Weekly Market Report: April 18th, 2025
The holiday shortened trading week was still consumed with tariff and trade narratives including signs of progress with Japan and the EU. Volatility and interest rates remained stable for the time being as constructive hard economic data is countered by more troubling soft economic data. The S&P 500 closed down 1.5% while non-U.S. markets again fared better. Bond yields gave back some of the prior week’s rise with rates falling 15bps-20bps across the belly of the curve, leaving 10yr yields at 4.34%. The USD continued its weakening streak, closing down 0.73% while commodities rose on the back of a 5% increase in the price of oil, closing at $64.68/bbl.
Market Anecdotes
- A quick look at valuations and the term premium reinforces relatively compelling equity market valuations
overseas, ranging from 10.3x to 13.7x, versus U.S. markets at 19.8x but the rise in UST term premium has
garnered attention. - The trade war with China is thriving but negotiations with 14 countries are happening as well.
- China ordered all airlines to halt purchases of U.S. equipment and to not accept Boeing plane deliveries. The U.S. is taxing all Chinese owned or built ships for docking in the U.S. and ordered Nvidia to cease sales of H20 chips to China.
- The Administration blinked again last week, announcing a number of exempted products, primarily technology from Asia, but they also published notices of request for public comment on Section 232 investigations of pharma, semiconductor, and critical minerals trade.
- Two lawsuits have been filed, challenging POTUS ‘use of IEEPA for tariff powers.
- Hard data, backward looking by default, remains relatively sanguine while soft data is indicating turbulence across both consumers and businesses.
- Cliff Clavin noted that in June 1930, a petition signed by over 1,000 economists was presented to Hoover urging him not to implement tariffs, which he proceeded with regardless.
Bullish Asset Allocation Narratives
- Bond markets and public opinion have and will continue to enforce the “Trump put” as adverse economic policies persist.
- A slowdown or mild recession remains much more likely than sustained stagflationary given the man made and political nature of the current climate.
- Stagflationary tariff policies are unlikely to persist in the intermediate or long term after which fiscal stimulus (tax cuts) and deregulation may well resume the bullish narrative.
Bullish Asset Allocation Narratives
- Soft data is growing increasingly troublesome including slowing labor markets and negative business and consumer sentiment which have the potential to lead to a self-fulfilling decline in business spending and hiring as well as personal consumption.
- The rare “trifecta selloff” (USD, U.S. equities, U.S. bonds) in 2025 has left little room to hide from the overall risk aversion trend and is likely to persist until heightened uncertainty surrounding trade policy, monetary policy, and fiscal policy begins to clear up.
- A continuation of adverse trade policy and trade wars will accelerate deterioration in sentiment and economic growth, representing a key risk to markets and the overall economy.
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