Weekly Market Report: October 17th, 2025

Markets last week remained in a partial economic data vacuum due to the government shutdown but still had the first batch of third quarter earnings reports, ample Fed speak, and some subtle AI and credit undertones to shape trading. The week began with an S&P 500 recovery rally that held on for a 1.7% gain and international developed (+2.5%) and emerging (+4.3%) participated and benefitted from a weaker USD (- 0.55%). Bond yields fell, reflecting slowing growth and perhaps echoed some credit and AI momentum
concerns.

Financial Market Highlights

• Third quarter earnings season kicked off last week on sound footing with a 7.5% bottom line expectation on positively skewed guidance and modest upward street revisions. 
• Signs of credit stress at U.S. regional banks (ZION , WAL ) kept percolating last week. While equity markets have remained relatively sanguine, global high yield spreads have begun to widen.

Economic Highlights

• An Atlanta Fed 3.9% Q3 GDP forecast would typically coincide with accelerating employment yet the consensus outlook is currently centered on a decelerating growth outlook with capital expenditures , personal consumption, and the housing market; all key questions going forward.
• Sell side analysis of state level unemployment claims fell from 235k to 217k last week and thanks to social security statutory requirements, markets will get a CPI reading on Friday.

Policy Highlights

• With no resolution in sight on the government shutdown, the economic data vacuum continues.
• China is maintaining two trade war fronts with the Dutch government blurring the business and national security line further last week by taking control of a Chinese owned semiconductor company, Nexperia, due to “serious governance shortcomings.” This in addition to recent U.S./China narratives.
• New research from Alvarez & Marshall suggests deregulation in the banking sector is set to unlock a significant amount of lending capacity, boosting both EPS and ROE across the industry.

Bullish Asset Allocation Narratives

• AI momentum, healthy earnings and persistent growth continue against a relatively liquid backdrop.
• Monetary, fiscal, and regulatory policies including a dovish leaning Fed, business friendly deregulation, and front end loaded deficit spending package are all supportive for risk assets
• Tariff tax policy uncertainty is fading with administration officials aggressively pursuing

Bearish Asset Allocation Narratives

• Market reliance on AI momentum coupled with skepticism surrounding circular AI driven capex, realized productivity enhancements, and associated valuation/earnings considerations.
• A monetary policy mistake by the Fed of loosening too quickly given above target inflation, resilient growth, and persistently low unemployment.
• Risks to consumption given normalized interest rates, low growth labor markets, and a fatigued consumer balance sheet.
• Tariff levies moving to multi-decade highs and associated pressure on inflation, profit margins, and consumers with longer-term implications on growth, trade, and consumption.

Weekly Market Report: June 6th, 2025

Last week equity markets welcomed a soft inflation print as strengthening the case toward future Fed rate cuts but a significant escalation of conflict in the Middle East on Friday quickly dampened risk appetite globally. WTI oil spiked 13% to $72.98 and UST yields closed lower across the curve. Global equity markets closed lower for the first time in three weeks while emerging markets (0.40%) were up.

Market Anecdotes

• Armed conflict escalated in the Middle East last week as U.S.-Iranian diplomatic efforts failed and Israel launched strikes on Iranian military assets and nuclear infrastructure. Markets responded logically with surging oil prices and a risk-off tone across equity markets.
• Treasury auctions last week saw a relatively healthy 10yr where it traded through pre-auction yield for a fourth consecutive issuance. However, the FT highlighted the notable rise in long-term government bond yields and the weak USD which is back below its early April low.
• Indications of progress with U.S.- China trade talks last week were constructive but garnered a muted market reaction given renewed tariff threats from Trump, strategic tensions with China, and high effective overall tariff rates still in place.
• Bessent indicated in Congressional testimony last week that for the 18 major trading partners currently in negotiations, the deadline for reciprocal tariffs will be pushed out, assuming the U.S. feels negotiations are happening in good faith.
• Economic release highlights last week included a benign May inflation reading alongside improved confidence and sentiment in the NFIB and UofM indices respectively.
• Inflation, growth, and labor market data didn’t change market expectations for next week’s FOMC meeting where ‘wait and see’ is the guidance. Markets are not pricing in any rate cuts until the September meeting (67%), which is effectively a coin toss given how far out it is.
• In a reminder that private equity is no silver bullet to outperformance, the State Street private equity index through year end 2024 is underperforming the S&P 500 over 1-, 3-, 5-, and 10-year periods.

