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Macrosynthesis
TLDR
GDP Contracts as Stimulus Impact Wanes
Real GDP fell -0.3% in Q1 2025 despite $528B in March federal outlays. Imports surged 41% pre-tariff.
Top 10% Drives Spending While Middle Class Stalls
New data shows the wealthiest 10% now account for nearly half of U.S. consumption. Middle- and lower-income demand is stagnating, muting the velocity of money and weakening aggregate demand.
Rates, Stimulus, and Tariffs: A Broken Policy Trifecta
Monetary policy is blunted, fiscal ammo is spent, and tariffs are now the default lever. But tariffs raise prices, hurt wages, and shrink capital formation.
Tariffs Reignite Global Food Inflation Risks
FAO food index hits two-year high as trade friction triggers export hoarding. Wheat, rice, and dairy spike, amplifying volatility in fragile economies and raising the risk of global unrest.
S&P's Winning Streak Stretches to 9 days as Tariff Worries Ease
Wall Street bulls charged into May on the back of a Friday surge, capping the S&P 500’s longest winning streak since 2004. The index climbed 1.5% to close the week up 2.3%, while the Nasdaq and Dow each rallied nearly 2.5%. What sparked the melt-up? A 177,000 jobs beat for April helped quiet fears of an imminent slowdown, even as the headline number was a step down from March’s revised 185,000. Markets saw it as “goldilocks,” enough to keep growth hopes alive without forcing the Fed to drastically cut rates to save the economy.
China added fuel to the rally by softening its tone on trade, floating conditional talks if tariffs are reduced—a notable shift following weeks of tit-for-tat escalations. Meanwhile, the White House carved out a partial exemption for U.S. automakers importing foreign parts, seen as a tactical retreat in the tariff war. The optics were clear: Trump is posturing but blinking, and markets are sniffing a potential deal—or at least a pause.
But under the hood, earnings were mixed. Apple tumbled 3.7% after flagging a $900M tariff hit, and Amazon dipped slightly on soft guidance. Yet Facebook and Microsoft reaffirmed their commitment for spending tens of billions on new data centers, extending the narrative that AI demand remains robust, not receding. The Nasdaq’s 2.7% weekly gain suggests investors are leaning into big tech again—especially after a brutal April.
Labor Market Holds... But for How Long?
Post-COVID jobs data defy interest rate logic.
April’s 177,000 jobs print was more than just a headline beat — it was another sign that the labor market is operating outside the Fed’s old playbook. With unemployment flat at 4.2% and key service sectors still expanding, the U.S. job machine is humming despite restrictive policy. It’s the twelfth straight month of labor resilience, even as real GDP turns negative and the Fed funds rate holds above 5%. Under conventional macro theory, higher interest rates increase borrowing costs, reduce consumption and investment, cool hiring, and ultimately lower GDP, wages, and inflation. In the past this worked.
Today’s economy is playing a different game. In the post-COVID era (2020–2025), the same rate hikes are barely touching the surface. Internal analysis by LevelFields' analysts show a structural break in monetary transmission, with GDP and inflation far less responsive to interest rate shocks than in earlier eras. The Fed can raise rates — but the impact on output and jobs is muted. Why?
Between 2020 and 2025, the federal government spent over a quarter of all its inflation-adjusted expenditures from the past six decades — an unprecedented surge. This spending, coupled with direct transfer payments, industrial subsidies, and debt-financed expansion, distorted the traditional interest rate transmission mechanism. Employers hoarded labor. Households built savings buffers. And now, even negative GDP prints aren’t breaking the employment trend.
But this isn't economic strength — it’s policy inertia. The stimulus artificially delayed the impact of rate hikes. With fiscal buffers now draining and inflation still sticky, policymakers are running out of room.
The Q1 2025 GDP print confirmed what many feared: the post-COVID recovery has hit a wall. Real GDP fell 0.3% — the first contraction since 2022 — and imports surged by over 41% as firms front-loaded inventories ahead of Trump’s sweeping April tariffs. Government spending, despite topping $528 billion in March alone, failed to arrest the decline.
The Rich Are Spending More — But the Middle Class Isn’t
According to Moody’s and Bank of America, the top 10% of earners now account for nearly 50% of all consumption—a sharp departure from historical norms—and their spending is up 58% since 2020. The top 5% of taxpayers with incomes above $220,000 also paid 65.7% ($1.38 trillion) of all U.S. federal tax revenues. Meanwhile, expenditures among middle- and working-class households have stalled.
