A recovery in earnings expectations; A big jump in expectations for second-quarter GDP; The recent surge in home sellers; Wages are rising; The U.S. dominates tech 'unicorns'

1) My friend and former colleague Enrique Abeyta found an interesting chart that helps visualize why the market dipped in April and then recovered...

He posted it yesterday on social platform X – take a look:

As is almost always the case, the markets, like individual stocks, are driven by earnings expectations.

When President Donald Trump announced his "Liberation Day" tariffs on April 2, analysts and investors feared the worst and cut their forecasts for earnings over the next year for the companies in the S&P 500 Index.

But then, as Trump eased up on his threats, expectations recovered – as did markets.

2) The Federal Reserve Bank of Atlanta's GDPNow model moved up sharply last week after the Commerce Department reported a 19.8% decline in imports in April, which reduced the trade deficit and will boost GDP.

In that update, the GDPNow model surged to 3.8% for the second quarter. Take a look at the chart in this X post from Charles Schwab Chief Investment Strategist Liz Ann Sonders:

Don't read too much into this, however...

The reduction in imports (and the trade deficit) is simply a reversal of the huge surge in goods imports in the first quarter as businesses rushed to buy inventory before higher tariffs kicked in. In another post on X, Sonders shared this chart showing the reversal:

3) Here's some good news for anyone looking to buy a home: We're at more than a 10-year high in home sellers exceeding home buyers. Take a look at the chart in this post on X from last week:

This has resulted in home prices moving lower in April – the first monthly decline since September 2022. Check out this chart in the latest Week in Charts blog post from Creative Planning's Charlie Bilello – it shows data from Redfin:

4) There is also good news on wages...

As Bilello noted in a recent Week in Charts post, real average hourly earnings have outpaced inflation on a year-over-year basis for 24 consecutive months. Take a look at this chart he shared:

5) Lastly, here's one more reason to remain bullish on America...

As this recent Wall Street Journal article notes, we're light-years better than anyone at creating, funding, and building innovative companies: The Tech Industry Is Huge – and Europe's Share of It Is Very Small.

Just look at the incredible graphic below from the article. It shows America's dominance with privately held tech companies valued at more than $1 billion (known as "unicorns"):

The WSJ article focuses on Europe's struggles in this area – noting that just four of the world's top 50 tech companies are European. That's despite Europe's larger population than ours, its similar education levels to those in our country, and the fact that the region accounts for 21% of global economic output.

As the article also notes:

Over the past 50 years, the U.S. has created, from scratch, 241 companies with a market capitalization of more than $10 billion, while Europe has created just 14...

The typical company in the top 10 publicly traded U.S. firms was founded in 1985, while in Europe, it was in 1911...

As always, I remain bullish on our country. Don't bet against America!

Best regards,

Whitney

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