Weekly Market Commentary (June 3 Edition)

1. Uncertainty around trade and policy remains high.

2. U.S. demand is solid despite weak headline GDP.

3. Labor costs are rising while productivity drops.

4. Central banks are split; India stands out for strength.

5. Strong, adaptable businesses continue to shine.

A Value Investor's Take on This Week's Market Action

The biggest theme I'm seeing right now? Uncertainty everywhere. Companies are having a harder time making long-term plans because they don't know what's coming next. This is actually good news for us patient investors. When everyone else is confused, that's when we find our best opportunities.

The U.S. Economy: Better Than It Looks

Last week's GDP numbers looked pretty rough at first glance. The economy actually shrank by 0.2% in the first quarter. But before you panic, let me tell you what really happened.

Companies went crazy buying stuff from overseas because they were worried about new tariffs hitting. So imports went through the roof, which made our GDP number look bad. But when you dig into the real demand from American consumers and businesses, things actually grew by 2.5%. That's pretty solid.

I also noticed something interesting in the spending data. People's incomes went up 0.8% in April, but they only spent 0.2% more. To me, this says consumers are being more careful with their money. They're not splurging on expensive stuff, but they're still buying what they need.

This tells me to focus on companies that sell essentials or have customers who really love their products. The companies selling luxury items might have a tougher time.

Jobs and Productivity: A Mixed Bag

Here's something that caught my attention: companies posted 7.39 million job openings in April, which was more than expected. That means businesses are still confident enough to hire people. But at the same time, factory orders dropped 3.7%, and worker productivity fell for the first time since 2022.

What's going on here? Labor costs are going up fast (5.7% increase), but not every company is handling it well. However, manufacturing companies actually got 4.5% more productive, which is impressive.

This makes me want to look closely at which companies can get more efficient as labor gets expensive. The ones that can automate or benefit from being bigger are going to do better than those that can't adapt.

Central Banks Around the World: Everyone's Going Different Ways

Central banks made some interesting moves this week, and they're all doing different things:

• Europe is probably going to cut interest rates because their economy is weak

• Canada decided to wait and see, even though inflation is coming down

• India might cut rates because their economy is doing well and inflation is cooling off

• Russia is keeping rates super high (21%) because of inflation and all their geopolitical problems

For us investors, this opens up some opportunities. Countries like India, where the central bank can help the economy without creating problems, might be good places to look for investments.

Trade Wars: The Uncertainty Continues

Trade policy is messy right now. A U.S. court said some tariffs might not be legal, but then another court paused that decision while everyone figures it out. For companies that buy and sell stuff globally, this kind of back-and-forth is a nightmare for planning.

And just when things with China seemed to be getting better, new restrictions on AI chips and student visas got everyone upset again. It looks like the trade tensions aren't going away anytime soon.

This makes me want to focus on companies that can be flexible. The ones with operations in multiple countries and suppliers in different places are going to handle this uncertainty better.

What Individual Companies Are Telling Us

Even though the big picture is confusing, some companies gave us good clues about what's really happening:

Nvidia had another amazing quarter selling chips for data centers, but they still missed expectations because of export restrictions. This tells me two things: the AI boom is real, but so are the geopolitical risks.

C3 AI showed strong growth and got deeper partnerships with Microsoft and Google Cloud. This confirms that businesses really want AI solutions.

In the energy world, Viper Energy bought Sitio Royalties for $4.1 billion. This shows how companies are getting bigger to become more efficient in tough markets.

Whether it's tech, energy, or software, I'm watching for companies that turn problems into opportunities, not just the ones riding the wave.

What This Means for Us

Look, it's easy to get overwhelmed by all the headlines these days. But as value investors, our advantage comes from staying focused on what really matters: strong businesses that make steady cash, run by smart people who know how to use that cash wisely.

The world is noisy right now with trade fights, changing interest rates, and political uncertainty. But this is exactly when being patient and disciplined pays off the most.

Thanks for reading, and if you found this helpful, feel free to share it with a friend. Got questions about any of the companies I mentioned? Just hit reply. I'd love to hear from you.

Happy investing!
Josh

The information is provided for educational purposes only and does not constitute financial advice or recommendation and should not be considered as such. Do your own research.