Shesa's MAY 2025 Investment Blog
By Shesa Nayak
U.S. Stock Market Update
The U.S. stock market in 2025 has been marked by significant volatility, primarily driven by trade policy uncertainties, particularly tariffs, and macroeconomic factors like inflation, Federal Reserve actions, bad economic numbers, anticipated higher inflation, lack of consumer confidence and sentiment. The Trump policies - so called liberation day brought chaos. However, the market seems to have turned the table and has been on upswing for last couple of weeks.
The uptrend started since 21st April, about two weeks ago. During this time the S&P and Nasdaq had consecutive 9 days upward movements which is a record in last 100 years of stock market history. And both the indexes went up over 10% in last 9 days. It all started as Trump paused tariff for 90 days, positive news on trade negotiations, reasonable economic numbers, fantastic earnings and guidance from some top tech AI companies. Furthermore, the expectation of trade deals with other countries, good employment report and some de-escalation of trade war with China, all these contributed to the market breakthrough. What it means is that, investors confidence is building and bringing the momentum back for the growth stock. We saw fantastic earnings from companies like Netflix, Meta and Microsoft. Amazon, Google and Apple had also a good quarter. I will provide more update on earnings later. The earnings further consolidated the fact that AI is well and alive. It’s a multi-year phenomena. But that does not mean that AI stocks will keep going up always, hence we need to act in a thoughtful way.
Market Recovery: The U.S. stock market is in a volatile recovery phase and after the key tech companies earning there seems to be a growing optimism about tech, particularly AI and cloud computing, as investors bet on long-term growth despite tariff risks. The tariff pause announced on April 9 has reduced immediate fears of supply chain disruptions for tech firms, encouraging investment flows.
Economic
GDP: The Q1 2025 GDP was released today which revealed that the economy contracted at an annualized rate of -0.3% vs. 0.4% expected. This is the first quarter of negative growth since Q1 2022. The Nonfarm payroll employment increased by 177,000 exceeding expectations of around 138,000. The unemployment rate remained steady at 4.2%, in line with forecasts. However, please note that But the liberation day impact may show in the next month’s job report and also there may be some impact on next quarter corporate earnings since lots of consumers have front-loaded buying stuff with fear of future tariff and cost increases similar to COVID situation.
Federal Reserve
The good news was that tussle between Trump and Jerome Powell has abated. The FOMC meets on May 6-7. I do not anticipate any rate cut this time but visualizing the current economic environment they may give a dovish view about a possible rate cut in June.
The main question remains, what to expect from the stock market next? Well, I will share some of my thoughts but before that let’s take a look at the Indexes.
Indexes | Close TUE 12/30/24 | Close TUE 4/8/25 | Change in 2025 | % Change in 2025 | All Time High | From All Time High | % from All Time High |
DOW | 42,544.22 | 41,317.43 | -1,226.79 | -2.97% | 45,073.63 | -3,756.20 | -8.33% |
S&P 500 | 5,881.63 | 5,686.67 | -194.96 | -3.43% | 6,099.97 | -413.30 | -6.78% |
NASDAQ | 19310.79 | 17,977.72 | -1,333.07 | -7.42% | 20,204.58 | -2,226.86 | -11.02% |
Russel 2000 | 2,230.16 | 2,020.74 | -209.42 | -10.36% | 2,466.49 | -445.75 | -18.07% |
SOX (Semi) | 4,979.93 | 4,397.05 | -582.88 | -13.26% | 5,931.83 | -1,534.78 | -25.87% |
Economy News
- Interest Rate: 4.5%
- GDP Annual GDP: 2%, -0.3% in March 2025.
- Inflation: 2.4% previous: 2.8% (YOY)
- NonFarm Payroll: 177,000 in April vs. 138,000 expected. Unemployment: 4.2%
- Retail Sales: down 1.4% in March
- Consumer Confidence Index: 52.2 (Apr) vs. 57% (Mar)
- ISM Manufacturing: 50.2 (Mar), vs. 52.7% (Feb)
- ISM Services: 48.7 indicating contraction of economy
- US Mortgage Rate: The 30-year fixed around 6.76%
Q1 earnings
Earnings: For Q1 2025 (with 72% of S&P 500 companies reporting actual results), 76% of S&P 500companies have reported a positive EPS surprise and 62% of S&P 500 companies have reported a positive revenue surprise. The earnings growth rate for the S&P 500 is 12.8%. If this earnings continues then it will mark the second consecutive quarter of double-digit earnings
growth
Valuation: The forward 12-month P/E ratio for the S&P 500 is 20.2. This P/E ratio is above the 5-year average (19.9) and above the 10-year average (18.3).
