Stocks should climb a bit higher this month. The next round of tariffs is not due to be levied until July nor will Trump's Big Beautiful Bill (BBB) be passed until then. That gives investors some breathing room to book some gains.

 

The first-quarter earnings season is just about over. Overall results have beat estimates by 6 percent with 79 percent of companies delivering an upside earnings surprise. The incoming economic data has been mostly favorable but much of the data reflects an economy that has been rushing to purchase what it can before the onset of further tariffs.

 

A key economic indicator, The Institute for Supply Management (ISM), data for May showed a slowdown in business new orders and services and an increase in prices and employment. That is in keeping with my own forecast of an ongoing mild case of economic stagflation.

 

The employment numbers for May — a gain of 139,000 jobs — indicated that the labor market remained largely resilient amid the government's new tariff policy. I am forecasting a slowdown in the economy but am still expecting a 1.8 percent gain in GDP for the second quarter, followed by a 1.36 percent gain in the fourth quarter — slow but no recession. Those data points are a bit higher than most economists are expecting. On the inflation front, I see the Consumer Price Index for April announced to show a 2.36 percent increase year-over-year. Regular readers know I am predicting that the data will begin to show an uptick in the inflation rate that will continue into year's end.

 

That is one reason why I doubt the Federal Reserve Bank will bow to the president's wishes to cut interest rates anytime soon. The bond market has penciled in two rate cuts before years' end, but it is hard to see that happening with rising inflation. One caveat would be that if the tariff war drove the economy into recession, while employment fell off a cliff, the Fed might be forced to cut.

 

In the meantime, after months of promising trade agreements were just around the corner, Wall Street is in a "show me" frame of mind. The most progress on trade this week was a brief phone call between the president and his Chinese counterpart and a meeting with the newly elected German leader, Friedrich Merz. Investors are convinced that the TACO (Trump Always Chickens Out) tariff play is alive and well within the White House.

 

The administration has until June 9 to justify its sweeping tariffs under the Emergency Powers Act before the U.S. Court of Appeals. If unsuccessful, the Court of International Trades' decision a week ago to block those tariffs will stand. If so, legal experts predict the case will go to the Supreme Court immediately. In the meantime, our trading partners will most certainly drag their feet in tariff negotiations.

 

And while investors are no longer "tariffed," the spending side of the BBB is before the Senate. It has been crucified by the president's best bro and megabucks campaign backer, Elon Musk of Tesla. Musk has blasted the BBB as a "disgusting abomination" and demanded Congress "Kill the Bill."

 

 The forever friendship of the two amigos seems to have hit the rocks, if their vitriolic exchanges on social media this week are any indication. Will they kiss and make up? Let's hope so. Musk, through his ownership of X, has a large and powerful social media presence that could pose a serious threat to the bill's passage. Given their slim majority in both the House and Senate, the Republicans face the uncomfortable prospect of renegotiating the spending portion of this bill.

 

As for the markets, I wrote that the S&P 500 Index is in a trading range. My upside target is 6,100-6,150 or 100 to 150 points from here. This should happen in fits and starts working its way higher into July. At that point, traders will begin to discount the ramifications of possible tariffs and the passage of the tax and spending bill on inflation, growth, debt and the deficit.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Home prices have been climbing for years, but the pace of that growth is beginning to cool. That may be good news for some buyers, but relatively few Americans can still find a place they can afford to buy.

 

Redfin, a national real estate brokerage, recently estimated that there are almost half a million more home sellers than buyers in today's housing market. In 2023, buyers outnumbered sellers but last year the trend turned. Sellers outnumbered buyers by 6.5 percent. Today, sellers outnumber buyers by 33.7 percent, which is the most significant gap since 2013.

 

The recent economic uncertainty has sparked a willingness to sell but has also made buyers hesitant. The upcoming threat of tariffs on foreign goods, their potential impact on the economy, and concerns about possible layoffs, such as those affecting federal workers, have combined to reduce demand for housing. 

 

If history is any guide, when the trend reverses, housing prices drop. That appears to be happening in select areas, such as Florida, California, and Texas, but only modestly so far. The combination of high house prices and lofty mortgage rates is taking its toll.

