“If it makes a difference to you whether your stocks are down 15% or not, you need to get a somewhat different investment philosophy,” Buffett said. “The world is not going to adapt to you. You’re going to have to adapt to the world.”
Buffett cautioned that just because he doesn’t think the recent market swings were notable doesn’t mean we won’t get a more violent downturn some time in the future. He said “certainly in the next 20 years” we will get a “hair curler” event.
“The world makes big, big, big mistakes, and surprises happen in dramatic ways,” he said. “The more sophisticated the system gets, the more the surprises can be out of right field. That’s part of the stock market. That’s what makes it a good place to focus your efforts if you have the proper temperament for it — and a terrible place to get involved if you get frightened by markets that decline and get excited when stock markets go up. I don’t mean to sound particularly critical. People have emotions. But you have to check them at the door when you invest.”
Buffett covered a lot during his five-hour long Q&A. His comments on protectionist trade policy and pessimism toward the U.S. economy were particularly interesting. A lot of media outlets are covering it. I may write about it later.
But the big news out of this year’s event was Buffett’s announcement that he intends to step down as CEO as he makes way for vice chairman Greg Abel to succeed him.
“I think the time has arrived where Greg should become the chief executive officer of the company at year-end,” Buffett said.
Buffett’s time at the helm of Berkshire may be coming to an end. But his timeless investing lessons will surely endure.
There were several notable data points and macroeconomic developments since our last review:
📈 The stock market rallied last week, with the S&P 500 climbing 2.9% to close at 5,686.67. It’s now down 7.4% from its February 19 closing high of 6,144.15 and up 59% from its October 12, 2022 closing low of 3,577.03. For more on how the market moves, read: One of the most misunderstood moments in stock market cycles ⏱️
👍 The labor market continues to add jobs. According to the BLS’s Employment Situation report released Friday, U.S. employers added 177,000 jobs in April. The report reflected the 52nd straight month of gains, reaffirming an economy with growing demand for labor.
Total payroll employment is at a record 159.5 million jobs, up 7.2 million from the prepandemic high.
The unemployment rate — that is, the number of workers who identify as unemployed as a percentage of the civilian labor force — stood at 4.2% during the month. While it continues to hover near 50-year lows, the metric is near its highest level since November 2021.
While the major metrics continue to reflect job growth and low unemployment, the labor market isn’t as hot as it used to be.
For more on the labor market, read: The labor market is cooling 💼 and 9 once-hot economic charts that cooled 📉
💸 Wage growth ticks lower. Average hourly earnings rose by 0.2% month-over-month in April, down from the 0.3% pace in March. On a year-over-year basis, this metric is up 3.8%.
For more on why policymakers are watching wage growth, read: Revisiting the key chart to watch amid the Fed’s war on inflation 📈
💼 Job openings fall. According to the BLS’s Job Openings and Labor Turnover Survey, employers had 7.19 million job openings in March, down from 7.48 million in February.
During the period, there were 7.08 million unemployed people — meaning there were 1.01 job openings per unemployed person. This continues to be one of the more obvious signs of excess demand for labor. However, this metric has returned to prepandemic levels.
For more on job openings, read: Were there really twice as many job openings as unemployed people? 🤨 and Revisiting the key chart to watch amid the Fed’s war on inflation 📈
👍 Layoffs remain depressed, hiring remains firm. Employers laid off 1.56 million people in March. While challenging for all those affected, this figure represents just 1.0% of total employment. This metric remains below prepandemic levels.
For more on layoffs, read: Every macro layoffs discussion should start with this key metric 📊
Hiring activity continues to be much higher than layoff activity. During the month, employers hired 5.4 million people.
That said, the hiring rate — the number of hires as a percentage of the employed workforce — has been trending lower, which could be a sign of trouble to come in the labor market.
For more on why this metric matters, read: The hiring situation 🧩
🤔 People are quitting less. In March, 3.3 million workers quit their jobs. This represents 2.1% of the workforce. While the rate is above recent lows, it continues to trend below prepandemic levels.
A low quits rate could mean a number of things: more people are satisfied with their job; workers have fewer outside job opportunities; wage growth is cooling; productivity will improve as fewer people are entering new unfamiliar roles.
For more, read: Promising signs for productivity ⚙️
📈 Job switchers still get better pay. According to ADP, which tracks private payrolls and employs a different methodology than the BLS, annual pay growth in April for people who changed jobs was up 6.9% from a year ago. For those who stayed at their job, pay growth was 4.5%.
