Welcome to the May 2025 Newsletter. This month, we’re discussing the economy, employment, financial terminology, and more.
Summary
Below are comments from four major brokerage houses on Wall Street as broadcast on CNBC on April 11.
Charlie Sharf, CEO of Wells Fargo, was quoted as saying, “We expect continued volatility and uncertainty, and we are prepared for a slower economic environment in 2025.”
Jamie Dimon, CEO of JPMorgan, was quoted as saying, “The economy is facing considerable turbulence.”
Ted Pick, CEO of Morgan Stanley, was quoted as saying, “Economists are telling us the risk of recession has materially increased, but the consensus today is softer, not negative, growth ahead.”
Larry Fink, CEO of BlackRock, was quoted as saying, “Uncertainty and anxiety about the future of markets and the economy are dominating client conversations.”
Just remember, when this economic uncertainty ends, the stock market will have anticipated that six to nine months prior! In other words, the stock market will have begun its comeback well before the anxiety has ended. The stock market always anticipates which makes trying to buy at the very bottom a fruitless effort.
Gospel Quote of the Day
According to the 23rd chapter of the Gospel of Luke, after the three were hung on a cross, one criminal said to Jesus, “Aren’t you the Messiah? Save yourself and us!”
But the other criminal rebuked him saying, “Don’t you fear God? We are punished justly, for we are getting what our deeds deserve. But this man has done nothing wrong.”
Then he said, “Jesus, remember me when you come into your kingdom.”
Jesus answered him, “Truly I tell you, today you will be with me in paradise.”
Financial Quote of the Day
Merton Miller (1923 to 2000) was an American economist, professor and author. In 1990, he was awarded the Nobel prize in economics for his theory on corporate finance as published in 1958.
Miller told retail investors regarding the US stock market:
• Markets work.
• Costs matter.
• Diversification is your friend.
Miller’s work on corporate finance can be illustrated by a joke frequently told by Yogi Berra. Berra once told his trainer, “I’m particularly hungry today so please cut my pizza into 12 slices not just six so I have more to eat.”
Similarly, Miller’s corporate finance theory concluded a firm’s value is independent of the mix of equity and debt used to finance the company.
Pop Quiz
When is passing a financial literacy course required to graduate high school in Indiana?
The answer to this month’s Pop Quiz is at the bottom of the newsletter.
The Economy
Employment
Total U.S. nonfarm payroll employment rose by 228,000 in March. The official unemployment rate, U-3, increased slightly to 4.2%. The January and February 2025 combined employment numbers were revised lower by 48,000 than previously reported.
Chart 1 is based on the Bureau of Labor Statistics official unemployment rate, U-3.
Chart 2 shows the two-year trend of employment growth.
The Job Openings & Labor Turnover Survey (JOLTS) decreased to 7.2 million open jobs across the country as of the last business day in March. It was 7.7 million in the prior month. Even though the October and November JOLTS data showed an increase in open jobs, the 10-year chart shows the downward trend continues in open jobs since March 2022.
The seasonally adjusted Total U.S. Unemployment Rate, U-6, decreased to 7.9% in March as compared to the prior month. There were 7.2 million people unemployed in March, aged 16 and older. Last month, it was 7.6 million people unemployed.
March Unemployment Rates by Education Level
Average hourly earnings of all employees on private nonfarm payrolls were up 3.8% in March compared to a year ago. It was 4.0% the previous month.
| Less Than High School Diploma | 5.8% |
| High School Graduate, No College | 4.1% |
| Some College, Associate's Degree, or Skilled Trade Degree | 3.5% |
| Bachelor's Degree or Higher | 2.6% |
Leading Economic Indicators (LEI) sponsored by The Conference Board
The LEI decreased 0.7% in March. The Conference Board’s spokesperson said, “The US LEI for March pointed to slowing economic activity ahead. March’s decline was concentrated among three components: lower consumer expectations, softer stock prices, and fewer new manufacturing orders. This does not suggest a recession has begun or is about to start. The Conference Board has downwardly revised our US GDP growth forecast for 2025 to 1.6%. This reflects the deepening trade wares, higher likely inflation, supply chain disruptions, less spending, and a weaker labor market.”
Gross Domestic Product (GDP)
The Bureau of Economic Analysis said the advance estimate for GDP in the first quarter of 2025 decreased at an annual real rate of 0.3%. GDP for the fourth quarter 2024 was +2.4%.