 

Statistics indicate that the housing inventory has increased nationwide. Single-family home construction is expected to grow by 3 percent, while multifamily starts are projected to decline by 4 percent. Theoretically, this means buyers have more options, which can help ease price pressures. However, beneath the surface of the housing market, the supply of houses in the lower and middle price tiers remains subpar and more volatile than at the high end of the market.

 

Buyers are also struggling to find anything they can afford, especially first-time homebuyers. The median price of a home sold in the U.S. during the first quarter of the year was $417,000, 33 percent more than it cost in 2019 before the pandemic. First-time buyers are looking for something cheaper than the average, but even then it's hard to find something they can afford. A typical home will cost a buyer $361,000 in 2025, according to Zillow, compared to $354,000 last year.

 

Thanks to inflation, a tighter Fed policy, and concerns about the country's growing debt and deficit, interest rates have risen significantly in the last several years. Mortgage rates have climbed above 6.92 percent. The average rate on a 30-year fixed mortgage hasn't dipped below 6 percent since 2022, according to Freddie Mac. As such, most consumers who took out new mortgages in recent years have rates above 6 percent.

 

Over the last several years, as interest rates continued to rise, many U.S. homeowners who were lucky or astute enough to lock in a mortgage rate of 3 percent or less in the past, stayed put. Sure, prices were going up for their home, they reasoned, but so were mortgage rates. At current rates, they would be crazy to sell.

 

But the years are passing, and many empty-nester homeowners are getting older. Others are changing jobs or getting divorced. Some are having more children. The pressure to sell is mounting. The sticker shock of paying twice your existing mortgage rate or more is waning, and what's to say that mortgage rates won't go even higher?

 

Home prices declined in 11 of the top 50 most populous metro areas in the last month. The spring buying season has been sluggish, to say the least. To be sure, no one is looking for a market crash or anything remotely like it. However, the higher long-term interest rates climb, the more buyers will disappear.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Equities remained on hold this week but managed to produce gains for the month. Tariff news dominated the tape, while the quarterly earnings results supported the market overall. Thanks to strong earnings from Nvidia and a federal court decision against reciprocal tariffs.

 

It was a Mr. Myagi kind of week as tariffs off, tariffs on ping-ponged through the federal court system while global markets reacted in kind. On Wednesday, a federal trade court blocked some of President Trump's most sweeping tariffs, set to take effect in July. The three-judge panel of the U.S. Court of International Trade placed a temporary hold on some tariffs imposed by utilizing a 1977 law called the International Emergency Economic Powers Act (IEEPA). That lasted less than 24 hours as White House lawyers managed to lift the order for ten days.

 

The president had argued the act gave him the authority to impose reciprocal tariffs worldwide, but the court disagreed. It wrote that Trump's actions  "exceed any authority granted to the president by IEEPA to regulate importation using tariffs." Duties based on other laws remain in force, such as tariffs on steel, aluminum, and autos.

 

Expectations that the ruling would shoot down the tariffs may have been why so many countries have been "negotiating with good faith" and yet were unwilling to sign on the dotted line until the trade court announced their decision. Why agree to anything when the country's legal system declares your actions illegal? It appears foreigners were right to hold out until this week.

 

The U.S. court system is causing increasing problems in the implementation of many of Trump's most important initiatives. Over 328 lawsuits have challenged Trump's use of executive powers. The courts have ruled against him in more than 200 cases so far in his second term. Immigration, deportations, reduction in the size of government, birthright citizenship, transgender military service, DEI programs, and now tariffs.

 

However, the Wall Street consensus is that the trade war is far from over. There are more conventional means at the president's disposal to impose tariffs, although they do not confer the broad powers Trump claims he needs. The more traditional approach would be to utilize provisions of U.S. trade laws, such as Section 232 (tariffs on national security grounds) or Section 301 (unfair trade practices), to impose tariffs.

 

Overall, this legal setback will likely delay and complicate the imposition of tariffs. Appeals take time, as will adjusting trade strategy. Given that tariff revenues figured prominently in the calculations of deficit spending, the delays may also cause trouble within the Republican Congress and its timetable for passing the tax and spending bill.