💵 Key labor costs metric ticks up. The employment cost index in the Q1 was up 0.9% from the prior quarter.
For more on why policymakers are watching wage growth, read: Revisiting the key chart to watch amid the Fed’s war on inflation 📈
💼 Unemployment claims tick higher. Initial claims for unemployment benefits rose to 241,000 during the week ending April 26, up from 223,000 the week prior. This metric continues to be at levels historically associated with economic growth.
For more context, read: A note about federal layoffs 🏛️ and The labor market is cooling 💼
👎 Consumer vibes deteriorate. The Conference Board’s Consumer Confidence Index fell in April. From the firm’s Stephanie Guichard: “The decline was largely driven by consumers’ expectations. The three expectation components—business conditions, employment prospects, and future income—all deteriorated sharply, reflecting pervasive pessimism about the future.
Notably, the share of consumers expecting fewer jobs in the next six months (32.1%) was nearly as high as in April 2009, in the middle of the Great Recession. In addition, expectations about future income prospects turned clearly negative for the first time in five years, suggesting that concerns about the economy have now spread to consumers worrying about their own personal situations.”
“Consumers’ Perceived Likelihood of a U.S. Recession over the Next 12 Months rose in February.”
Relatively weak consumer sentiment readings appear to contradict resilient consumer spending data. For more on this contradiction, read: CHART: The confusing state of the economy 📊 and We’re gonna get ambiguous signals in the economic data 😵💫
👎 Consumers feel worse about the labor market. From The Conference Board’s April Consumer Confidence survey: “Consumers’ views of the labor market weakened in April. 31.7% of consumers said jobs were ‘plentiful,’ down from 33.6% in March. 16.6% of consumers said jobs were ‘hard to get,’ up from 16.1%.”
Many economists monitor the spread between these two percentages (a.k.a., the labor market differential), and it’s been reflecting a cooling labor market.
For more on the labor market, read: The labor market is cooling 💼
🎈 Inflation cools. The personal consumption expenditures (PCE) price index in March was up 2.2% from a year ago. The core PCE price index — the Federal Reserve’s preferred measure of inflation — was up 2.6% during the month, down from February’s 3.0% rate. While it’s above the Fed’s 2% target, it remains near its lowest level since March 2021.
On a month over month basis, the core PCE price index was up 0.03%. If you annualized the rolling three-month and six-month figures, the core PCE price index was up 3.5% and 3.0%, respectively.
For more on inflation and the outlook for monetary policy, read: The Fed closes a chapter with a rate cut ✂️ and The other side of the Fed’s inflation ‘mistake’ 🧐
🛍️ Consumer spending ticks up. According to BEA data, personal consumption expenditures increased 0.7% month over month in March to a record annual rate of $20.65 trillion.
Adjusted for inflation, real personal consumption expenditures increased by 0.7%
For more on consumer spending, read: Americans have money, and they’re spending it 🛍️ and 9 once-hot economic charts that cooled 📉
💳 Card spending data is holding up. From JPMorgan: “As of 22 Apr 2025, our Chase Consumer Card spending data (unadjusted) was 1.0% below the same day last year. Based on the Chase Consumer Card data through 22 Apr 2025, our estimate of the US Census April control measure of retail sales m/m is 0.50%.”
From BofA: “Total card spending per HH was down 1.9% y/y in the week ending Apr 26, according to BAC aggregated credit & debit card data. Easter Sunday (historically lower spending Sunday) timing mismatch (4/20/25 vs 3/31/24) likely drove the y/y rate decline. Meanwhile, total card spending per HH was up 0.9% on a 52-week basis in the six days after Easter Sunday.”
April spending is likely being boosted by consumers pulling forward purchases in an attempt to front-run tariffs.
For more on consumer spending, read: We’re gonna get ambiguous signals in the economic data 😵💫 and Americans have money, and they’re spending it 🛍️
⛽️ Gas prices tick higher. From AAA: “The national average for a gallon of regular saw few changes over the past week, going up slightly to $3.18. Even though this is the time of year when we typically see seasonal increases and rising demand, the price of crude oil has been plunging. A couple of factors are at play: economic concerns and the decision by OPEC+ (the group of oil-producing countries) to increase output and add more oil to the market, despite tepid demand. The lower the price of oil, the less drivers pay at the pump. The national average is almost 50 cents less than it was this time last year.”
