Rate Cut, but Strong Jobs Data Dims the Odds

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– Trump called for a full-point rate cut, but the Fed is unlikely to move after May’s better-than-expected jobs report.
– The U.S. economy added 139,000 jobs in May, with unemployment steady at 4.2%, easing fears of a labor slowdown.
– Fed officials remain focused on inflation, signaling no near-term rate cuts despite mounting political pressure.

President Donald Trump ramped up pressure on the Federal Reserve Friday, calling for a dramatic interest rate cut just as new data showed the U.S. labor market remains relatively strong. Trump’s plea came via a social media post in which he declared “AMERICA IS HOT” and pushed Fed Chair Jerome Powell to slash rates by a full percentage point—what he referred to as “rocket fuel” for the economy.

The timing of Trump’s demand, however, clashed with Friday’s release of the May jobs report, which showed the U.S. economy added 139,000 nonfarm payrolls—comfortably ahead of economists’ expectations of 126,000. Unemployment held steady at 4.2%, defying fears of a sharp slowdown. Wage growth also ticked higher, with average hourly earnings rising 0.4% month-over-month and 3.9% over the past year, indicating that worker demand remains solid despite broader concerns about economic deceleration.

Market watchers and economists were quick to point out that the report effectively shuts the door on the possibility of a rate cut at the Fed’s upcoming June meeting. “The labor market is not cracking yet, even though it is decelerating,” said Brij Khurana, a fixed income portfolio manager at Wellington Management. He noted that while earlier in the week, weak private payroll data from ADP raised questions about a potential cut, the stronger-than-expected government report all but “takes away June.”

Trump, who has repeatedly branded Powell as “Too Late” in an effort to blame the Fed chair for past inflation missteps, has increasingly turned the central bank into a political target. On Friday, he argued the Fed is “costing our country a fortune” by keeping borrowing costs elevated, citing the European Central Bank’s series of rate cuts as a model for what the U.S. should emulate.

But the Fed has held its benchmark rate steady in 2025 after lowering it by a full percentage point at the end of last year, citing uncertainty around economic policy and inflation risks. Recent commentary from Fed officials suggests the central bank is far more concerned with reining in inflation than stimulating employment. “I see greater upside risks to inflation at this juncture,” said Federal Reserve Governor Adriana Kugler, adding that current policy should remain unchanged unless inflation pressures abate.

Kansas City Fed President Jeff Schmid echoed those sentiments, warning that tariffs—some introduced by the Trump administration—could create further inflationary pressure. “While the tariffs are likely to push up prices, the extent of the increase is not certain,” Schmid noted, cautioning against prematurely loosening policy.

Still, some divergence within the Fed is emerging. Governor Chris Waller, speaking in South Korea last weekend, argued that any tariff-driven inflation would be temporary and should not alter the Fed’s long-term stance. “I support looking through any tariff effects on near-term inflation when setting the policy rate,” he said.

Yet with job gains still solid and inflation risks lingering, most analysts believe the Fed will remain on hold through the summer. Trump’s demand for a jumbo cut may resonate with some voters, but for now, the data simply doesn’t back him up.

Treasury Yields Slide Sharply as Market Bets Heavily on September Fed Rate Cut

Posted on by slightbourne@noblecapitalmarkets.com

U.S. Treasury yields fell significantly on Wednesday as soft economic data increased expectations for the Federal Reserve to cut interest rates by September. The decline was driven by weaker reports on private-sector job growth and a contraction in service-sector activity, leading traders to price in a more aggressive pace of monetary easing.

Yields across the curve, particularly from the 2-year to the 10-year notes, dropped to their lowest levels since early May. The benchmark 10-year yield declined to 4.35%, highlighting the bond market’s strong reaction to signs of slowing economic momentum.

The first catalyst came from the ADP employment report, which showed the slowest pace of job creation in two years. That was followed by the Institute for Supply Management’s services index, which signaled contraction for the first time in nearly a year. Together, these indicators pointed to a potential softening in the labor market and raised concerns about overall economic resilience.

Market participants increased their bets that the Fed could start cutting rates as early as September, with the probability of a move rising to around 95%, up from just over 80% the day before. Additionally, expectations for two rate cuts by the end of 2025—likely in October and December—also gained traction.

