Category: Markets

Interest Rates on Hold Again as Fed Maintains Forecast for Two Cuts

Posted on by slightbourne@noblecapitalmarkets.com

The Federal Reserve held interest rates steady on Wednesday for the fourth consecutive meeting, keeping its benchmark rate in the range of 4.25% to 4.5% and reaffirming its forecast for two interest rate cuts before the end of 2025. The decision, which was supported unanimously by the Federal Open Market Committee, underscores the central bank’s cautious approach as it navigates a complex economic environment shaped by persistent inflation, slower growth expectations, and growing political pressure from the Trump administration.

Despite recent signs that inflation has eased modestly, the Fed raised its inflation outlook for the year. Officials now expect core PCE inflation, the central bank’s preferred metric, to end 2025 at 3.1%, up from a previous estimate of 2.8%. That adjustment reflects concerns that tariffs and other policy shifts under President Trump’s administration may continue to elevate prices and complicate the Fed’s path to achieving its 2% inflation target. At the same time, economic growth projections were lowered, with the Fed now anticipating annual GDP growth of 1.4%, down from 1.7%. The unemployment rate is also expected to climb slightly, from 4.4% to 4.5%, signaling a potential slowdown in the labor market as higher borrowing costs weigh on hiring and business investment.

The Fed’s statement noted that “uncertainty about the economic outlook has diminished, but remains elevated,” marking a shift in tone from earlier warnings that uncertainty was rising. While this change suggests that some risks may be stabilizing, policymakers remain sharply divided over the appropriate course of action. Eight officials project two rate cuts this year, while seven expect no cuts at all. Two members see a single cut, and two others anticipate as many as three. This internal split reflects the complexity of balancing inflation management with support for economic growth, particularly in a volatile political climate.

President Trump, who has been increasingly vocal in his criticism of Fed Chair Jerome Powell, once again expressed dissatisfaction with the central bank’s approach. Hours before the rate announcement, Trump took aim at Powell in front of reporters, joking that he might appoint himself to the Fed, claiming, “Maybe I should go to the Fed; I’d do a much better job.” He continued his push for lower rates by declaring that inflation is no longer a concern, stating, “We have no inflation, we have only success.” This political pressure has not gone unnoticed, but Powell and other Fed officials appear focused on maintaining their independence and credibility by anchoring decisions in economic data rather than political narratives.

Markets responded calmly to the announcement, with the S&P 500 rising 0.18% and the Dow Jones Industrial Average gaining 0.21%. Investors largely interpreted the Fed’s decision as a sign that rate cuts remain on the table, just not at the pace the White House may want. For now, the Fed continues to walk a careful line, seeking to bring inflation down without derailing a fragile recovery. With just months left in the year and political tensions rising, all eyes will remain on Powell and the FOMC as they weigh their next move.

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.

Tariffs, Imports, and Uncertainty: What the Manufacturing Slump Means for Small Cap Stocks

Posted on by slightbourne@noblecapitalmarkets.com

The U.S. manufacturing sector continues to show signs of stress, with May’s ISM Manufacturing PMI slipping further into contraction territory at 48.5 — down from April’s 48.7. This persistent decline highlights the fragility of the sector amid deepening global trade tensions and domestic economic uncertainty. Perhaps more alarmingly, U.S. imports plunged to their lowest levels since 2009, registering a reading of 39.9, a significant drop from April’s 47.1.

This steep decline in imports reflects both softening demand and the growing impact of tariffs, many of which have been reintroduced or expanded under President Trump’s revised trade policy. According to Susan Spence of the ISM Manufacturing Business Survey Committee, tariffs were the most cited concern among respondents — with 86% mentioning them. Several likened the current climate to the disarray of the early pandemic.

For small-cap stocks, especially those tied to industrials, materials, and manufacturing, this environment spells both challenge and opportunity. Small caps are often more domestically focused than their large-cap counterparts and tend to be more sensitive to economic cycles. When manufacturing slows, these companies typically suffer more acutely from reduced orders, higher input costs due to tariffs, and tighter margins.

