Making Sense: In Brief
The week ahead for markets and the economy
Monday, May 5, 2025
Blake: Both equity and bond markets moved higher last week, even with volatility still elevated and a lot of uncertainty hanging over the outlook.
Investors worked through the latest GDP and jobs data, but now the focus is shifting more toward real-time signals to get a clearer sense of where the economy may be headed.
The main event for markets this week is the Federal Reserve's policy meeting on Wednesday. Markets are not expecting a rate cut just yet, but they are pricing in four rate cuts before the end of the year, starting sometime this summer.
Tariffs have complicated the Fed's job, and the key question will be how the Fed sets the tone. Most economic analysts today are suggesting that tariffs could push inflation higher and employment lower, pulling the Fed in two different directions and creating tension on both sides of the Fed's dual mandate of maximum employment and stable prices.
We'll be listening closely for whether the Fed chairman gives any hints about which side of that inflation-employment trade-off they might favor in the months ahead.
Beyond the Fed, there are a few additional data points that could move markets. On Monday, we'll see the ISM services index for April—a broad measure of health across the services sector, which continues to sit right on the edge of signaling growth and contraction.
Then on Thursday, we'll be watching a pair of updates on the labor market. First, unit labor costs, a sometimes overlooked but still important gauge of wage pressures. Markets expect that number to have jumped in the first quarter before the latest tariffs kicked in. And second, weekly jobless claims, where last week's increase caught some attention.
With more eyes on the real-time labor market trends, these weekly figures are going to become more significant.
So the three things to watch this week. The Fed meeting on Wednesday, ISM services on Monday, and jobless claims and unit labor cost data on Thursday.
Authors
Brent Ciliano CFA | SVP, Chief Investment Officer
Capital Management Group | First Citizens Bank
8510 Colonnade Center Drive | Raleigh, NC 27615
Brent.Ciliano@FirstCitizens.com | 919-716-2650
Phillip Neuhart | SVP, Director of Market & Economic Research
Capital Management Group | First Citizens Bank
8510 Colonnade Center Drive | Raleigh, NC 27615
Phillip.Neuhart@FirstCitizens.com | 919-716-2403
Blake Taylor | VP, Market & Economic Research Analyst
Capital Management Group | First Citizens Bank
8510 Colonnade Center Drive | Raleigh, NC 27615
Blake.Taylor@FirstCitizens.com | 919-716-7964
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