Adding to the market’s reaction was a sharp decline in oil prices, spurred by indications that Saudi Arabia may be open to increasing oil production. Falling energy prices helped reinforce the idea that inflation pressures could be easing, giving the Fed more room to support the economy with lower interest rates.

Despite these signals, not all data pointed to weakness. A separate government report released Tuesday showed that job openings increased in April, and hiring also improved. Furthermore, within the ISM services report, the employment component showed unexpected strength, and the prices paid index rose to its highest level since late 2022. These mixed signals reflect the complexity of the current economic environment and suggest that the Fed will continue to weigh multiple indicators before making a policy decision.

Recent volatility in rate expectations followed a series of mixed economic releases throughout the spring. While rate cut hopes grew late last year, persistent inflation and stronger-than-expected economic activity had cooled those expectations in recent months. May saw the Treasury market lose 1%, as measured by a Bloomberg index, though it remains up 2.1% year-to-date through early June.

All eyes now turn to the upcoming U.S. government employment report for May, due Friday. Economists expect a payroll gain of 130,000 jobs, down from April’s increase of 177,000, with the unemployment rate forecast to remain at 4.2%. A notable rise in the jobless rate could give the Fed additional justification to pivot toward rate cuts.

Investors will continue to monitor labor market indicators, inflation data, and Fed commentary as they navigate an uncertain path for interest rates heading into the second half of 2025.

Job Openings Rise in April Despite Trade Policy Turbulence

Posted on by slightbourne@noblecapitalmarkets.com
Key Points
– Job openings rose to 7.39M in April, defying tariff fears.
– Hiring and quits edged up slightly, but remain subdued.
– Unemployment rate stayed at 4.2% as labor market holds firm.

In a surprising development for economic watchers, job openings in the United States increased in April, defying expectations of a slowdown amid escalating trade tensions. According to the latest data from the Bureau of Labor Statistics, open positions climbed to 7.39 million, up from 7.2 million the previous month. This rise marks a significant rebound from March’s near four-year low and comes as the first round of President Trump’s wide-ranging tariffs began to take effect.

Despite concerns that these new trade measures could dampen business confidence and hiring, the April data suggests that the labor market continues to show resilience. Economists had forecasted a decline in job openings to 7.1 million, making the latest figures particularly notable. Although headline numbers remain solid, underlying indicators suggest that the labor market is not without its challenges.

While the number of job openings increased, broader hiring activity showed only modest gains. Employers brought on 5.57 million new hires in April, a slight uptick from the 5.4 million seen in March. The hiring rate inched up to 3.5%, but this remains relatively low by historical standards and reflects ongoing caution among employers.

Worker behavior also points to a more reserved outlook. The quits rate—often seen as a barometer of employee confidence—dipped to 2% from 2.1% in March. This slight decline indicates that fewer workers are willing to voluntarily leave their jobs, a potential signal that many remain uncertain about finding new opportunities in a changing economic environment.

Taken together, these data points suggest that while businesses are still looking to hire, both employers and workers are navigating an atmosphere shaped by uncertainty. Companies may be posting jobs but are hesitant to move aggressively on staffing until there is more clarity on the economic direction, particularly with regard to ongoing trade disputes and tariff implementation.

Despite these headwinds, the broader labor market continues to hold steady. April saw 177,000 new nonfarm payroll additions, and the unemployment rate remained unchanged at 4.2%. These figures indicate that the overall employment landscape remains stable for now, even as underlying dynamics hint at a more cautious economic tone.

Looking forward, analysts expect the May jobs report to show only a slight easing in job growth, with consensus estimates pointing to 130,000 new positions. The unemployment rate is projected to stay flat, reinforcing the view that the labor market, while not accelerating, is also not deteriorating in a meaningful way.

Overall, April’s labor market data paints a picture of a U.S. economy that remains functional but wary. With trade policy still in flux and many businesses unsure about future demand and costs, the job market appears to be holding its ground—for now.

Inflation Eases to 2.1% in April, Offering Potential Breathing Room to Fed

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– April’s inflation rate slowed to 2.1%, lower than expected, easing pressure on the Federal Reserve.
– Consumer spending grew just 0.2%, while the savings rate jumped to 4.9%.
– Core PCE inflation held at 2.5% annually, supporting a wait-and-see approach from policymakers.