Bullish Asset Allocation Narratives

• Barring any inflation/interest rate surge, growth, employment, and the business cycle look to be simply cooling rather than falling into the prevailing recession narratives.
• A stimulative U.S. budget deal and business friendly deregulation are continuing to take shape in D.C. which should bolster growth dynamics in the U.S. as long as bond markets sign off.
• Trump has demonstrated a finite pain threshold with tariff policy induced angst as administration officials, financial markets, and public opinion press for resolutions to trade disputes and policy uncertainty. While not over, peak tariff panic is likely in the rear view.

Bearish Asset Allocation Narratives

•  The Fed may ultimately need to maintain restrictive monetary policy for longer than otherwise necessary due to resilient growth, tariff inflation pressures, and healthy labor markets.
• Upward pressure on U.S. interest rates due to fundamental and technical factors present unique challenges for politicians, investors, and economic growth with wide ranging implications.
• Policy uncertainty leading to negative business and consumer sentiment poses risks to employment (deferred hiring), business capital expenditures, and personal consumption.

Weekly Market Report: June 6th, 2025

Last week U.S. equity markets passed the 20% recovery mark, with the S&P 500 closing within 2.5% of the February record high. Constructive May job numbers and indications of the U.S.-Sino trade discussions fed the positive narrative with budget negotiations and reaffirmed Fed ‘wait and see’ approach to monetary policy filled the counter narrative. Bond yields moved higher last week with intermediate (2yr-10yr) maturities increasing double digits, pushing the 10yr back above 4.5% at Friday’s close.

Market Anecdotes

• The Mag 7 world has driven the 20%+ rebound in the S&P 500 since the April 8th low, accounting for a whopping 40% of the move.
• Global long bond yields have been moving higher, likely due to higher cost tariff driven restructuring of global supply chains. However, intermediate term yields and bond volatility have remained rangebound, suggesting fiscal deficit concerns have not yet revealed themselves.
• We have a stark mirror image in the first five months of the year with gold up 24.2%, its best initial five months with data back to 1975, and the USD down 8.4%, the second worst initial five months with data going back to 1967. International equities have benefited tremendously.
• As expected, tariff tax policy in April triggered the largest drop in U.S. merchandise trade on record (-19.8%), a dramatic 45% reduction in the merchandise trade deficit, a surge in Q2 GDP estimates, and a 51% increase in the inflation rate (1.35% to 2.05%).
• The CBO published its estimate of the fiscal impact of the OBB at $2.4t, excluding interest and assuming Congress will allow the tax cuts to expire in 5 years.
• Notable economic reports last week included generally positive labor market data and some mixed data in the form of ISM surveys indicating improving employment but rising prices.

Bullish Asset Allocation Narratives

• Barring any inflation/interest rate surge, growth, employment, and the business cycle look to be simply cooling rather than the prevailing recession narratives.
• A stimulative U.S. budget deal and business friendly deregulation are continuing to take shape in D.C. which should bolster growth dynamics in the U.S. as long as bond markets sign off.
• Trump has demonstrated a finite pain threshold with tariff policy induced angst as administration officials, financial markets, and public opinion press for resolutions to trade disputes and policy uncertainty. While not over, peak tariff panic is likely in the rear view.

Bearish Asset Allocation Narratives

• The Fed may ultimately need to maintain restrictive monetary policy for longer than otherwise necessary due to policy uncertainty, tariff inflation pressure, and a resilient labor market.
• Fundamental and technical factors in U.S. bond markets (upward pressure on rates present unique challenges for investors and economic growth with implications across the economy.
• Policy uncertainty is translating to negative business and consumer sentiment posing risks to employment (deferred hiring), business capital expenditures, and personal consumption.

Weekly Market Report: May 30th, 2025

Last week equity markets closed higher globally as tariff legal challenges took shape but late week narratives served reminders that tariff volatility is anything but over. The S&P 500 was up 1.9% to close out an impressive May where markets rebounded from volatility in April. Interest rates took a breather last week, falling 10-12 bps across most maturities taking 30yr yields back below 5%.

