Hope your Easter weekend is full of joy, family time and a renewed faith!
Palacios’ Perspectives
Week ending April 18th, 2025
From Wall Street to Main Street
Market / Macro Economic Summary This past week saw a modest downturn in equity markets. The S&P 500 concluded the week approximately 1.5% lower, while the Nasdaq Composite experienced a decline of around 2.6%. Year-to-date, the S&P 500 is now down about 10.2%, and the Nasdaq is lower by roughly 15.7%. One of the primary drivers of this week's market activity was continued uncertainty surrounding tariffs. The introduction of new export restrictions on semiconductors destined for China exerted downward pressure on major U.S. semiconductor companies, such as NVIDIA and Advanced Micro Devices. Additionally, Federal Reserve Chair Jerome Powell reiterated the central bank's likely stance of patience regarding interest rate reductions. While I’m frustrated with this, I don’t blame Powell for not committing towards rate reductions to support the economy as the potential for tariffs could exert upward pressure on inflation. This is a delicate balance that I hope is resolved sooner by the conclusion of trade deals with a variety of countries and we can get back to business as usual. Looking ahead, near-term market movements are likely to remain sensitive to developments in the tariff landscape. However, I anticipate that fiscal and monetary policy responses may play a crucial role in potentially mitigating these effects as we progress toward year-end. I remain committed to actively managing your portfolios in this evolving environment and will continue to provide timely updates and strategic guidance. Earnings season is bringing a mixed bag as lots of companies are reporting good quarters, but are understandably concerned and cautious in their outlooks amidst this politically unstable environment. Company Specific / Micro Economic Summary Goldman Sachs (GS) Shares rose 2.3% as the bank reported a strong quarter as it exceeded analyst estimates for both earnings per share and revenues. Earnings per share of $14.12 came in higher than the calls for $12.35. Revenue of $15.06 billion was also ahead of the Wall Street estimates of $14.81 billion. Profit surged 15% year-over-year to $4.74 billion, driven by a 6% increase in revenue. Notably, higher trading revenue compensated for a slight dip in asset and wealth management revenue. CEO David Solomon acknowledged the shifting economic landscape due to escalating trade tensions will make estimates hard to do. Bank of America (BAC) Shares rose 4% as the money center bank reported a strong quarter. Earnings per share of $0.90 cents were eight cents above analyst estimates. Revenue of $27.51 billion came in better than the calls for $26.99 billion. CEO Brian Moynihan said lower deposit costs and higher yielding investments helped the bank report a strong Net Interest Income. “Our business clients have been performing well; and consumers have shown resilience, continuing to spend and maintaining healthy credit quality,” He also said , “Though we potentially face a changing economy in the future, we believe the disciplined investments we have made for high-quality growth, our diverse set of businesses, and the team’s relentless focus on responsible growth will remain a source of strength.” Taiwan Semiconductor (TSM) Shares rose 2% as the chip component manufacturer reported a very strong quarter. Earnings per share of $13.9 were better than the calls for $13.60. Revenue of $839 billion New Taiwan dollars was also ahead of the estimates of $835.1 billion NT dollars. TSMC’s high-performance computing division which encompasses artificial intelligence and 5G applications drove sales in the quarter, increasing 7% since the last quarter to account for 59% of total revenue. CEO C.C. Wei said, “We understand there are uncertainties and risks from the potential impact of tariff policies however, the company has yet to see any changes in customer behavior.” This should play well into the earnings reports of other chip makers. American Express (AXP) Shares traded relatively flat as the credit card issuer reported a top and bottom-line beat. Earnings per share of $3.64 beat the estimates of $3.47. Revenue of $17.0 billion was also ahead of the Wall Street estimates of $16.9 billion. CEO Stephen Squeri said that through the first 10 to 12 days of the current quarter, spending is as strong as it was last quarter, maybe slightly, slightly stronger, and credit still continues to look really good. He added that while it just didn't make sense to yank his guidance, as the business is holding steady. Netflix (NFLX) Shares gained 2% as the consumer streaming giant reported a top and bottom line beat. Earnings per share of $6.61 came in stronger than the calls for $5.71. Revenue of $10.54 billion also came in better than the Wall street estimates of $10.52 billion. When asked about the tariff impacts on consumer confidence and spending, co-CEO Greg Peters said, “Based on what we are seeing by actually operating the business right now, there’s nothing really significant to note.” United Health Group (UNH) Shares dropped nearly 21% as the insurance provider reported a concerning quarter. Management slashed annual profit forecast as higher medical costs. On the current quarter, revenue of $110 billion came $2 billion short of estimates. Earnings per share of $7.20 was also below the calls for $7.29 billion. Several analysts came forward saying that the company’s dire forecast is an “ominous sign” for the industry as accelerating costs will probably affect all companies in the medical insurance plan space. Parting Thoughts We welcome an opportunity to discuss the above detail and wish you much success in the rest of your week! Regards, Erick J. Palacios, MBA Wealth/Fiduciary Advisor