Late last week, a favourable US jobs report advanced US equity markets to the longest winning streak since 2004.
The S&P 500 (INDEXSP: .INX) and Nasdaq Composite (NASDAQ: .IXIC) surged 1% on Friday, marking the ninth consecutive gains. Since their recent troughs, Trump's Liberation Day-induced market volatility appeared a distant memory, with the indices up 14% and 17%, respectively.
This comeback has advanced several US focused ASX exchange traded funds (ETFs). Since its 22 April trough, Vanguard US Total Market Shares Index AUD ETF (ASX: VTS) has climbed 9%. Meanwhile, Betashares Nasdaq 100 ETF (ASX: NDQ) is up 11% over the same period.
Behind Friday's surge was a favourable US jobs report. The Department of Labor revealed that US employers had added 177,000 new jobs in April. While this outpaced expectations, it marked a slowdown from March.
Another announcement that pleased investors was that Beijing was considering an offer with Washington to enter trade negotiations. China currently faces 145% tariffs, the largest of any nation.
All eyes are on the Federal Reserve
The US Federal Reserve will meet for its next policy meeting this week.
Markets widely expect the Federal Reserve to keep the Federal Funds Rate on hold at its 6-7 May meeting. Any departure from that would likely elicit a strong reaction from markets.
However, what isn't so clear is the likely tone of comments made by US Federal Reserve Chairman Jerome Powell at the post-meeting conference.
Money markets expect three rate cuts this year. However, the chance of a fourth rate cut has recently dropped from 68% to 40%. Powell's comments could further impact this prediction.
Powell has also come under the microscope lately after calling out Trump's tariffs for being larger than expected, and suggesting inflation could rise while growth slows.
The latter concern came to life last week, after US GDP contracted for the first time in three years. As The Motley Fool's Sebastian Bowen put it, that revelation put the US 'halfway to a recession'. Two consecutive quarters of negative GDP are required to classify as a recession. The last technical US recession was in 2020, although that was short-lived. Markets will be eager to hear Powell's take on the recent US GDP data point.
Of equal importance will be US President Trump's reaction to the Federal Reserve's decision.
President Trump has recently criticised Powell for being "always too late and wrong" on interest rates. After the recent jobs report, Trump once again called for rate cuts.
Last month, markets became concerned about the Fed's independence after Trump threatened to fire Powell. President Trump has since walked back the threat. However, any change in this position would be the catalyst for further market volatility.
All eyes on the Federal Reserve this week.. and perhaps Trump's truth social feed.