This dynamic breaks contemporary economic logic, which holds that lower- and middle-income groups—who spend a greater share of each dollar earned—are the engine of aggregate demand. Instead, the tax and consumption base is now overly reliant on high earners, who save more and are more sensitive to asset valuations than to wage or price shifts. Capital is pooling at the top and circulating less through the real economy. The result is weaker retail activity, rising hiring freezes, and a growing fragility. If the wealth effect fades, broad consumption could fall off a cliff.

Government Spending Lost Its Punch — Now Tariffs Fill the Gap
So where is Washington turning next? Tariffs. In April, the government collected over $17.4 billion in customs and excise taxes — nearly double March’s revenue and the largest monthly take of Trump’s presidency. But even this figure only covers about 3.3% of monthly federal outlays.
Penn Wharton’s model shows that while tariffs may raise $5.2 trillion over the next decade on paper, they also impose a substantial drag on output. Long-run GDP is projected to fall by up to 6%, with wages down 5% and capital formation decelerating. A middle-income household is projected to lose $22,000 in lifetime income under the new trade regime — double the impact of a corporate tax hike. Trump wants to offset this with a Congressional tax cut bill, lower Federal interest rates, and lower federal spending. But timing is critical.
Tariffs are also fueling a resurgence in inflation expectations. With prices rising, businesses are cutting headcount and passing on costs. The Port of Los Angeles expects cargo volume to fall by 30%, Amazon sellers are laying off workers, and recession risk is climbing. Economic policy uncertainty has reached its highest level since COVID, further curbing investment and hiring.

Global Food Prices Flash Crisis Warning
Global food prices jumped to a two-year high in April, with the FAO’s index hitting 128.3—just shy of the levels that helped fuel the Arab Spring. Wheat and rice surged on export constraints, while dairy hit records amid tightening European supply.
Tyson Foods reports earnings this week, and the pressure from rising feed and protein costs, combined with margin compression and shifting export dynamics, could weigh heavily on results—offering an early look at how consumer staples firms are absorbing tariff-driven cost shocks.

Last Week's Market Performance
Markets rallied sharply last week, with the S&P 500 gaining 2.9%, the Nasdaq climbing 3.4%, and the Dow rising 3.0%. Industrials (+4.3%), tech (+4.0%), and telecoms (+4.2%) led sector gains, while energy lagged (-0.7%) on falling crude prices. Natural gas surged 23.6%, while oil fell 7.5% to $58.29/bbl and gold declined 1.3%.
Global markets also saw strength, with Germany up 3.8% and Japan up 3.2%, while China dipped 0.5%. On the equity front, Carrier Global (+19%), Arista Networks (+17%), and Trane Technologies (+15%) led S&P gainers, while Becton Dickinson (-18%) and Super Micro (-8%) were among the biggest laggards. Treasury yields were little changed, with the 10-year ending near 4.31%, and Bitcoin rose 1.9% alongside broader gains in crypto.
Upcoming Events This Week
Markets will be on edge this week as attention turns to potential U.S.–China tariff negotiations, with Beijing reviewing Washington’s latest proposals and Trump signaling openness to easing trade tensions. The Federal Reserve’s two-day meeting will also be closely watched, with policymakers expected to hold rates steady amid softening economic indicators and lingering uncertainty around tariff impacts.
Earnings season continues with results due from Ford, Uber, Disney, Palantir, AMD, Shopify, and others. On the data front, the ISM Services PMI is forecast to show slower growth, while updated U.S. trade figures are expected to reveal a record import surge from pre-tariff stockpiling.
Internationally, the UK, Brazil, Poland, and Norway will announce rate decisions. Germany and China release factory orders, services PMI, and loan data — all key for assessing global demand trends.
Company News
LevelFields AI Stock Alerts Last Week
Dexcom Soars +17% on $750M Buyback Amid Strong Q1 Results
Dexcom (DXCM) surged 17% after reporting solid Q1 2025 financials and announcing a $750 million share repurchase program. The glucose monitoring leader cited confidence in long-term growth and profitability, with the buyback viewed as a strategic capital deployment to enhance shareholder value.