Inflation cooled in April, offering a potential signal that price pressures may be stabilizing and possibly giving the Federal Reserve more flexibility in managing interest rates. According to data released Friday by the Commerce Department, the personal consumption expenditures (PCE) price index — the Fed’s preferred inflation gauge — rose just 0.1% for the month, bringing the annual rate down to 2.1%. That figure is slightly below expectations and marks the lowest inflation reading of the year so far.

Core PCE, which strips out the more volatile food and energy categories and is considered a better indicator of long-term inflation trends, also increased just 0.1% in April. On a year-over-year basis, core inflation stood at 2.5%, slightly under the anticipated 2.6%.

These subdued inflation figures arrive amid a backdrop of softer consumer spending and a jump in personal savings. Consumer spending rose just 0.2% for the month — a sharp slowdown from the 0.7% gain in March. Meanwhile, the personal savings rate surged to 4.9%, its highest level in nearly a year. This suggests that households may be pulling back on discretionary purchases and becoming more cautious with their finances.

The moderation in price increases could provide the Federal Reserve with more breathing room as it considers the trajectory of interest rates. While the Fed has resisted calls for rate cuts amid lingering inflation concerns, a sustained easing trend could support a policy shift later this year. However, the central bank remains wary, particularly as some inflationary risks — such as potential tariff impacts — loom in the background.

Energy prices ticked up by 0.5% in April, while food prices dipped by 0.3%. Shelter costs, a key driver of persistent inflation in recent months, continued to rise at a 0.4% pace. Nonetheless, the overall inflation picture showed clear signs of deceleration.

Notably, personal income climbed by 0.8% in April, well above the 0.3% estimate. This growth in income, paired with higher savings, points to a consumer base that may be more financially resilient than previously thought, even if spending has temporarily cooled.

Markets responded with relative indifference to the inflation data. Stock futures drifted lower and Treasury yields were mixed, as investors weighed the implications for future monetary policy against broader economic uncertainties.

Recent trade tensions — especially President Trump’s imposition of sweeping tariffs and the ongoing legal back-and-forth over their legitimacy — add complexity to the outlook. While the direct inflationary impact of tariffs has so far been muted, economists warn that higher input costs could feed into prices later this year if tariff policies persist.

Looking ahead, the Fed will be closely monitoring inflation trends, consumer behavior, and labor market developments. If price pressures remain tame and growth conditions warrant, the central bank may eventually consider adjusting rates — though for now, caution remains the guiding principle.

Mortgage Rates Hover Near 7% Pressuring Housing Market and Consumer Confidence

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– Mortgage rates edge up — 30-year fixed rates rose to 6.89%, tracking higher Treasury yields.
– Buyer affordability hit — High rates continue to suppress home sales and affordability.
– Applications mixed — Purchase applications rose 3%, while refinance demand fell 7%.

Mortgage rates rose modestly this week, with the average 30-year fixed loan hitting 6.89%, up slightly from 6.86% the week before. The 15-year average also inched higher to 6.03%, reflecting the continued influence of Treasury yields, which have been volatile amid shifting economic signals.

The movement in mortgage rates follows recent fluctuations in the 10-year Treasury yield, a key benchmark for borrowing costs. Investors have been digesting a complex mix of developments, including the U.S. credit rating downgrade, the fiscal implications of proposed tax reforms, and evolving trade policy. While yields dipped slightly in recent days, overall borrowing costs remain elevated.

High mortgage rates continue to act as a headwind for the housing sector. According to newly released data, pending home sales dropped sharply in April, underscoring how rate-sensitive the market remains. Despite a modest weekly increase in home purchase applications, affordability challenges persist, particularly for first-time buyers and middle-income households.

This constrained environment has implications beyond real estate. A sluggish housing market can ripple through related industries—from homebuilding and furniture to construction materials and local services—potentially influencing performance in sectors that rely on consumer confidence and discretionary spending.

Although refinancing activity dropped by 7%, the slight increase in purchase applications signals that some buyers are still moving forward, especially those less sensitive to rate fluctuations or motivated by limited inventory. Nonetheless, sustained high rates may continue to delay broader recovery in housing-related demand.