What to expect from the stock market and my current strategy
Making a judgement about the stock market these days is herculean task and error-prone. However, the market has stabilized and we saw some spectacular upswing in last 9 trading days where indexes went up more than 10% and recouped some of the investors losses. Whenever market has gone up in such a fashion in the past, the stock market has always gained over 20% in the next one year. The stocks rallied over the next 12 months every time. Oftentimes, those forward 12 month returns were in excess of 20%, including the three most recent times the signal was triggered (late 2020, early 2016, and late 2011). So, if we see the history then it’s highly likely that the trend should continue. If you read my blog or attended the investment meet, I guess more than 90% of those stocks that I mentioned have beaten the market handsomely. As I said, the FOMC meets on May 6-7. I do not anticipate any rate cut this time but visualizing the current economic environment they may give a dovish view about a possible rate cut in June. In addition, we may see further progress on trade talks and more earnings next week. The technical signals shows that the Nasdaq has recovered above its 200-day moving average and the S&P 500’s thrust signal (indicating a potential bottom) suggest bullish momentum, with tech stocks driving index gains. If we were out of market then we might have missed some huge bounce in last few days. That’s the reason, I am never out of the market. Because by the time we realize it may be too late. And we may think that it’s too late now. In the whole process, a major market uptrend may be missed and it would be difficult to recoup the losses and/or beat the market. Having said that, there is no need to be over-excited and jump with both hand and then some bad news hits and lose all our gains. We have seen what happened to the market a few weeks ago.
- In May: we can expect some trade deals with allies like India, Japan, South Korea etc. We can also expect for a dovish pivot from the Fed and a possible rate cut in June.
- In June: probable rate cut and possible trade agreement with China and EU.
- July: Passage of a major tax cut package in Washington and deregulations by Trump administration. Late July to August: Q2 earnings may potentially benefit from rebounding macro clarity (trade deals, rate cuts, tax cuts, etc).
But let’s not forget that market never goes up straight. There would be many pullbacks and rocky ride in between. Whenever the tax cut happens, after that we may see some market volatility or pullback/correction. However, in my view any pullback in next few days/weeks may be buying opportunity. Probably, buy the dip, trim on the up..
Bullish Scenario: If U.S.-China trade negotiations progress, tariffs are moderated, and earnings hold up, the S&P 500 could climb to above 6,600 by mid-2026, supported by AI adoption and potential Fed rate cuts.
Bearish Scenario: If tariffs are reimposed at high levels, inflation spikes, and consumer spending weakens then we may see another downturn.
As part of my strategy it’s always better to plan for the best but prepare for the worst. Of course, how well we the retail investors are prepared, we are the small fish in the big ocean of sharks, Personally, I am invested to a large extent but as a strategy I try to make it a point to have some cash to leverage and capitalize any pullback.
Secondly, if market is good, we should have some long term position but also take the opportunity to trade (not day trade). That way, we can recycle/re-utilize our available resources to get better return on investment (ROI).
Going forward, we may see many important events in the next few months. But please note that these are simply a projection and not true prediction. We should not forget to hedge our portfolio in such environment. If you want to see my list of stocks that I like then please read my April 2025 blog.
Stock Market TOP sectors for 2025
|
Sector |
YTD Performance in %age |
|
Consumer Staples (Best) |
5.5% |
|
Utilities |
5.22% |
|
Financials |
2.92% |
|
Real Estate |
2.77% |
|
Healthcare |
0.57% |
|
Consumer Discretionary (Worst) |
-12.37% |
You can click below link to view complete sectorial performances:
Source: https://www.barchart.com/stocks/sectors/rankings?timeFrame=Ytd
Now let me discuss this month’s hedging pick for my Blog Portfolio.
Broadcom (AVGO)
Broadcom Inc. (AVGO) is a leading semiconductor and infrastructure software company, excelling in AI chips, networking, and enterprise software (e.g., VMware). The company operates in two segments, Semiconductor Solutions and Infrastructure Software. Broadcom Inc. was founded in 1961 and is headquartered in Palo Alto, California.
