Each month, CAISSA performs an analysis of prevailing global events, assessing their potential influence on our client’s wealth plan. We are diligently having strategic discussions with our portfolio managers, ensuring that our position remains informed and aligned with current market dynamics.

Below, you will find CAISSA’s perspective on key topics markets are digesting post-election.

Labor Market

The U.S. labor market presented a mixed picture last week. Private sector job growth has slowed significantly, with only 37,000 jobs added, well below expectations of 115,000, signaling a potential cooling in private hiring. The weekly data also cited that Initial jobless claims rose to 247,000, the highest reading since 2023.

CAISSA Perspective: Despite the concerning numbers, the same week’s payroll data painted a more positive picture. Non-farm payrolls increased by 139,000 in May, more than expected, and the unemployment rate held steady at 4.2%. The economy is highly dependent on the American consumer, which relies on a healthy labor market. The data suggests that pockets of strength remain in the labor market, and as long as the American consumers remain employed or confident in their ability to find work, spending is likely to continue, reducing the risk of a significant economic slowdown. This is a leading indicator we are closely assessing as this report reflected both resilience and emerging signs of weakness.

Growth and Tech Stocks Resume Dominance Amid AI Surge and Tariff Pause

The temporary pause in tariffs, set to expire August 31, has eased trade-related pressures, allowing investors to refocus on growth driven technology stocks despite ongoing global trade uncertainties.

Nvidia’s stock surged in May, fueled by an increase in year-over-year revenue increase tied to strong demand for AI chips, leading to the Nasdaq composite’s best month since 2023. Other tech giants, including Meta, Microsoft, and Amazon, have also contributed to the strong rally with heavy investments in AI infrastructure and data centers.

CAISSA Perspective: The differential impact of anticipated tariffs on growth vs. value stocks stems from several key factors. For instance, value stocks are more exposed to tariff impacts due to their thinner margins and they have less pricing power to pass through increased costs. Growth stocks are less dependent on physical goods and global supply chains, allowing them to sidestep tariff impacts and potentially provide higher returns. While value stocks experience periods of outperformance, over the past decade growth stocks have maintained their relative resilience vs. value, and it has generally been beneficial for portfolios to maintain an overweight position to growth.

Bond Market Volatility

The tariff announcements sent a bit of a shockwave through the bond market as the 10-year Treasury yield spiked from less than 4 percent on April 4th to 4.5 percent on April 8th, while the 30-year yield topped over 5 percent in May.

CAISSA Perspective: Typically, bonds are purchased to hedge the volatility of the stock market but when there is a hint of global fear, and the US Government stability is being questioned, the market for bonds erodes. Buyers are questioning US debt levels and the effect of tariffs, so the selloff is signaling a lack of confidence in US paper. Additionally, Moody’s Corp downgraded the US Credit Rating, citing that ballooning debt was the trigger. Why does this matter? When interest rates change so abruptly, it will change the value of a bond (on paper) with a multiplier effect in an inverse manner depending on the bond’s duration. The rising yields can have temporary negative implications but also create higher income opportunities through new bond issuance. This calls for an active management approach in fixed income to adjust duration as conditions change, rotate between sectors based on relative value, and take advantage of temporary dislocations in specific bond markets. This diversification helps ensure our clients are generally positioned to benefit regardless of the direction rates move, rather than betting everything on one particular scenario.