The decrease in the first quarter GDP reflected a substantial increase in imports, which are a subtraction in the GDP calculation. For the year 2024, GDP increased 2.8% and grew 3.2% in 2003.
Broadly how is GDP calculated? One way is referred to as the expenditure method. This looks at the money spent by businesses, plus spending by households, plus spending by all levels of government, plus net exports (exports – imports).
Results for the first quarter were:
- Business investment +1.3%
- Household spending +1.2%
- Government spending -0.3%
- Net exports -4.8%
Imports were up dramatically in the first quarter. So why were imports up so much? We believe importers were trying to beat the pending tariffs, so they brought in as much as possible. This is unlikely to repeat itself in future quarters, so we are not concerned about the second quarter having a negative GDP as the first quarter had.
Labor Productivity – Quarterly
Annualized and seasonally adjusted, nonfarm, business sector labor productivity increased a revised 1.5% in the fourth quarter of 2024 as reported by the Bureau of Labor Statistics. For the same quarter a year ago, the increase was 1.6%.
By calendar year, labor productivity grew a revised 2.7% in 2024 and 1.8% in 2023. For gross domestic product (GDP) to continue to grow, our country needs population growth, or productivity growth or more realistically, both.
Inflation
Annual inflation decreased to 2.3% as measured by the Personal Consumption Expenditures (PCE) price index for March. The revised February number was 2.7% during the prior 12-months and 2.6% in January. The core PCE price index, which excludes food and energy, decreased to 2.6% in March. It was 3.0% in February and 2.7% in January.
University of Michigan Consumer Sentiment
Consumer sentiment in April had another drop to 52.2, as compared to March’s 57.0 and April’s 77.2. See the 10-year chart below.
This month’s decline reflects a drop-off in personal finances and business conditions. Expectations have fallen 32% since January, the steepest 3-month percentage decline seen since the 1990 recession. While this month’s deterioration was particularly strong for middle-income families, expectations worsened for vast swaths of the population.
Mortgage Rates and Average Existing Home Prices
As of April 30, 2025, the average 30-year fixed-rate mortgage had an interest rate of 6.81%, compared to 6.74% last month. The average 15-year fixed rate mortgage had an interest rate of 6.15%, compared to 6.13% last month.
The median existing-home sale price increased in March 2025 to $403,700 from $398,400 in March 2024. The volume of existing home sales decreased 2.4% compared to a year earlier, according to the National Association of Realtors. The inventory of existing homes for sale increased slightly to a 4.0-month supply in March. The desired supply target is 6 months.
The U.S. Public Debt as Issued by the Treasury Department as of April 30, 2025, was:
$36,791,000,000,000.
Last month it was $36,667,000,000,000.
Important Dates in March
THE STOCK MARKET
Commentary
This month, we have two interesting quotes.
Tom Lee, of Fundstrat, said on April 28, “Because equities collapsed from 2/19 to 4/8, this waterfall decline resets positioning and sentiment in a way to allow for a V-shaped recovery.”
Tony Pasquariello, of Goldman Sachs, also said on April 28, “For the first time in two months, the technical factors tilt net positive….on the fundamental side of the equation, the dynamics are much less clear.
Stock Market Valuation
Now Mark has a question: Did the S&P 500 just enter a bear market? Yes, sort of! A bear market is a 20% or more drop in a major stock market index from a recent high. Recent performance details for the S&P 500 Index have been:
The all-time closing high was 6,144.15 on February 19.
The recent closing low was 4,982.77 on April 8.
That was a 18.9% drop – not quite an official bear market, but close enough!
Below, all of the major brokerage houses have lowered their year-end S&P 500 Index projections. See the chart.
During April, all the brokerage houses have reduced their end of year projections for the S&P 500 Index as follows:
- BMO went from 6,700 to 6,100.
- Wells Fargo went from 6,600 to 6,000.
- Oppenheimer went from 7,100 to 5,950.
- UBS went from 6,400 to 5,800.
- Goldman Sachs went from 6,200 to 5,700.
- Evercore ISI went from 6,800 to 5,600.
- Bank of America went from 6,666 to 5,600.
- RBC went from 6,200 to 5,500.
- JPMorgan went from 6,500 to 5,200.
The S&P 500 Index closed on April 30, 2025 at 5,569.06. Year to date the market is down 5.3%.
Prior Annual S&P 500 Performance As Per The Exchange Traded Fund, VOO
2024: +24.98%
2023: +26.32%
2022: -18.19%
2021: +28.78%
2020: +18.29%
2019: +31.35%
Recommended Action for Your Stock Portfolio
Our current favorite S&P 500 sectors are:
- Most favored: Consumer Discretionary, Financials, Industrials, Technology.