In this climate, market participants are keeping a close eye on interest rate trends and consumer sentiment data, both of which remain central to shaping the economic outlook. As borrowing costs remain elevated, the pressure on housing and adjacent industries may persist—adding another layer of complexity to growth expectations in the months ahead.

Gold Nears All-Time Highs: Why It’s Defying the Typical Market Cycle

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– Gold surges as investors seek safety from Trump’s tariff threats.
– U.S. fiscal worries and a weaker dollar drive demand for gold.
– Gold defies norms, staying strong despite rising Treasury yields.

Gold is trading just a few percentage points below its all-time highs, confounding expectations for a significant retracement typical of most asset classes. In a normal market cycle, rapid price increases are often followed by pullbacks as traders take profits and reassess fundamentals. But gold’s current behavior suggests that broader forces are at play, reshaping how investors evaluate risk and value in today’s geopolitical and macroeconomic landscape.

As of May 23, 2025, gold surged nearly 2% to $3,357.78 an ounce, extending its weekly gain toward 5%. This spike follows fresh threats from former President Donald Trump, who vowed to impose sweeping tariffs on the European Union and Apple Inc. These geopolitical tensions have reignited demand for gold as a safe haven, a traditional response to rising uncertainty.

According to a Bloomberg report, Trump’s proposed 50% tariffs on EU goods and a minimum 25% tariff on Apple if it fails to manufacture in the U.S. rattled financial markets. U.S. equity futures dropped in response, highlighting investor unease. At the same time, bullion prices surged as traders sought refuge from the volatility.

But tariffs alone don’t explain why gold is hovering so close to record highs without a typical retracement. Several structural shifts underpin the resilience of gold in this cycle.

First, gold is being buoyed by deep concerns over U.S. fiscal health. Moody’s recently downgraded the U.S. credit rating, citing fears that the government’s ballooning deficit—exacerbated by Trump’s tax proposals—could worsen. With trust in government debt shaken, gold has gained favor as a store of value.

Second, the usual inverse relationship between gold and Treasury yields appears to be breaking down. Yields on 10-year U.S. Treasuries have risen to around 4.5%, a level that would historically undermine gold, which offers no yield. However, this time, investors are prioritizing safety over returns. The desire to shield portfolios from political and economic instability is overriding traditional valuation models.

Third, the macroeconomic backdrop includes a weakening U.S. dollar, as evidenced by the Bloomberg Dollar Spot Index slipping 0.6% for the week. A softer dollar makes gold cheaper for foreign buyers, further boosting demand.

Finally, investor psychology has shifted. Gold’s surge of over 25% this year has created a momentum-driven market where fear of missing out (FOMO) is fueling further buying. This sentiment-driven rally leaves little room for retracement, especially when headlines continue to reinforce the bullish narrative.

In conclusion, gold’s current strength—so close to its peak with little sign of reversal—reflects more than just a temporary flight to safety. It signals a deeper lack of confidence in traditional hedges like government bonds and an increasingly uncertain geopolitical environment. Until those pressures ease, gold may not follow the rules of a “normal” market cycle.

Inside the “Big Beautiful Bill”: What It Means for You and the Markets

Posted on by slightbourne@noblecapitalmarkets.com

House Republicans have passed a massive new tax and spending proposal dubbed the “One Big Beautiful Bill Act,” aiming to rewrite large portions of the U.S. tax code while reshaping safety net programs and personal finance tools. The multi-trillion-dollar legislation is already stirring debate on Wall Street and Main Street alike, with wide-reaching implications for taxpayers, investors, and public programs.

One of the centerpiece changes is the permanent extension of the 2017 Trump tax cuts, along with a significant expansion of the SALT (state and local tax) deduction. The new cap would rise to $40,000 in 2025—up from $10,000—before gradually increasing through 2033. The benefit phases out for incomes above $500,000, reinforcing its tilt toward middle- and upper-middle-income households.

The bill temporarily boosts the child tax credit from $2,000 to $2,500 through 2028, but offers no added benefit for families with very low incomes who don’t owe federal tax. Analysts caution that about 17 million children may continue to be left out of full credit eligibility.

Among the new personal finance tools is a $4,000 “bonus deduction” for seniors aged 65 and up, aimed at helping retirees reduce their taxable income. It applies fully to individuals earning up to $75,000 and couples earning up to $150,000.