As many of my WhatsApp group and the attendees of Investment Meet group knows, I like Broadcom (AVGO) since a long time. However, I did not have the opportunity to put it on my blog portfolio. I guess it’s time to write it now. If any stock that I like in AI side after Nvidia (NVDA) then AVGO is the next one.
Why do I like AVGO?
As I was telling from the beginning of the year, AVGO is not only an AI Chip company but also an AI software company after the acquisition of VMWare. However the stock had a terrible time in last few months. The stock has faced volatility in 2025 due to tariff concerns but recently it has rallied since the beginning of April, to be specific April 7. The stock has gone up from the low of $139.17 to $203.64 that’s bounce of 46%.
• Strong AI Growth: Q1 2025 revenue rose 25% year-over-year to $14.9 billion, with AI chip revenue up 15% sequentially to $4.1 billion, comprising half of chip revenue. Analysts forecast 55% AI revenue growth through 2027, targeting a $60–90 billion market.
• Analyst Optimism: Of 34 analysts, about 30 rate AVGO as a Strong Buy, with a consensus 12-month price target of $239.78–$259, implying 18–27% upside.
• Financials: Despite a 58% earnings drop in 2024 to $5.9 billion, 2025 EPS is forecast at $5.69, with revenue growth of 14.39% annually through 2027. AVGO has $11.1B in cash and 1.2% dividend yield adds slightly to the income appeal.
• Market Position: Broadcom holds around 70% share in AI data center Ethernet switches and benefits from a 20,000+ patent portfolio, ensuring competitive dominance.
As I have said many times AI is not a hype, it’s a multi-year phenomena that we have been witnessing. And I believe AVGO is in a great position to capitalize on this AI growth.
Strategy
The stock is currently trading at $203.64. The 52-week high for this stock is $251.88. So, that’s a discount of about 20% from its high. As most of my blog reader know I am growth investor and usually I never buy any stock at once. I always buy in small quantities in a phased manner. And I use such opportunity to accumulate and build my portfolio position. Nobody can predict the top or bottom of a stock. Particularly, growth companies stocks are very volatile. When there is bump, it’s extremely important to take some chips out of the table and book some profits to mitigate risks and generate some cash.
Risks:
The July 8, 2025, tariff pause expiration could reimpose high tariffs of 145% on China unless negotiated by U.S and China. Please note that AVGO fell about 40% from its January 2025 peak due to tariff fears. The stock still seems to be little expensive with a forward P/E of around 30. So, if the market pullback then it may be hit little hard. One of the major risk that I visualize is, it generates about one third of its revenue from China and Hongkong. If tariff negotiations fails then there may be 10-15% impact on it revenue and that may certainly impact the stock, Hence, it’s suitable for growth investors who wants to take some risks. The risk averse investors must take a cautious look.
My final thoughts
The stock market has become chaotic. However, we have seen a big turnaround and the AI stocks have rebounded in a major way. The AI is here to stay for many years. It does not mean stock will keep going up for ever. However, I think it’s time to start accumulating this stock slowly for the longterm. This has a great potential for long term and one of the stock that I like in the technology sector. So, I may keep accumulating. If I see any red flag on any of my holding then I won’t hesitate to get out irrespective of how great the company may be. Don’t be in love with any of the stock, take the current opportunity and future potential and decide accordingly.
A quick look to the Big Tech Earnings
Netflix (NFLX)
- Earnings per share: $6.61 vs $5.71 expected.
- Revenue: $10.54 billion vs $10.52 billion expected.
- Guidance: $11.04B vs. 10.98B.
- My view: Netflix has been going strong despite very challenging and uncertain environment. I like this stock.
META
Reported Q1 stronger-than-expected revenue in the first quarter and provided second-quarter guidance that was in line with Wall Street’s expectations.
- Earnings per share: $6.43 vs. $5.28 expected, up 16%.
- Revenue: $42.31 billion vs. $41.40B expected, up 35%.
- Guidance: Q2 sales will be in range of $42.5B - $45.5B in line with the WS expectations.
My view: Though it continues to lose on it VR revenue still going strong. I like this stock.
MSFT
- Earnings per share: $3.46 vs. $3.22 expected, up 18%.
- Revenue: $70.07 billion vs. $68.42 billion expected, up 13%.
Guidance: Revenue $73.15 to $74.25 billion vs. $72.6B expected. The company sees 34% - 35% in Azure growth vs. 31.5%. This is a good sign.