- Moderately favored: Communication Services, Health Care, Real Estate, Utilities.
- Least Favored: Consumer Staples, Energy, Materials
We have three favorite large-cap Growth exchange-traded funds. Their Morningstar ratings are:
- GARP is 5-star Gold.
- VUG is 4-star Gold.
- IWF is 5-star Silver.
Our favorite large-cap Blend (growth and value) fund is:
- VOO, 5-star Gold
Our favorite large-cap Value mutual fund has two classes:
- OAKMX, investor class, 5-star Gold, minimum deposit is $0. The expense ratio is 0.89%.
- OANMX, institutional class, 5-star Gold, minimum deposit is $250,000. The expense ratio is 0.66%.
For those who buy individual stocks for dividends, here are four picks:
Just remember, don’t put all your eggs in one basket. If you have 12 eggs, put them in 12 different baskets.
• Not FDIC Insured • No Bank Guarantee • May Lose Value
Financial Markets Vocabulary
This month, instead of a vocabulary topic, we are discussing comments from the Wall Street Journal, March 24, 2025, page A11. This subject is, “Six Ways Crypto Investors Could Risk Losing It All.”
The Wrong Exchanges
You can buy or sell cryptocurrencies through a broker, but many people trade crypto directly on an exchange, of which there are many. Unfortunately, some exchanges have gone out of business, taking crypto investors’ holdings with them. An increased level of protection can be achieved by making sure all crypto exchanges an investor deals with are registered with the New York State Department of Financial Services by checking the department’s website.
Ignoring Storage Risks
To access crypto assets, investors need the codes called private keys – long strings of numbers and letters. These keys are too long to memorize, so investors need to store them somehow. There are several options for storing them online, but experts say anything online can eventually be stolen. These experts recommend a device called a hardware wallet, or cold wallet, that stores private keys offline.
Master Key Protection
A “seed phrase” is a sort of master key – a long string of words that can be used to access all the private keys in a crypto wallet. It can be a lifesaver for crypto investors because it can be used to recover your keys if your wallet is ever lost or damaged. But if someone else gets hold of it, they gain access to all the keys in the wallet, enabling them to steal everything.
Also, make sure your estate executor knows where your seed phrase is stored.
Watch for Scammers
Scammers are always looking for ways to steal seed phrases. For instance, sometimes they’ll pose as tech support and ask for a crypto owner’s seed phrase to help solve a problem. Never, under any circumstances, give out your seed phrase! Even if your crypto is stored on a hardware device in your possession, it can be stolen if you give thieves the seed phrase.
Familiar Tricks
Scammers can also use familiar social-engineering tactics to steal your crypto. They may send emails or texts, asking you to click on a link to claim crypto you’ve earned. When the innocent link is clicked, the investor is inadvertently authorizing the cyber thieves to take everything out of their wallets.
Botched Transactions
Before moving a particular cryptocurrency to an exchange, make double sure that the exchange trades that particular crypto. If crypto is moved to an exchange that does not handle that particular crypto, the investor will not be able to trade it and will not be able to get it back!
Broadly, Lorenz Financial does not recommend any type of crypto as a financial investment, as there is nothing behind crypto except hope.
OK, Now What Do I Do?
Financial Questions for Engaged Couples
This month, we begin a four-month series of appropriate questions for engaged couples. Assuming an engaged couple is not receiving financial counseling prior to getting married from another source, below are our suggested probing questions.
“Spouse” below is an abbreviation for “future spouse.”
INCOME
- What is the gross and net income of each spouse today?
- What do you think you will be making five years from now?
- How important is it to “spend less than you make”? The correct answer is “VERY”!
BUDGET AND SPENDING
- How much can one spouse spend without getting an OK from the other spouse? $100? $200?
- How many checking accounts do you plan to have after getting married? The correct answer is one.
- To the first spouse: Are you a saver or a spender?
To the second spouse: Are you a saver or a spender? - To the first spouse: What is the best thing and worst thing you have ever done with money?
To the second spouse: What is the best thing and worst thing you have ever done with money? - Who is going to be in charge of cash flow (paying bills)? Who is going to be in charge of long-term investment management? Who is going to be in charge of insurance decisions and filing tax returns?
- How are you going to budget your spending? For example, do you plan to use an online budget to track every dollar spent? Please say yes!