The legislation also expands the reach of health savings accounts (HSAs), doubling annual contribution limits to $8,600 for individuals and $17,100 for couples earning under $75,000 and $150,000, respectively. Starting in 2026, HSAs could also be used for select fitness expenses, like gym memberships, up to $500 per individual or $1,000 per couple.

A notable new provision introduces government-seeded savings vehicles for children, now branded “Trump Accounts.” These accounts start with a $1,000 deposit from the U.S. Treasury and can be used for education, home buying, or launching a business. Parents can contribute up to $5,000 annually, with investments growing tax-deferred.

There are also breaks for car buyers and tipped workers. A new tax deduction allows up to $10,000 in annual auto loan interest for vehicles assembled in the U.S., while tip income for workers earning under $160,000 would be temporarily exempt from federal tax through 2028.

To fund these changes, the bill proposes historic cuts to Medicaid and SNAP, totaling roughly $1 trillion. Tighter work requirements could result in 14 million people losing health coverage and 3 million households losing food assistance, according to policy analysts.

For student borrowers, the news isn’t good. The bill would eliminate subsidized loans, meaning interest would begin accruing while students are in school. Forgiveness on income-driven repayment plans would be delayed to 30 years in many cases, drawing criticism from higher education experts.

Though markets may welcome expanded consumer spending power and tax relief, concerns about the growing deficit and the bill’s political path forward loom large. The Senate is expected to revise key components before a final vote.

Whether the “Big Beautiful Bill” becomes law as drafted or is reshaped in the coming weeks, its impact could ripple across household budgets and investment strategies for years.

The Russell Reconstitution 2025 Preliminary List

Posted on by slightbourne@noblecapitalmarkets.com

The preliminary list of stocks to be included in the Russell Reconstitution, and also which Russell Index, is a huge day for many stock investors and the impacted companies as well. This year, it occurs on Friday, May 23. The list, although preliminary and subject to refinements each Friday through June, includes the stocks that are believed to meet the requirements based on valuations taken on April 30. This is the first official file from the popular index provider, in addition to informing the investor public what to expect when the indexes are reconstituted. The reconstitution can be expected to impact prices as index fund managers readjust holdings. The event also, for many, redefines market-cap levels that are considered small-cap, mid-cap, and large-cap.

Background

The Russell Reconstitution is an annual event that reconfigures the membership of the Russell indexes by defining the top 3000 stocks based on market-cap (Russell 3000), then the top 1000 stocks (Russell 1000), and reclassifying the smaller 2000 stocks to form the Russell 2000 Small Cap Index. These serve as a benchmark for many institutional investors, as the indexes reflect the performance of the U.S. equity market across different market-cap classifications. The reconstitution process adds, removes, and weights stocks to ensure the indexes accurately represent the market.

The Preliminary List which will be published after the market closes on May 23, 2025, is a crucial step in the market cap reclassification process. It provides market participants with an initial glimpse into potential additions and deletions from the indexes. The stocks listed on this preliminary roster may experience increased attention from investors, as it hints at potential buying or selling pressure once the final reconstitution is completed.

The newly reconstituted indexes become live after the market close on June 23.

Implications for Investors

The release of the Russell Preliminary List on May 23 could provide opportunities for investors, including:

Enhanced Market Visibility – Companies listed on the Preliminary List may experience increased trading volumes and heightened market popularity, or even scrutiny, as investors evaluate their potential inclusion in the Russell indexes.

Potential Price Movements – Stocks slated for addition or deletion from the indexes can experience price volatility as market participants adjust their positions to align with the anticipated reconstitution changes.

Portfolio Adjustments – Active managers who track the Russell indexes may need to realign their portfolios to reflect the new index constituents, potentially triggering buying or selling activity in affected stocks.

Investor Considerations

Stock market participants should consider the following factors when analyzing the Preliminary List and its potential impact:

Final Reconstitution – The Preliminary List is subject to changes in the final reconstitution, which is typically announced in late June. Investors should monitor subsequent updates to confirm the actual index membership changes. These updates may occur as the result of faulty data or dramatic changes to the company such as a merger since the April 30 market cap snapshot.

Fundamental Analysis – As always, the fundamentals and financial health of the companies should be among the most important factors for non-index investors to consider. In the past, potential additions often presented attractive investment opportunities, while potential deletions may mean the stock gets less attention from investors.

