This past week was a classic case of “bad news is good news,” pushing markets to fresh all-time highs. If you're relatively new to investing, that might sound counterintuitive. Why would weaker economic data send stocks soaring?
The answer lies in interest rate expectations. Slower economic growth increases the likelihood—and potential magnitude—of rate cuts. Markets reacted swiftly after disappointing non-farm payroll numbers, significant downward revisions totaling -911K to prior payrolls (from April 2024 to March 2025), and a rise in the unemployment rate. As a result, investors are now pricing in two, possibly even three, rate cuts for the remainder of the year.
Beyond the weakening labor market, inflation data painted a mixed picture. The Producer Price Index (PPI) came in lower than expected, while the Consumer Price Index (CPI) showed some upward pressure—particularly in the headline figure, which rose 0.4% for the month, translating to an annualized rate of 2.9%.
While the markets surged on this week's headlines, we have a sense that investors may soon start to reconsider. Slowing economic growth isn’t something the market tends to love for long. Several risks are not currently reflected in equity valuations: the potential for a government shutdown, trade tensions with the EU and China, and rising debt issuance all pose meaningful headwinds.
So, we're still anticipating some downside risk and remaining patient. For clarity: we’re currently about 8% overweight in cash, allowing us to stay opportunistic—and we may even increase that position in the coming weeks.
📅 Looking Ahead: Key Economic Data Releases
Here’s what we’re watching this week:
Monday: Empire State Index
Tuesday: Export Prices, Retail Sales (expected to slow to 0.3%), Business Inventories
Wednesday: Building Permits, Housing Starts, FOMC Meeting
Thursday: Jobless Claims, Leading Economic Indicators, Philadelphia Fed Index
Friday: HPK Friday Live
We're particularly curious to hear what Chair Powell says following Wednesday’s FOMC meeting. Our base case? A 25bps rate cut. Expect the messaging to highlight the dual risks of persistent inflation and a weakening labor market/economy.
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📌 Disclaimer:
The opinions expressed in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Economic forecasts may not develop as predicted.