In Markets "In a Nutshell"

Markets “In a Nutshell” for May 5, 2025

Investment Week at a Glance

Stocks finished higher for the week. The Dow Jones Industrial Average rose 3.0%, the S&P 500 was up 2.9%, and the NASDAQ rose 3.4%. Foreign stocks (MSCI EAFE) were also up, rising 0.9%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 4.31%.  (Data source: Wall Street Journal)

Strong Earnings Growth for Q1

Earnings season is underway and roughly 70% of the S&P 500 have reported earnings for Q1. Of the companies that have reported earnings, 76% have bear estimates, slightly above the 10-year average of 75%. Earnings growth has been better than expected as year-over-year growth has been 12.5%. Earnings growth estimates going forward have dropped from the end of 2024 as uncertainty has caused companies to be cautious when giving guidance. The good news is that earnings growth is still expected to be positive and typically positive earnings growth and recession do not occur in the same time period. Investors will continue to pay close attention to the impact possible tariffs have on the consumer and overall economy.

GDP Turns Negative

Q1 GDP was released last quarter and came in slightly negative at -0.3%. This was driven by a spike in imports looking to avoid possible tariffs going forward. The positive from this report was that personal consumption came in at 1.8%, above the 1.2% estimates. Business investment also rose by 21.9% as corporations made investments in equipment ahead of potentially higher prices from tariffs. Expectations are that GDP growth will be positive next quarter as imports will likely drop off as companies rushed to import products in Q1. For the full year GDP growth is expected to be in the 1.5% range.

Warren Buffett Plans to Step Down From Berkshire CEO Role

The annual Berkshire Hathaway meeting in Omaha was this weekend and Warren Buffett unexpectedly announced he would soon ask the board to have Greg Abel replace him as CEO. Buffett had designated Abel as CEO successor in 2021 so the transition should be rather smooth as investors knew who the next CEO would be but were unsure of when. Buffet said he would “hang around” to help where needed but that Abel would have the final say going forward. Warren Buffet will go down as the greatest investor in history and has been CEO at Berkshire for 55 years, growing the company into a $1.2 trillion business today. (CNBC)

Quiz:

What has been the annualized return for Berkshire Hathaway from 1965-2024? (Scroll Down for Answer)

  1.    19.9%
  2.    15.8%
  3.    12.3%
  4.    8.2%

 

 

 

 

 

Answer below.

 

 

Have a Great Week!

 

 

 

 

 

 

 

Answer:

1.   19.9%. Berkshire Hathaway has beaten the S&P 500 by an average of 9.5% annually with Warren Buffet at the helm.

 

 

 

 

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