For more on energy prices, read: Higher oil prices meant something different in the past 🛢️
🚢 Imports surge. Here’s Bloomberg on March Census data: “The US merchandise-trade deficit unexpectedly widened in March to a record as companies continued importing goods to get ahead of tariffs, indicating a large hit to the economy in the first quarter. … In the March merchandise trade report, imports rose 5% to $342.7 billion, led by a record surge in consumer goods, while inbound shipments of motor vehicles and capital goods also increased. Exports increased 1.2%.”
For more on the implications of purchases pulled forward ahead of tariffs, read: A BIG economic question right now 🤔 and CHART: The confusing state of the economy 📊
🏠 Mortgage rates tick lower. According to Freddie Mac, the average 30-year fixed-rate mortgage declined to 6.76% from 6.81% last week. From Freddie Mac: “Mortgage rates again declined this week. In recent weeks, rates for the 30-year fixed-rate mortgage have fallen even lower than the first quarter average of 6.83%.”
There are 147.8 million housing units in the U.S., of which 86.1 million are owner-occupied and about 34.1 million of which are mortgage-free. Of those carrying mortgage debt, almost all have fixed-rate mortgages, and most of those mortgages have rates that were locked in before rates surged from 2021 lows. All of this is to say: Most homeowners are not particularly sensitive to movements in home prices or mortgage rates.
For more on mortgages and home prices, read: Why home prices and rents are creating all sorts of confusion about inflation 😖
🏠 Home prices rise. According to the S&P CoreLogic Case-Shiller index, home prices rose 0.3% month-over-month in February. From S&P Dow Jones Indices’ Nicholas Godec: “Even with mortgage rates remaining in the mid-6% range and affordability challenges lingering, home prices have shown notable resilience. Buyer demand has certainly cooled compared to the frenzied pace of prior years, but limited housing supply continues to underpin prices in most markets. Rather than broad declines, we are seeing a slower, more sustainable pace of price growth.”
🔨 Construction spending ticks lower. Construction spending increased 0.7% to an annual rate of $2.196 trillion in March.
👎 Manufacturing surveys weren’t great. From S&P Global’s April U.S. Manufacturing PMI: “Manufacturing continued to flat-line in April amid worrying downside risks to the outlook and sharply rising costs. Factory output fell for a second successive month as tariffs were widely blamed on a slump in export orders and curbed spending among customers more broadly amid rising uncertainty. Although the survey saw some producers report evidence of beneficial tariff-related switching of customer demand away from imports, any such sales increase was countered by worries over tariff-related disruptions to supply chains and lost export sales.”
The ISM Manufacturing PMI also deteriorated, signaling contraction in the industry.
Keep in mind that during times of perceived stress, soft survey data tends to be more exaggerated than actual hard data.
For more on soft sentiment data, read: The confusing state of the economy 📊 and What businesses do > what businesses say 🙊
👎 Texas area managers are worried about the future. From the Dallas Fed’s Texas Manufacturing Outlook Survey: “Perceptions of broader business conditions continued to worsen notably in April. The general business activity index fell 20 points to -35.8, its lowest reading since May 2020. The company outlook index also retreated to a postpandemic low of -28.3. The outlook uncertainty index pushed up 11 points to 47.1.”
Comments from survey respondents were riddled with references to “uncertainty” related to the Trump administration’s tariff policy. They included:
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“There is really no way to predict anything accurately six months out or even six weeks out now for our industry due to the tariff and trade uncertainty.”
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“President Trump, tariffs and maximum business uncertainty [are issues affecting our business]. [We see a] probable recession soon.”
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“The current economic environment is confusing. President Trump keeps things in turmoil, and we do not know what he will do next.”
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“Tariffs and tariff uncertainty are wreaking havoc on our supply lines and capital spending plans.”
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“Tariffs are causing uncertainty and a reduction in demand for our products. We buy all raw materials domestically but are still experiencing adverse business climate due to reduction in demand.”
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“Tariffs. Tariffs. Tariffs. There was a better way to do this.”
For more on soft sentiment data, read: The confusing state of the economy 📊
🇺🇸 GDP declined in Q1. The BEA estimated that real GDP contracted at a 0.3% rate in Q1. This is down from the +2.4% growth rate in Q4 2024.
