Welcome to The Predictive Investor weekly update for May 4th, 2025!
Friday’s close marked the S&P 500’s longest winning streak in 20 years, with 9 consecutive daily gains. An important reminder of why trying to time the market during increases in volatility can be so detrimental.
Volatility cuts both ways, and some of the biggest up days occur near some of the biggest down days. Investors who followed our guidance and took advantage of lower prices with a disciplined plan are in great shape despite continued uncertainty.
Here’s my takeaways from the week.
Q1 GDP drop confirmed
Q1 GDP fell by -0.3%, slightly more than expected. Which means we’re halfway to a recession according to the technical definition (2 consecutive quarters of negative GDP growth).
No surprise there. We flagged this a few weeks ago, with data showing a surge in imports would deliver negative growth (imports are subtracted from GDP).
The surge in imports was an effort to get ahead of tariffs, and will not continue in Q2. A substantial drop in imports this quarter could very well deliver a positive surprise to GDP.
Plus, consumption remains strong. Real final sales to private (non-government) domestic purchasers grew at a 3% annualized rate in Q1.
Investments in growth continue
Economic data continues to offer a mixed bag. Nonfarm payrolls increased more than expected, but initial jobless claims also rose above expectations.
Q1 earnings growth remains on track for 12.5% year-over-year according to Factset, but estimates for Q2 growth drop significantly to 5.8%.
While economists are hashing out what this means for the next few months, as investors we want to remain focused on the long term.
And corporate America is not retreating from this economy:
Eli Lilly will more than double domestic manufacturing with $50 billion investment
Microsoft will increase 2025 capex to $80 billion, largely focused on data centers
Meta raised its 2025 capex forecast to $64-$72 billion, focusing on AI infrastructure and applications
Alphabet increased it’s capex to $17.2 billion due to sustained AI demand
Continued capex investment by the largest companies will create some incredible opportunities for investors who remain focused and disciplined.
AI is the opportunity of a lifetime
Microsoft CEO Satya Nadella made headlines last week when he revealed that roughly 30% of the company’s code is written by AI.
While this created another round of fear-based headlines focused on AI job losses, the flip side of that is that AI is allowing companies to drive much more efficient growth, and has already led to a boom in new startups as entrepreneurs realize they can do more with less resources.
An increasing number of unicorn startups with billion-dollar valuations have just a few dozen employees.
AI will unlock some incredible growth opportunities for investors over the next several years. If you haven’t already, upgrade to a paid membership to get our best ideas first.
