This commentary was issued recently by money managers, research firms, and market newsletter writers and has been edited by Barron's.

All Eyes on Taiwan's Exports

A.M. Charts for May 9 BMO Capital Markets May 8: We received another piece of evidence that many American companies remained in stock-building mode last month. Taiwan's goods exports grew 29.9% year over year in April, nearly doubling the consensus expectation of 16%. Notably, shipments to the U.S. climbed 29.5% year over year thanks in large part to red-hot demand for high-tech goods.

A breakdown by product shows that shipments of information, communication, and audiovisual products (i.e., computers, notebooks, monitors, etc.) surged 60.5% year over year. Meanwhile, semiconductors were up 28.2% year over year. It's no surprise that these categories are doing well as they have been given a temporary reprieve from President Donald Trump's tariff wall. We suspect that American companies will continue to load up on goods from the island since it still faces the threat of a 32% reciprocal tariff.

Otherwise, it seems like Taiwan's economy is fairly well positioned to cope with higher U.S. tariffs. The AI boom has amplified global demand for computers and semiconductors, and the island is likely to remain a key supplier of such goods. Real GDP grew a hefty 5.4% year over year in the first quarter, and is unlikely to slow much in Q2.

Art Woo

Air Pockets and Turbulence

U.S. Economic Outlook May 2025 Wells Fargo May 8: The economy isn't out of the woods yet. Our forecast looks for the big drag from trade that swamped robust domestic demand in Q1 to reverse in the remaining quarters of the year, with domestic demand coming down and net exports providing a modest, but fading, lift through year end. The upshot is a bumpy ride for GDP growth.

-- We anticipate some stomach-turning turbulence this year, particularly in the third quarter, when an air pocket in consumer and business spending follows in the wake of the pre-tariff spending surge that likely carried into early Q2. Look out for an outright decline in GDP growth during that period.

-- Although the monthly jobs reports have revealed an orderly slowing thus far, we look for the early signs of moderation already evident in the labor market to slow to a standstill by late summer and a rising unemployment rate by year end.

-- The last time FOMC policymakers were in a similar spot with the labor market was in September 2024, and they lowered the fed-funds rate by a total of 100 basis points [one percentage point] over the course of three meetings at the end of that year. We forecast a nearly identical cadence in our updated forecast, with the top end of the range for the fed-funds rate coming down to 3.50% in the second half of this year before policymakers pivot back to a familiar holding pattern throughout 2026.

-- A key difference this autumn compared with last autumn is that inflation is apt to be rising rather than coming down. We expect the Fed to look through the price level increase caused by tariffs, provided that long-term measures of inflation expectations remain anchored.

Jay H. Bryson and Team

Reading the Put/Call Ratio

Chart in Focus McClellan Financial Publications May 8: At the bottom of the "Liberation Day" Trump Tariff Crash, sentiment was very bearish, with a lot of options traders favoring put options versus calls. That sent the five-day simple moving average of the daily Put/Call Volume Ratio to its highest reading since August 2024, when a rate hike by the Bank of Japan scared everyone by disrupting the "yen carry trade."

Prices have rebounded nicely since the April 8, 2025, low, and with that price rebound there has also been a rebound in trader sentiment. This same five-day MA of the Put/Call Ratio has fallen back down to the lower threshold, a place that pretty reliably marks at least short-term price tops.

Call options are a bullish bet on prices rising, so when traders are feeling bullish, they want to trade more calls than puts, since a put is a bet on lower prices. But the Put/Call Ratio only tells you about a condition; it isn't a trading signal. And it won't tell you when that condition will matter.

Tom McClellan

Antidote to Stagflation? Gold.

Articles Ahead of the Herd May 7: The U.S., and perhaps large parts of the global economy, are on the road to stagflation. What are good investments in a stagflationary environment? The answer is gold and silver.

Gold does well in stagflationary periods and outperforms equities during recessions. The gold price climbed during the stagflationary 1970s, surging from $100 per ounce in 1976 to around $650 in 1980, when CPI inflation topped out at 14%.

Of the four business cycle phases since 1973, stagflation is the most supportive of gold, and the worst for stocks, whose investors get squeezed by rising costs and falling revenue. Gold returned 32.2% during stagflation compared with 9.6% for US. Treasury bonds and negative 11.6% for equities. In six of the past eight recessions, gold outperformed the S&P 500 by 37% on average.

When inflation started rising in March 2021, gold was trading around $1,700 an ounce. Over subsequent months, both gold and inflation headed higher, with the CPI topping out at 9% in July 2022 and gold reaching $2,050 in March 2022.

Bad economic and geopolitical news leads to precious metals being an attractive alternative to stocks.

Rick Mills

Fed: The Risks "Have Risen"

Below is an excerpt from the Federal Reserve's FOMC statement, issued after this month's Federal Open Market Committee meeting. The Fed left interest rates unchanged in a target range of 4.25%-4.50%.

May 7: Uncertainty about the economic outlook has increased further. The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.

To be considered for this section, material, with the author's name and address, should be sent to MarketWatch@barrons.com.

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

May 09, 2025 18:15 ET (22:15 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.