 

Aside from busting the budget, the "One Big Beautiful Bill Act" also includes a change in the tax treatment for foreign capital in the U.S. under a provision labeled Section 899. The provision states that "discriminatory foreign countries” that impose levies that impact U.S. companies would be charged a new 5 percent tax on their U.S. income. Why should you care?

 

If passed, it would transform the present trade war into a capital war, where U.S. assets, such as plants and equipment, as well as purchases of bonds and stocks owned by foreigners, including foreign governments, would see their income taxes here grow to 20 percent per year. It would certainly hasten the current trend among non-U.S. investors to reduce their holdings in the U.S. How that squares with Trump’s desire to increase foreign investment is a mystery to me.

 

As for the markets, I warned readers last Friday not to take Trump's threat to apply 50 percent tariffs on Europe seriously. The markets sold off, but I wrote, "His track record for implementing such actions in the recent past has been spotty at best." Sure enough, by Sunday afternoon, he backed off. 

 

Again, in a post this Friday morning (is this becoming a Friday thing?), Trump accused China of violating their two-week-old trade agreement. Markets fell once again on the news. It's impossible to predict how long this tantrum will last but traders have now begun to discount the president's on-again, off-again, shoot-from-the-hip outbursts. His tariff tactics have earned him a new moniker making its way across social media — "TACO," which means "Trump Always Chickens Out."

 

Nvidia, the semiconductor leader in AI, delivered a robust set of numbers in its latest quarterly results, which provided support for technology stocks and the broader market. Earnings overall have been surprisingly good. Economic data has been mixed, with both the economy and inflation slowing. GDP declined by 0.3 percent in the first quarter, driven by a surge in imports. The Fed's inflation forecaster, the PCE Index, came in less than expected for April, as I had expected.

 

In any case, markets are extended but working off those overbought conditions through time. It appears that stocks are poised to continue their upward climb, barring any new developments from the White House. The best-case scenario for the S&P 500 Index would be between 6,000 and 6,200 before taking a breather.  

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

The American tradition of firing up the backyard grill for a BBQ among friends and family is upon us. However, this year's record high prices for beef, brought on by generational lows in cattle inventories, make serving up steaks and hamburgers a budget-busting event.

 

A look at cattle futures on the Chicago Mercantile Exchange (CME) reveals what we can expect in terms of price increases this summer. Over the last month, live cattle futures have hit a record high of $2.18 a pound. That is a record high. Prices are up 22 percent from the same time last year. In comparison, pork prices are forecasted to rise by 1.8 percent, while poultry prices are expected to increase by a mere 1 percent

 

Grilling season officially began on Memorial Day and runs through to Labor Day. For whatever reason, the lion's share of grilling is packed into the days between Memorial Day and the Fourth of July. Your local supermarket or grocery store has already stocked its meat counters by buying steak, ribs, ground beef, and other meat selections from wholesalers to lock in supply.

 

But before you blame food companies for gouging, consider that companies such as Tyson Foods have reported a second-quarter loss of $285 million in its meat division, where a $470 million cost increase hit them in their beef-packing operations. What, therefore, is the core problem in the sky-rocketing price of meat?

 

I have said it before, and I will say it again — climate change. The U.S. Department of Agriculture reported that the total cattle herd in the U.S. is 86.7 million head. That is a generational low dating back to 1951. The changing weather has caused drought conditions in grazing and farming lands throughout the nation. That not only limits ranchers' ability to add more animals to the herd but has also increased the cost of feeding them, as feed prices have also risen.

 

That's tough going for the average hard-working rancher, who is now in his sixties. Drought, rising feed prices, water scarcity, the threat of tariffs, and increasing prices for everything from diesel to tools and tractors leave little room for profit.  Many are retiring, and few are taking their places. The cost of starting a farm or ranch requires enormous capital, and few are willing to risk it in this environment.

 

Producers are taking steps to reduce costs, including raising heavier animals, closing inefficient meat-packing facilities, and encouraging growers to replenish their herds. If, by some miracle, this were to occur, it would still require 18-24 months for the calf to grow into a harvestable animal. In the meantime, the trend is not your friend. Unfortunately, since most of the world has given up on addressing climate change, the only real solution to rising meat prices is to accept higher prices.