Take Away

The release of the Preliminary List on May 23, 2025, marks a significant milestone in the Russell Reconstitution process. Investors should pay close attention to the stocks listed, as they may experience increased market visibility and potential price movements. However, it is important to remember that the Preliminary List is subject to changes. Thorough fundamental analysis, including earnings, potential growth, and liquidity assessment, is prudent for most stock investments. For more information to evaluate small-cap names, look to Channelchek as a source of data on over 6,000 small cap companies.

30-Year Treasury Yield Tops 5% as Moody’s Downgrades U.S. Credit Rating

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– Moody’s downgrades U.S. credit rating from Aaa to Aa1, citing unsustainable debt and fiscal inaction.
– 30-year Treasury yield briefly rises above 5%, pressuring markets and borrowing costs.
– Investors question long-term safety of U.S. Treasurys as safe-haven assets.

The U.S. bond market was jolted Monday as yields on long-term Treasurys spiked following a downgrade of the nation’s credit rating by Moody’s Investors Service. The 30-year Treasury yield briefly topped 5.03% in early trading—levels not seen since late 2023—before retreating slightly as bond-buying resumed later in the session. The 10-year yield also climbed, reaching 4.497%, while the 2-year note edged close to 4%.

The market reaction came swiftly after Moody’s downgraded the U.S. credit rating from the top-tier Aaa to Aa1 on Friday, citing structural fiscal weaknesses and rising debt-servicing costs. The downgrade brings Moody’s in line with other major agencies like Fitch and S&P, which had already lowered their U.S. ratings in recent years.

“This one-notch downgrade reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns,” Moody’s said in its statement.

The move raised alarm bells on Wall Street and in Washington, as investors weighed the implications of higher yields on financial markets, consumer loans, and global confidence in U.S. fiscal management. Long-term Treasury yields directly influence rates on mortgages, auto loans, and credit cards—potentially tightening financial conditions for households and businesses.

Markets had already been uneasy following policy uncertainty in Washington. The latest trigger: a sweeping tax and spending bill backed by House Republicans and the Trump administration is advancing through Congress, raising concerns it will further balloon the deficit. Analysts estimate the legislation could add trillions to the debt over the next decade, worsening the very conditions that prompted Moody’s downgrade.

“This is a major symbolic move as Moody’s was the last of the big three rating agencies to keep the U.S. at the top rating,” Deutsche Bank analysts noted in a client memo. “It reinforces the narrative of long-term fiscal erosion.”

Moody’s also warned that neither party in Congress has offered a realistic plan to reverse the U.S.’s deficit trajectory, with high interest payments now compounding the debt burden. “We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals,” the agency stated bluntly.

Meanwhile, investors are beginning to reevaluate the role of U.S. Treasurys as the world’s go-to safe-haven asset. The combination of mounting debt, political dysfunction, and now credit downgrades raises new questions about their long-term reliability.

While yields retreated slightly by midday as bargain hunters stepped in, the message from the market was clear: America’s fiscal credibility is under scrutiny, and investors are demanding higher compensation to lend long-term.

For small-cap and individual investors, rising yields can translate into greater borrowing costs, tighter capital access, and increased market volatility—all of which could ripple through equities in the weeks ahead.

SALT Cap Clash Threatens Progress on Trump’s New Tax Bill

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– GOP plans to raise SALT cap from $10,000 to $30,000 met with resistance from within the party.
– Internal divisions between coastal Republicans and fiscal conservatives delay the bill’s progress.
– Broader tax reform faces pressure from deadlines, debt ceiling implications, and healthcare savings.

Tensions within the Republican Party over state and local tax (SALT) deductions are threatening to derail momentum for President Trump’s proposed tax overhaul, dubbed the “big beautiful” tax bill. The proposed increase of the SALT deduction cap from $10,000 to $30,000 for households earning under $400,000 was supposed to be a compromise—but instead, it has triggered a standoff between GOP factions, particularly lawmakers from high-tax states.

The so-called “SALTY Five,” a group of Republicans largely from New York and California, are demanding even more relief, arguing the current proposal doesn’t go far enough to benefit middle-class constituents in their states. Suggestions have ranged from a $62,000 cap for individuals to $80,000 for couples—far above what the broader GOP caucus is willing to support.