However, this was driven by a spike in imports. Negative net exports cut a record 4.83 percentage points from the GDP growth rate.
Because the way GDP is calculated includes a lot of quirks, economists will often point to “real final sales to private domestic purchasers” to get a better sense of the underlying health of the economy. This metric excludes net exports, inventory adjustments, and government spending. That metric grew at a respectable 3.0% rate in Q1, up modestly from the 2.9% rate in Q4.
For more on GDP, read: What does the negative GDP report really tell us? 🤔
🏭 Business investment activity ticks higher. Orders for nondefense capital goods excluding aircraft — a.k.a. core capex or business investment — rose 0.1% to $75.05 billion in March.
Core capex orders are a leading indicator, meaning they foretell economic activity down the road. The growth rate had leveled off a bit, but they’ve perked up in recent months. However, economists caution that this may reflect a pull forward in sales ahead of new tariffs.
For more on core capex, read: A BIG economic question right now 🤔 and 9 once-hot economic charts that cooled 📉
📈 Key recession indicators point to growth. Here’s a great chart from economist Justin Wolfers tracking the trajectory of key measures of economic activity.
From Wolfers: “My guess: There remains a *substantial chance* that the NBER will at some point declare there’s a 2025 recession. But given that other reliable data suggest the economy was still humming along through most of Q1, it’s unlikely that recession began in Jan or Feb.”
For more on how recessions are defined, read: You call this a recession? 🤨
📉 Near-term GDP growth estimates are tracking positive. The Atlanta Fed’s GDPNow model sees real GDP growth rising at a 1.1% rate in Q2.
For more on GDP and the economy, read: 9 once-hot economic charts that cooled 📉 and You call this a recession? 🤨
🏢 Offices remain relatively empty. From Kastle Systems: “Peak day office occupancy was 63% on Tuesday last week, down six tenths of a point from the previous week. Washington, D.C. experienced the biggest single-day drop, falling more than eight points on Wednesday as local government offices were closed to observe Emancipation Day. New York’s high was 62.9% on Tuesday, down nearly six points from the previous week. The average low was on Friday at 35.2%, down 1.1 points from the previous week.”
For more on office occupancy, read: This stat about offices reminds us things are far from normal 🏢
🚨 The tariffs announced by President Trump as they stand threaten to upend global trade — with significant implications for the U.S. economy, corporate earnings, and the stock market. Until we get some more clarity, here’s where things stand:
Earnings look bullish: The long-term outlook for the stock market remains favorable, bolstered by expectations for years of earnings growth. And earnings are the most important driver of stock prices.
Demand is positive: Demand for goods and services remains positive, supported by healthy consumer and business balance sheets. Job creation, while cooling, also remains positive, and the Federal Reserve — having resolved the inflation crisis — has shifted its focus toward supporting the labor market.
But growth is cooling: While the economy remains healthy, growth has normalized from much hotter levels earlier in the cycle. The economy is less “coiled” these days as major tailwinds like excess job openings have faded. It has become harder to argue that growth is destiny.
Actions speak louder than words: We are in an odd period given that the hard economic data has decoupled from the soft sentiment-oriented data. Consumer and business sentiment has been relatively poor, even as tangible consumer and business activity continue to grow and trend at record levels. From an investor’s perspective, what matters is that the hard economic data continues to hold up.
Stocks are not the economy: Analysts expect the U.S. stock market could outperform the U.S. economy, thanks largely due to positive operating leverage. Since the pandemic, companies have adjusted their cost structures aggressively. This has come with strategic layoffs and investment in new equipment, including hardware powered by AI. These moves are resulting in positive operating leverage, which means a modest amount of sales growth — in the cooling economy — is translating to robust earnings growth.
Mind the ever-present risks: Of course, this does not mean we should get complacent. There will always be risks to worry about — such as U.S. political uncertainty, geopolitical turmoil, energy price volatility, cyber attacks, etc. There are also the dreaded unknowns. Any of these risks can flare up and spark short-term volatility in the markets.
Investing is never a smooth ride: There’s also the harsh reality that economic recessions and bear markets are developments that all long-term investors should expect to experience as they build wealth in the markets. Always keep your stock market seat belts fastened.
Think long term: For now, there’s no reason to believe there’ll be a challenge that the economy and the markets won’t be able to overcome over time. The long game remains undefeated, and it’s a streak long-term investors can expect to continue.
A version of this post first appeared on TKer.co
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