 

At some point, that steak or hamburger will cost so much that it could cause a massive shift in consumer preferences. When that occurs, is anyone's guess. As for your next BBQ, you have three choices: take out a loan, switch to chicken, pork, or fish, or pray for rain.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

On Friday morning, Donald Trump decided to ruin investors' Memorial Day holiday weekend by threatening Apple with 25 percent tariffs on foreign-made iPhones and 50 percent tariffs on Europe. Stocks sank worldwide in response.

 

Whether the president will carry through on his threats remains to be seen. His track record for implementing such actions in the recent past has been spotty at best. Nonetheless, the armies of proprietary traders and algorithmic computers that control markets always shoot first and ask questions later.

 

I must confess that the timing of these announcements is somewhat suspect. Throughout the week (until Friday morning), the serious issues we face in the nation's debt and spending was the focus of investors' attention. Trump's "Big Beautiful Bill" passed the Republican House by a narrow margin. The consensus on Wall Street Bond was that this budget-busting bill was over the top. Last week, I warned readers that the House bill would increase the nation's debt and deficit. The bill will increase the deficit by almost $3 trillion over ten years and $4-$5 trillion to our debt load.

 

While stocks rose a little in relief that the GOP could at least pass a significant piece of legislation, if only by a vote or two, bond investors both here and abroad were not happy. The U.S. Treasury's 20-year bond auction on the eve of the bill passage could only be described as ugly. Investors went on a buyer's strike, which sent the yields on government bonds higher across the board. The 10- and 30-year bonds saw their yields break 4.5 percent and 5 percent, respectively. That drove equity investors into a tizzy. Markets declined with the dollar, while gold and cryptocurrencies spiked higher.

 

The stock market has drawn a line in the sand for months on bond yields. The lights begin flashing red when the yield on ten-year government bonds reaches 4.5 percent. At that point, many believe interest rates start to dent economic growth, corporate earnings, and, therefore, valuations in the stock market.

 

The downgrade of the nation's debt by Moody's credit agency from AAA to Aa1 this week didn't help the mood either. It was the last of the big three credit agencies to downgrade U.S. debt. They cited the growing burden of financing the federal government's budget deficit and the rising cost of rolling over existing debt amid high interest rates. It is now costing more than $1 trillion per year to do so.

 

By Thursday, bond yields continued to climb. The 30-year hit 5.11 percent, while the tens were yielding 4.6 percent. Equities struggled to hold onto their gains. Investors were torn between relief that the continued tax breaks since 2018 would continue and worries that the debt-fueled fall in the dollar and rise in interest rates would continue.

 

The administration argues that its policies, tax breaks, and deregulation will allow the economy to grow its way out of the debt and deficit quandary. It is a risk. The alternative of just slashing spending would likely result in a recession, higher unemployment, and a Republican loss in the mid-term elections. 

 

In the meantime, the dollar has now lost 8 percent since Trump took office. Fears of a burgeoning debt and deficit problem, policy uncertainty. The trend of 'money going home' has been cited as the cause of the decline. I suspect a weaker dollar has been part of the administration's economic plan from the beginning.

 

U.S. Treasury Secretary Scott Bessent knew that U.S. tariffs would trigger a corresponding increase in tariffs on American imports by our trading partners worldwide. Putting aside the threat of reciprocal tariffs, the administration appears determined to maintain its global 10 percent on all imported goods and services. Logically, other nations will retaliate with a 10 percent tariff on our goods. Those tariffs would hurt American exporters unless the dollar declined by the same amount as the tariff. 

 

By the week's close, however, Trump had managed to shift investors' attention away from the bonds and debt debate and back on him and tariffs in just two social media posts before the markers opened. His posts also sent the 10-year bond yield below 4.5 percent, pushing the dollar further. Mission accomplished.

 

As for the stock market, in my last column I wrote that the equity markets are in a trading range. As such, we can see further weakness in the averages into next week before bouncing back higher. Gold continues to shine. Bitcoin reached a new high, and the dollar continues to decline.

 

As usual, we remain Trump-dependent, and Friday's announcements only underscore that point. He is a master of marketing, and this Memorial Day you can be sure that the topic at BBQs will be Donald Trump and his tariffs and not the price of beef, and that is just how he wants it.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.