Kohl’s Pops +7.6% After CEO Termination Shocks Market
Kohl’s (KSS) jumped 7.61% following the abrupt termination of CEO Tom Kingsbury for cause, citing conflicts of interest. The leadership shake-up renewed investor hopes for a strategic pivot or operational overhaul as the company navigates a challenged retail environment.
CNXN Climbs +7% on Expanded Buyback Authorization
PC Connection, Inc. (CNXN) rallied 7% after its board approved a $50 million increase to its existing share repurchase plan, boosting total authorization to $170 million. With $50.5 million still available, the move underscores management’s focus on capital return and confidence in ongoing performance.
Buffett to Retire, Greg Abel Named Next Berkshire CEO
Warren Buffett announced he will step down as CEO of Berkshire Hathaway at the end of 2025, bringing to a close his six-decade run as one of the most influential figures in investing. Vice Chairman Greg Abel, who already oversees the company’s non-insurance operations, will officially take over. While Buffett will remain involved in select matters, he emphasized that decision-making power will fully shift to Abel.
Berkshire reported a 14% drop in Q1 operating earnings to $9.6 billion, weighed down by insurance losses tied to wildfires. However, the company’s cash reserves grew to a record $347.7 billion. The firm also continued to sell more stocks than it bought, trimming positions like Apple while boosting liquidity.
Buffett used the meeting to warn about rising federal deficits and currency risks, calling the current fiscal path “unsustainable.” He also noted uncertainty tied to tariffs, which could affect several of Berkshire’s operating companies.
Amazon Beats on Q1, Warns of Tariff Headwinds in Coming Quarters
Amazon topped Q1 estimates with EPS of $1.59 (vs. $0.98 YoY) on revenue of $155.7B (+8.6% YoY), but shares dipped after the company guided below expectations for Q2 operating income ($13B–$17.5B vs. $17.8B consensus). AWS grew 16.9% to $29.3B but showed continued deceleration amid cloud competition and capacity constraints.
Tariffs emerged as a key risk, with Trump’s new 145% China duties and 10% blanket tariffs threatening Amazon’s e-commerce model. Over half of Amazon’s sellers are China-linked, and many are stockpiling goods in the U.S. to delay tariff pain. CEO Andy Jassy acknowledged this as a temporary solution, warning price hikes or margin compression may follow as inventories deplete.
The tariff pressure is compounded by the expiration of the de minimis exemption, affecting direct imports under $800. Amazon has denied claims it would display tariff costs on-site, but a dust-up with the White House underscored its delicate position. Despite steady demand, third-party seller growth slowed to 7%, and analysts expect sharper pain in Q3–Q4 if trade policy remains volatile.
Meta Smashes Q1 Estimates on AI-Fueled Ad Growth, But Eyes Tariff-Driven Ad Shifts
Meta kicked off 2025 with a blowout Q1: EPS came in at $6.43 vs. $5.28 expected, and revenue rose 16% YoY to $42.31B, beating consensus by nearly $1B. Net income surged 35% to $16.64B as the company’s AI-powered ad tools drove stronger engagement and conversion across Facebook, Instagram, and Threads.
Despite the beat, Q2 guidance of $42.5B–$45.5B came in line, with CFO Susan Li warning of reduced ad spend from Asia-based e-commerce exporters ahead of the de minimis loophole closure and ongoing U.S.-China trade tensions. Li said some of this ad budget has already shifted to other markets, but total spend remains below pre-April levels.
Meta raised 2025 capex to $64B–$72B (up from $60B–$65B) to fund AI infrastructure and offset global supply chain cost pressures. Management also flagged regulatory risks in Europe, where new restrictions could degrade user experience and dent revenue by Q3 if not resolved.
AI continued to power Meta’s growth story: the company now boasts 3.43B daily users, nearly 1B Meta AI users, and 350M Threads MAUs. Meta AI is expected to become a new monetization layer, though the company will hold off on aggressive monetization until the product matures.
Robinhood (HOOD) Q1 2025 Earnings: Record User Growth, Trading Volume Surge, and Aggressive Expansion Fuel Confidence
Robinhood posted strong Q1 2025 results, with revenue up 50% YoY to $927 million, driven by a 77% surge in transaction-based revenue. Crypto revenue more than doubled to $252 million, and net income jumped 114% to $336 million, with EPS rising to $0.37. Platform assets soared 70% to $221 billion, and ARPU rose 39% to $145. Funded accounts hit 25.8 million, with Gold subscriptions up 90% to 3.2 million.

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