The rift is creating legislative gridlock, with party leadership walking a tightrope between fiscal restraint and political necessity. Speaker Mike Johnson has taken a neutral stance in ongoing negotiations but faces pressure to finalize the bill ahead of next Monday’s internal deadline. With a razor-thin House Republican majority and Democrats unified in opposition, even a handful of GOP defections could sink the proposal.

Investors and markets are watching closely. The SALT deduction debate may seem like a narrow policy issue, but it’s emblematic of broader friction within the party over how to distribute tax benefits. For states like New York and California, higher SALT caps would offer relief to millions of homeowners. For fiscal hawks, however, such provisions represent giveaways that favor wealthy districts and jeopardize deficit reduction goals.

Beyond SALT, the bill also includes ambitious targets—seeking over $600 billion in healthcare savings and potentially authorizing up to $2.8 trillion in new government borrowing. If made permanent, the full package could add more than $5 trillion to the national debt over the coming years, according to independent budget analysts.

The clash reached a dramatic moment earlier this week when a closed-door meeting reportedly turned confrontational. One GOP lawmaker pushing for compromise was asked to leave, underscoring the intensity of the debate. With emotions running high, even social media has become a battleground, as key players trade barbs over who truly represents the interests of their voters.

Despite the turmoil, leadership remains optimistic about striking a deal by early next week. Once the bill clears the House, negotiations will move to the Senate, where further changes—and more political wrangling—are likely.

For investors, particularly those focused on small caps and real estate markets, the outcome of the SALT deduction debate could have material implications. A higher deduction cap could boost discretionary income in high-tax states, potentially lifting consumer spending, local economies, and small business revenues. Conversely, failure to pass the bill could dampen optimism for further fiscal support this year.

Trump Secures $600 Billion Saudi Investment Amid High-Stakes Riyadh Visit

Posted on by slightbourne@noblecapitalmarkets.com

In a major geopolitical and economic announcement, the White House on Tuesday revealed that Saudi Arabia has pledged to invest $600 billion in a series of U.S.-based initiatives and partnerships, following President Donald Trump’s high-profile visit to Riyadh. The commitment, announced during a U.S.-Saudi investment forum, marks one of the largest foreign investment packages ever pledged to the United States and comes as part of renewed diplomatic and economic ties between the two nations.

During his speech at the forum, President Trump praised the Saudi leadership and emphasized a deepening strategic alliance. “This historic investment is not just a sign of trust in the American economy — it’s a cornerstone of a new era of collaboration that spans defense, technology, and economic innovation,” Trump said.

The centerpiece of the announcement is a nearly $142 billion defense agreement that includes the transfer of advanced military equipment and services from more than a dozen U.S. defense firms to the Saudi kingdom. The figure is nearly double Saudi Arabia’s 2025 defense budget, highlighting the scale of the partnership. The White House did not specify when the deal would be completed, but it’s expected to unfold over several years.

In a notable and controversial move, Trump also announced that he will order the removal of all remaining U.S. sanctions on Syria, claiming the decision aims to “give them a chance at greatness.” The statement drew mixed reactions in Washington and abroad, as it represents a major shift in U.S. foreign policy.

Beyond defense, the agreement includes significant investment in technology and infrastructure. DataVolt, a Saudi digital infrastructure firm, is committing $20 billion to build AI-focused data centers across the U.S., positioning itself as a key player in the growing artificial intelligence arms race.

Additional commitments total $80 billion in joint investments between U.S. tech giants such as Google, Oracle, Salesforce, AMD, and Uber, and Saudi firms. These funds will support a mix of projects both in the U.S. and Saudi Arabia, aligning with Riyadh’s Vision 2030 strategy to diversify its economy and reduce its dependence on oil.

Crown Prince Mohammed bin Salman said the goal is to eventually raise total bilateral cooperation to $1 trillion. However, economists caution that executing such an ambitious investment plan may prove difficult, especially as Saudi Arabia grapples with its own budgetary constraints, fueled by fluctuating oil prices and expansive domestic spending.

Still, the symbolic and political significance of this deal cannot be understated. It signals a renewed U.S.-Saudi partnership that is likely to influence regional dynamics and global investment flows in the years ahead.