Market Movers & Shakers

Major U.S. equity indices posted solid gains last week, marking their second consecutive week of advances. The S&P 500 regained the 6,000 level and is now more than 20% above its early April lows and within 2.5% of its record high last set in February. Last week, the S&P rose 1.50%, the Nasdaq gained 2.18%, and small cap stocks outperformed, with the Russell 2000 up 3.19%. Top-performing sectors included Communication Services, Technology, and Energy, while Consumer Staples, Utilities, and Consumer Discretionary underperformed. Tesla was a notable laggard, dropping more than 14% on Thursday after a highly publicized falling out between Elon Musk and President Trump, with the two trading jabs at one another on their respective social media platforms, X (formerly Twitter) and Truth Social.



Source: FactSet

On the trade front, President Trump and Chinese President Xi Jinping spoke for 90 minutes last Thursday in an attempt to ease tensions between the two nations. Takeaways from the conversation appear positive. President Trump characterized the phone call as “very good” and announced trade talks between high-level delegations from the United States and China would take place this week. Right on cue, Treasury Secretary Scott Bessent, U.S. Commerce Secretary Howard Lutnick, and U.S. Trade Representative (USTR) Jamieson Greer met with a Chinese delegation led by Vice Premier He Lifeng in London on Monday. The talks follow last month’s negotiations in Geneva, where both countries agreed to a 90-day suspension of most tariffs. The U.S. signaled it is open to easing some tech export restrictions in return for China relaxing its controls on rare earth shipments. According to some estimates, China controls over 90% of global rare earth refining capacity. Rare earths are vital to numerous industries, powering everything from smartphones and electric vehicles to fighter jets and nuclear reactor control rods.

On the European front, recently fast-tracked trade negotiations with the EU appear to be moving in the right direction. USTR Jamieson Greer noted that he had a “very constructive meeting” with his EU counterpart. However, representatives from the European Union were taken aback by President Trump’s order to double tariffs on steel and aluminum imports from 25% to 50% last week. Markets remain keenly focused on new trade developments, as the 90-day pause is set to expire on July 9th for reciprocal tariffs, while the U.S. and China de-escalation agreement is scheduled to lapse on August 14th.

Shifting gears to the economy, the May employment report from the Bureau of Labor Statistics showed a mixed picture for the U.S. labor market. Nonfarm payrolls came in at 139,000, beating consensus expectations of 130,000, though downward revisions of 95,000 jobs for March and April reduced the net gain to just 44,000. The unemployment rate held steady at 4.2%. However, when looking beyond one decimal place it ticked up to 4.244%, almost enough to round to 4.3%, the highest rate since October 2021. The BLS report highlighted ongoing job growth in health care, leisure and hospitality, and social assistance, while employment in the federal government continued to decline. The labor force participation rate decreased by 0.2% to 62.4%, which some economists believe may reflect immigration dynamics. The reduction in the labor force also put downward pressure on the unemployment rate, potentially masking underlying weakness beneath the surface. For example, the Household Survey conducted by the BLS, which captures more of those who are self-employed, showed a 696,000 decline in employment last month despite the headline payrolls number being positive.



Source: CNBC, U.S. Bureau of Labor Statistics, FRED

One bright spot in the report was the increase in average hourly earnings, which rose by 0.4% in May and 3.9% from a year ago, exceeding expectations and April’s 0.2% gain. Economists suggest that stronger wage growth could serve to support consumer spending. Speaking of the consumer, recent corporate commentary out of two of the nation’s largest retailers provided some insight on the state of household budgets. Dollar General noted in its latest earnings release that it was attracting more middle- and higher-income consumers to its stores as they shift down to seek out value, while Walmart’s CFO, John Rainey, said that consumer wallets are stretched and that customers are spending more on food, giving them less money to spend on discretionary items like clothing and toys.

Homing in on the liability side of the consumer’s balance sheet, data from the New York Fed showed aggregate delinquency rates increased in the first quarter of 2025. As of the end of March, 4.3 percent of outstanding debt was in some stage of delinquency, up from 3.6 percent in the third quarter. Over 12% of credit card balances in the U.S. were over 90+ days delinquent in Q1, the highest percentage since 2011. Credit card interest rates also hover near all-time highs, with an average interest rate of over 21% based on the latest Fed data. Student loans saw a large uptick in delinquency rates following the resumption of payments and reporting of nonpayment on credit reports after a nearly 5-year pause that began during the pandemic. Per the New York Fed, “among borrowers who were required to make payments, nearly one in four student loan borrowers were behind on their student loans in the first quarter of 2025.” 7.74% of aggregate student debt was reported 90+ days delinquent in Q1 2025, compared to less than 1% reported in Q4 2024. However, it is worth pointing out that for the decade prior to the pandemic (2010-2020), the 90+ days delinquent rate on student loans was consistently above 10%, so, while alarming at face value, the rate may simply be normalizing.



Source: FRBNY Consumer Credit Panel/Equifax

Market expectations for interest rate cuts from the Federal Reserve shifted slightly following the release of the May jobs report. Markets are now pricing in a roughly 70% chance of a quarter-point rate cut by September, down from about 90% earlier in the week. The amount of easing priced in for the year declined to about 43 basis points, or fewer than two quarter-point cuts. Following Friday’s data, President Trump ramped up pressure on the Fed to cut rates more aggressively, calling for a full percentage point cut and criticizing the Fed’s cautious and patient approach. Meanwhile, speculation about Fed Chair Jerome Powell’s potential replacement swirled on Friday after President Trump told reporters on Air Force One that a decision on the next Fed chair will be coming out soon. Former Fed Governor Kevin Warsh and current Fed Governor Christopher Waller are the leading candidates, according to prediction markets. The announcement would fit with the “shadow Fed chair” idea that was floated last year by Treasury Secretary Scott Bessent, who said that based on the concept of forward guidance, markets would shift their attention away from Powell after his replacement was selected.

Updates & News*

Transition speeds remain at a relatively similar clip to our last update here – just a tad bit slower. New accounts and accounts with recent deposits are nearly a quarter of the way invested in our strategies after the first two weeks of management. At the one-month mark, new money with Tandem is approximately 40% of the way in-line with our strategies, and by month three that figure jumps to just under 90%.

On the portfolio news front, Bloomberg reported last week that Texas has removed BlackRock from its blacklist of investment managers. BlackRock was placed on the list back in 2022 for its involvement in ESG initiatives like Climate Action 100+ and Net Zero Asset Managers. After years of advocacy, last year BlackRock began rolling back support of environmental, social, and governance as a priority, and has since pushed for more energy production and the expansion of nuclear power. The removal allows pension funds and state-run investment managers to once again buy shares in BlackRock, as well as invest in the firm’s products. Elsewhere, Genpact announced the acquisition of data products and artificial intelligence solutions provider, XponentL Data. The acquisition enhances Genpact’s ability to assist clients with AI transformation and brings industry-specific solutions and expertise in platforms like AWS and Microsoft.

Source: Source of all data is FactSet, unless otherwise noted.

*The transition level activity taken by Tandem is applicable to new manager-traded accounts and new money in manager-traded accounts, not the composite or firm-wide level. New manager-traded accounts and new money in manager-traded accounts are not automatically invested on the first day. Rather, they are transitioned into our strategy over a longer time period that is dependent upon market conditions, this process differs from Tandem’s model-provided strategies, where money is invested on the day the account opens. Strategy level activity is applicable to the composite and action is taken at the firm-wide level.

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