- When you buy a car, how long will you target paying it off? The correct answer is no more than three years, but preferably, cars are purchased with cash, no borrowing.
- What type of spending will you both allow an increase in debt? In other words, what is worth going into debt? The correct answer is buying a house as your primary residence, after putting 20% down and obtaining a conventional, fixed-rate, first mortgage.
- How much do you plan on spending on your wedding? Do you currently have that much in cash today? The correct answer is do not go into debt to get married. Save up the money before the wedding.
More questions will be offered next month.
• Not insured by any bank or government • Subject to risk & possible loss of principal
Our Financial Bad Boy This Month
Harvard and the View from Hillsdale
The Wall Street Journal, April 19-20, 2025, Page A13
As President Trump trains his guns on Harvard, the president of a small non-denominational Christian college in southern Michigan is licking his lips in anticipation of a battle royal that could redefine how American higher education is financed. Larry Arnn, 72, has been president of Hillsdale College since May 2000.
Harvard, he says, was “exclusively funded by the private sector for – what was it? – it’s got to be 250 years.” (Harvard was founded in 1636.). “And now, in this progressive era, if my calculations are right, they get $90,000 per student per year from the federal government.” He recommends Harvard emulate Hillsdale and get off the government dole. “They should give it all up,” Mr. Arnn says. “They should make an honest living.”
Mr. Arnn believes colleges should strip the young of their illusions of knowing everything and protect them from their innocence and ignorance – while teaching them. “That, I think, is what they don’t do at Ivy League schools.
I noticed the anti-Israel demonstrations were hostile and ugly,” he says. “I watched several interviews with the students who were demonstrating, and they didn’t seem to know very much about the history of the Middle East. And shouldn’t they be there learning instead of trying to change policy? This type of action, without knowledge, tells me “they are off the rails.”
Mr. Arnn believes the real problem – a moral crisis, even – was that “Harvard and Columbia couldn’t define a reason to stop these protests last spring.” There wasn’t enough “integrity of purpose” for someone in authority to step up and say, “Enough, stop, get back to class! And I think that’s because they don’t have an agreement about what they’re there to do. It was astonishing to me. They couldn’t reach an agreement to go back to work.”
Harvard tweeted these words by its president, Alan Garber, on April 14: “No government – regardless of which party is in power – should dictate what private universities can teach, whom they can admit and hire, and which areas of study and inquiry they can pursue.”
At Lorenz Financial, we agree! But if you are going to take taxpayer dollars, there will be strings attached. If you don’t like those strings, then walk away from the money.
The Bond Market
Commentary
On April 16, 2025, Federal Reserve Chair Jerome Powell addressed the Economic Club of Chicago, discussing the U.S. economic outlook and the impact of recent policy changes, particularly tariffs. Powell emphasized the economy remains in a solid position despite heightened uncertainty. He also reiterated that tariffs are likely to cause at least a temporary increase in inflation, which could also be persistent.
Powell concluded by saying, “As that great Chicagoan Ferris Bueller once noted, ‘Life moves pretty fast.’ For the time being, we are well-positioned to wait for greater clarity before considering any adjustment to our policy stance. We continue to analyze the incoming data, the evolving outlook, and the balance of risks. We will continue to do everything we can to achieve our maximum-employment and price-stability goals.”
Recommended Action for Your Safest Money
Our recommendations for an investor’s safest money have not changed from last month.
Our recommendations, in no particular order, are:
- Short-term U.S. Investment-Grade Corporate or Securitized bond funds.
- Short-term high-yield bond funds.
- U.S. Savings I-Bonds which have a max contribution of $10,000 per account per year.
Due to the relatively low return of these investment products, investors should not put 100% or anything close to that in these products. These products are only for an investor’s safest money or perhaps 5% to 25% of an investor’s total portfolio. These products are credit safe, but they will not provide the growth or income needed to stay ahead of, or even keep up with, taxes and inflation.
Past performance is not a guarantee of future results.
Pop Quiz Answer
When is passing a financial literacy course required to graduate high school in Indiana?
Answer:
Seniors graduating high school in Indiana in 2028 and beyond are now required to first complete a one-semester financial literacy course. Admirable!
But are there any downsides? Yes, the financial literacy course can be used to reduce a semester of required math because, apparently, the last thing our high school graduates need is more math. And by the way, this bill was passed in 2023, so why did Indiana legislators and the governor wait until 2028 to require this high school graduation upgrade? We judge their actions to be both good and pathetic.