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Hello Peter Anthony Hovis,
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S&P 500 to make new all-time highs?
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Can the S&P 500 make a new all-time high this week?!
The benchmark index is about 2% away from making a record high. The momentum is solid after last Friday’s strong jobs report. The market, however, will receive fresh inflation readings this week that could determine whether the bullish sentiment can stay alive.
The May Consumer Price Index (CPI) is expected to show price gains accelerated due to tariffs. Economists expect headline inflation to rise 2.5% annually in May, versus the 2.3% increase seen in April.
The core CPI is projected to increase by 2.9% over the last year, up from the 2.8% rise seen in the prior month. Monthly core prices are expected to rise by 0.3%, above the 0.2% increase seen the previous month.
Bank of America US economist Stephen Juneau expects tariffs to begin affecting inflation in goods, but “modest” effects on services and seasonal factors in the auto sector would keep inflation lower.
- “Tariffs should have a clearer impact on goods, but seasonal factors on autos and modest services will keep a lid on core [price increases],” Bank of America US economist Stephen Juneau wrote in a note to clients.
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In general, Wall Street has moved on from its gloomy outlook on tariffs. President Donald Trump has shown his willingness to tone down on his tariffs if the market reacts negatively, so traders expect the final resolution to be modest.
Meaning? There are lower recession risks than previously thought.
Investors expect corporates and consumers to grow confident and post strong activity over the next few months. If that’s the case, it will support the stock market.
- “The bottom line is that while uncertainty remains high around the eventual tariff outcome, the rate of change on policy headwinds has become much less onerous.” wrote Morgan Stanley chief investment officer Mike Wilson.
- “This has reduced recession risk and is giving corporates and consumers more confidence in the forward looking outlook.”
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Morgan Stanley chief investment officer Mike Wilson (Photo: Bloomberg)
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Until something changes, the market looks poised to make a new all-time high.
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A Dark Horse Stock to Own During an Uncertain Market
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Today’s Stock Pick: LendingClub Corporation (LC)
Lending Club has the operating leverage that makes the stock look like an attractive buy.
It is no secret that consumers have been racking up credit debt. The total outstanding revolving consumer credit was $1.32 trillion in Feb. 2025. Plus, credit card interest rates surged from about 15% to 21.37%.
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Meaning?
Consumers are looking for solutions to consolidate debts and reduce interest rates. In fact, a quarter of Americans direct 20-40% of their paycheck toward paying off credit card debt, said Lending Club.
So, they use companies like Lending Club to reduce their rates.
Lending Club estimates that members save on average over 30% when they consolidate credit card debt through its platform.
Sure enough, Lending Club boasts a Net Promoter Score of 81 even though it is a debt provider.
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Lending Club offers some of the best traits of fintechs and traditional banks. For example, it is a capital-light, high-ROE business (like fintechs) but also has a lower-cost deposit funding business (like traditional banks).
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As a result, the company has a resilient business model due to recurring revenue stream from net interest income and servicing fees while keeping its balance sheet light.
What about the risks?
Lending Club has consistently post lower delinquencies and hardships than its competitive set in all FICO tiers.
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Now, the company is disciplined with expense management. Its efficiency ratio is strong at 66.1%, and it spends only 13.4% of its net revenue on marketing.
As a result, it posted just a 8.7% y-o-y increase in non-interest expense for the most recent quarter.
The pre-provision net revenue jumped 52% in the same quarter, giving it a powerful operating leverage.
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Bottom line: Lending Club has demonstrated its ability to execute operating leverage through disciplined capital management. With more consumers struggling with debt, Lending Club may have an opportunity to assist them with its products.
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