What We Learned This Week

Lots to Consider: Given the recent surge in the markets and the extreme volatility we've seen so far this year, it feels like a good time to take stock of where things currently stand. To simplify, let's break it down into three key categories: political policy, economic health, and business performance. The markets have climbed recently because each of these areas has shown some level of improvement—or at the very least, outcomes that were better than feared.

First and foremost, political policy has been the main driver. The Trump administration's aggressive stance on trade and tariffs shook markets earlier this year, introducing a lot of fear and uncertainty. But recently, we've seen some unexpected progress. Positive developments emerged with the UK on a framework trade deal, and even more surprisingly, a mutual agreement with China to ease tensions while negotiations are ongoing. This was unexpected, given China's historical resilience to external pressure—even at the cost of its own economic health. While it's still early days, these moves hint at some level of strategy behind the noise, offering a bit of optimism that there’s a broader plan at play.

On the economic front, things have also been better than anticipated. Inflation numbers came in lower, marking their lowest levels since 2021, and the latest jobs report showed stronger-than-expected hiring. While GDP estimates have been softer, those numbers are often revised up or down significantly after initial readings. It’s worth noting, though, that most economic indicators are lagging, and the full impact of tariff policies might not show up in the data for a few more months. But for now, the trend is encouraging.

Finally, there's business performance. First-quarter earnings were mostly in line or slightly better than expected, with companies reporting solid quarters while remaining cautious about the rest of the year. This was reassuring because it suggests that, despite the noise, business fundamentals are still holding up. The cautious guidance reflects uncertainty but also leaves room for improvement if macro and political issues stabilize.

In short, things are better than the doom-and-gloom forecasts we were hearing just a month ago. Of course, all of this is fluid and can change quickly, but the best course of action is to stay the path and let it all work through the system. Reacting to every headline is a recipe for trouble—staying disciplined is key.