Weekly Market Report: April 25th, 2025
Marginally constructive tariff headlines, bolstered Fed independence, and encouraging economic data translated to a healthy week for global equity markets. Signs the U.S. administration is looking for an off ramp on trade tensions and the consummation of trade deals were welcomed by markets. Additionally, first quarter earnings reports are providing an encouraging backdrop for equity markets. Last week overall, we saw global equity markets close up 3%-5% while interest rates moved marginally lower. Reduced volatility also translated to smaller moves in the USD (+0.10%) and commodities (-0.25%).
Market Anecdotes
- While it’s been a volatile first 100 days of the new U.S. administration, stock and bond market vol fell last week thanks to improved tariff headlines and healthy earnings and economic reports.
- What was obvious to most seems to be slowly taking shape within the U.S. administration which is that an off ramp to trade tensions cannot come soon enough. Signs of progress with South Korea, Japan, India, and China were noted last week with investors hoping for more.
- News of reported discussions with Japan and South Korea regarding investment in Alaska LNG export facilities and Norwegian sovereign wealth payments to the U.S. confused markets, as a reminder to be hesitant to focus too much on headlines related to trade negotiations.
- UST auction data published last week revealed normal foreign demand but also a notable drop in demand for maturities under five years, which may signal waning foreign central bank appetite.
- Policy uncertainty may be translating to reluctance of non-U.S. investors to invest in U.S. assets, contributing to falling USD and UST demand. While the “Sell America” move is likely overdone, the weakening USD may have further to go simply on a mean reversion basis.
- FOMC members acknowledged economic risks and potential for job losses relating to tariff policies last week alongside a clear willingness to respond in June as data informs the trend.
Bullish Asset Allocation Narratives
- Certain administration officials, bond markets, and public opinion have and will continue to pressure POTUS away from growth adverse trade policies.
- Tariff policies are unlikely to persist in the intermediate or long term given the potential for swift reversal of tariff policies, fiscal stimulus (tax cuts), and business friendly deregulation.
- A brief growth slowdown remains much more likely than sustained stagflation given the man made and political nature of the current climate.
Bearish Asset Allocation Narratives
- Heightened and persistent uncertainty is translating to concerning indications in hiring intentions and negative sentiment risking declines in employment, capex, and consumption.
- The rare “trifecta selloff” (USD, U.S. equities, U.S. bonds) is challenging for portfolios and may persist until trade policy, monetary policy, and fiscal policy directions become clearer.
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