However, the current backdrop is more nuanced. While ISM’s index showed contraction, S&P Global’s separate gauge of manufacturing activity rose to 52, indicating slight expansion. Yet, even that report carried warnings: Chief economist Chris Williamson noted that the uptick is likely temporary, driven by inventory hoarding amid fears of supply chain issues and rising prices.

This divergence reveals how mixed signals are becoming the norm — complicating investment strategies in the small-cap space. On one hand, small manufacturers that rely on imported materials face margin pressure from rising input costs due to tariffs. On the other, those able to localize supply chains or produce domestically could benefit from reshoring trends and domestic inventory build-up.

For investors, the key takeaway is caution, not panic. Many small-cap industrials are already priced for a slowdown, but those with strong balance sheets and pricing power may weather the storm — or even gain market share as competitors falter. Meanwhile, increased inventory levels could provide short-term tailwinds, though that may evaporate quickly if demand doesn’t keep pace.

Marketwide, prolonged manufacturing contraction can pressure broader economic indicators, especially employment and capital spending, ultimately weighing on the S&P 500 and Dow. The Nasdaq, less exposed to traditional manufacturing, may prove more resilient.

In conclusion, the state of U.S. manufacturing is flashing caution signs, especially for small-cap stocks in the sector. While short-term inventory surges and reshoring trends may offer brief relief, the longer-term picture remains clouded by tariff uncertainties and fragile global trade relations. Investors would be wise to look for companies with flexible supply chains, diversified revenue streams, and strong cash positions as potential outperformers in this challenging landscape.

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.

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.

US-China Deal Sends Stocks Soaring—Is the Rebound Just Beginning?

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– US and China agreed to a 90-day truce slashing tariffs, sparking a major market rally.
– Retailers and energy stocks surged as sectors hit hardest by tariffs saw renewed investor interest.
– Investors should remain cautious, as the deal is temporary and economic data will shape the next move.

Markets exploded higher Monday as Wall Street celebrated a surprise truce between the United States and China, easing months of investor anxiety over escalating tariffs. The temporary agreement—which reduces reciprocal tariffs and establishes a 90-day negotiation window—was met with enthusiasm from institutional and retail investors alike. But while the relief rally was immediate and broad-based, the question remains: is this just a short-term bounce, or the start of a more durable rebound?

Under the new deal, the U.S. will slash tariffs on Chinese imports from 145% to 30%, while China will reduce its levies on American goods from 125% to 10%. That’s a dramatic step down in trade barriers, at least temporarily, and it caught markets off guard. The Dow Jones surged over 1,000 points, the S&P 500 gained 2.9%, and the tech-heavy Nasdaq led the charge with a nearly 4% jump.

Big Tech names that had been under pressure from trade war concerns—like Nvidia, Apple, and Amazon—posted strong gains. However, it wasn’t just megacaps moving higher. The broad nature of the rally suggests optimism is spilling over into sectors that were directly affected by tariffs, including retail, manufacturing, and commodity-linked industries.

Retailers in particular could be big winners. Analysts at CFRA and Telsey Advisory Group noted that the tariff pause may have “saved the holiday season,” allowing companies to import critical inventory at lower costs just in time for the back-to-school and Christmas shopping periods. Companies such as Five Below, Yeti, and Boot Barn all saw noticeable gains on the news.

Oil prices also responded positively, with West Texas Intermediate crude climbing over 2% as traders embraced a “risk-on” environment. This could bode well for small energy producers and service firms that had been squeezed by demand worries tied to trade tensions.

Still, not everyone is celebrating unconditionally. Federal Reserve Governor Adriana Kugler warned that tariffs, even at reduced levels, still act as a “negative supply shock” that may push prices higher and slow economic activity. With inflation data, retail sales, and producer prices all set to drop later this week, investors will soon get a better sense of the underlying economic landscape.

For investors, this is a critical moment to reassess market exposure. While the 90-day truce is a positive step, it’s a temporary one. Volatility could return quickly if trade talks stall or inflation surprises to the upside. Still, the sharp market reaction highlights that sentiment had grown too pessimistic—and that even incremental progress can unlock upside.

If the rally holds, it could mark a broader shift in market tone heading into summer. For now, the rebound has begun. Whether it continues depends on what comes next from Washington and Beijing.