My view: overall it was a good quarter and good guidance, particularly for Azure. But I may have to wait for some pullback before taking any new position.
Robinhood (HOOD): Beat in top and bottom line.
- EPS: 37 cents per share vs. 18 cents last year, up more than 100%.
- Revenue jumped 50% to $927 million.
- My View: I like this stock in financial space.
AMZN
- Earnings per share: $1.59 vs. $1.36 estimated
- Revenue: $155.67 billion vs. $155.04 billion estimated
- Amazon Web Services: $29.3 billion vs. $29.42 billion expected
Guidance: Amazon expects sales this quarter to be between $159 billion and $164 billion, representing growth of 7% to 11%. Analysts were expecting $160.9 billion.
My view: The company may be impacted by tariff but still it looks good.
AAPL
- EPS: $1.65 vs. $1.63 estimated by LSEG
- Revenue: $95.4 billion vs. $94.66 billion estimated by LSEG
- iPhone revenue: $46.84 billion vs. $45.84 billion estimated
My View: Apple had a good quarter but the company said it is expecting mid-single digit revenue growth. If the tariff situation does not get better it may impact Apple in a big way. Hence, I will be cautions in investing new money in Apple at this time.
Shesa’s Blog Portfolio (As of MAY 4, 2025)
Equity | Suggested Price | Current Price | Suggested Date | % Change | My View (see disclaimer) |
STOCK (All prices are in USD) | |||||
12.9 | 205.35 | 1/25/13 | 1492% | HOLD | |
47 | 597.02 | 11/13/13 | 1170% | Accumulate on dip | |
77.18 | 479.92 | 12/12/13 | 522% | HOLD | |
15.58 | 189.98 | 4/12/14 | 1119% | Accumulate on dip | |
13.48 | 99.25 | 11/25/18 | 636% | HOLD | |
54.59 | 161.77 | 5/25/20 | 196% | HOLD | |
23.9 | 114.5 | 2/13/22 | 379% | Accumulate on dip | |
290.25 | 287.21 | 5/1/22 | -1% | Small accumulation on dip | |
8.87 | 9.59 | 4/6/23 | 8% | Company is SOLD | |
15.66 | 13.29 | 4/6/23 | -15% | Small accumulation | |
123.25 | 165.81 | 5/21/23 | 35% | HOLD | |
20.49 | 124.28 | 11/19/23 | 507% | HOLD | |
142.06 | 187.7 | 3/31/24 | 32% | Accumulate on dip | |
85.74 | 31.71 | 4/28/24 | -63% | SOLD | |
10.48 | 6.35 | 4/28/24 | -39% | Accumulate long term | |
51.92 | 60.89 | 8/11/24 | 17% | HOLD | |
76.16 | 74.52 | 11/11/24 | -2% | Accumulate on dip | |
6.76 | 3.97 | 1/2/25 | -41% | Accumulate | |
37.46 | 21.28 | 2/18/25 | -43% | Accumulate on dip | |
39.79 | 27.71 | 4/6/25 | -30% | HOLD | |
203.64 | 203.64 | 4/5/25 | 0% | NEW ADDITION | |
ETF | |||||
27.82 | 50.09 | 8/16/15 | 80% | HOLD | |
MUTUAL FUND | |||||
59.45 | 158.03 | 12/20/14 | 166% | HOLD | |
9.05 | 18.33 | 1/15/16 | 103% | HOLD | |
43.66 | 59.36 | 9/24/17 | 36% | HOLD | |
Economic report this week (5/5 - 5/13)
Monday, 5/5: ISM services
Tue, 5/6: U.S. trade deficit
Wed, 5/7: FOMC meeting
Equity Sold since my Last Blog
Super Micro Computer (SMCI)
Here is my YouTube channel link: https://www.youtube.com/channel/UCt7oLVUMG3NkJUzAVUzl4Tg
Disclaimer: This blog is meant to provide my opinion only. The information provided is to the best of my knowledge but may not be accurate. I do NOT provide any professional recommendation to buy/sell any stock, ETF, mutual fund, or any other security(s). As an investor, it’s your hard-earned money and you decide what is best for you. The above are merely my own opinions on what I do. Please contact a professional money manager to buy/sell any security. I do not charge any fees or commission by writing the blog except anything from Google AdSense. I have position(s) on whatever security I put on my blog portfolio and avoid including any security that I do not own or follow. Anyone buying or selling the equities mentioned here must do at their own risk.
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