Hedgie's Market Edge - May 19, 2025

Hey everyone, Hedgie here! Welcome to this week's market breakdown. I'm going to walk you through everything that happened in the markets this week and explain what it means for regular investors like you. This was a week of significant recovery as markets rallied strongly following the announcement of a 90-day tariff truce between the US and China, while economic data provided a mixed picture of the economy.

All three major indices finished the week with impressive gains, with the S&P 500 up 5.3%, the Dow up 3.4%, and the Nasdaq up a remarkable 7.2%. This powerful rally has pushed the S&P 500 back into positive territory for 2025, up 1.3% year-to-date. As of Sunday evening when this newsletter was prepared, stock futures were pointing to a slightly lower open on Monday (S&P 500 futures -0.2%, Nasdaq futures -0.3%, Dow futures -0.1%) as traders digest the week's dramatic moves and look ahead to upcoming economic data.

Note: This newsletter was prepared on Sunday evening for Monday morning release. Market conditions may have changed by the time you're reading this.

The S&P 500 has surged back into positive territory for 2025, with last week's 5.3% gain representing one of the strongest weekly performances in recent years. The index has now fully recovered from the April tariff announcement.

TRADE TRUCE AND ECONOMIC DATA: WHAT HAPPENED THIS WEEK

This week brought several significant developments that reshaped market dynamics:

US-China Trade Truce Fuels Market Rally

The biggest market catalyst came early in the week when the US and China announced a 90-day tariff reduction agreement following weekend negotiations in Switzerland. Under the deal, the US will reduce tariffs on most Chinese imports from 145% to 30%, while China will cut its tariffs on US goods from 125% to 10%. The agreement also includes China easing some non-tariff trade restrictions, such as those on rare-earth minerals.