Market Anecdotes

• U.S. equity market returns relative to developed international markets requires close examination of productivity, regulation, and innovation over the long run with the former clearly outpacing the latter, despite near term performance separation.
• Bond markets continue to monitor U.S. fiscal package negotiations with great interest.
• Equity markets digested the U.S. Court of International Trade ruling which checked Executive branch tariff powers under the auspice of national emergency, but an immediate appeal from administration lawyers produced a temporary stay.
• Another late week tariff announcement saw Trump increase imported steel and aluminum tariffs from 25% to 50%, a protectionist move for the industry but at a higher price consequence.
• Bespoke noted a change in equity market behavior on days where trade/tariffs/trade wars dominate the news cycle which led to notable underperformance during March (-0.45%) and April (-0.89%) but drove notable outperformance during the month of May (+1.34%).
• Recent Fed developments include a read-out from Powell’s visit to the White House – likely bolstered by last week’s SCOTUS decision insulating the Chair and BOG from removal by POTUS and the release of May’s FOMC meeting minutes which reiterated the Fed’s wait and see stance.
• Last week’s economic release highlights included in-line U.S. PCE inflation (2.1%), surging Japanese inflation (3.6%), an upside revision to UofM consumer sentiment, rising jobless claims, and durable goods orders contracting as expected.

Bullish Asset Allocation Narratives

• A stimulative U.S. budget deal and business friendly deregulation are continuing to take shape in D.C. which should bolster growth dynamics in the U.S. as long as bond markets sign off.
• Trump has demonstrated a finite pain threshold with tariff policy induced angst as administration officials, financial markets, and public opinion press for resolutions to trade disputes and policy uncertainty. While not over, peak tariff panic is likely in the rear view.
• Barring any inflation/interest rate surge, growth, employment, and the business cycle look to be simply cooling rather than the prevailing recession narratives which may ultimately allow the Fed to loosen restrictive monetary policy toward the end of summer/early fall.

Bearish Asset Allocation Narratives

• Fundamental and technical factors in U.S. bond markets (upward pressure on rates) present unique challenges for investors and economic growth with implications across the economy.
• Policy uncertainty is translating to negative business and consumer sentiment posing risks to employment (deferred hiring), business capital expenditures, and personal consumption.
• The Fed overstaying restrictive policy due to pipeline inflation, high inflation expectations, and resilient labor market poses risks to growth.

Weekly Market Report: May 9th, 2025

Last weekend’s pause in Chinese tariffs generated enough positive momentum to send equity markets sharply higher for a third week of the last four. The S&P 500 (+5.3%) and growth stocks led the way while developed international (+1.5%) and emerging markets (+3.0%) also closing higher but held back by a strengthening USD. Bond yields continued to slowly grind higher leaving the 10yr UST bond yielding 4.43%. Commodity markets were mixed with WTI oil closing up 2.4% to $62.49 and natural gas (-12.5%) and gold (-4.3%) both off sharply.

Market Anecdotes

• In 28 trading days since April 8th, we have gone from a near miss bear market and surging recession calls to a positive YTD U.S. stock market, now a mere 3% below a new record high.
• Gradually rising UST yields despite cooling growth, inflation, and trade tensions likely has the FOMC and investors wondering if the proposed tax cut package is stirring the bond vigilantes.
• Tax bill details last week included an extension of the 2017 TCJA, four key POTUS priorities, increase in SALT deduction, and temporary, not permanent, provisions.
• As written, the draft cost of proposed tax cuts carry a 10yr cost of $3.8t, which rises to $5.3t if cuts are extended, taking total costs including interest to $4.6t or $6.2t, respectively.
• Moody’s joined S&P and FItch in downgrading the U.S. on Friday afternoon, making the sub-AAA rating on U.S. debt official. Validity and timing of that move is facing ample criticism.
• The China tariff rollback was welcomed by risk markets with open arms. In part due to the fact that approximately 7% of S&P 500 revenues originate from China which, given average operating leverage of 2x, implies that China accounts for approximately 14% of EPS.
• Tariff off ramps have influenced strategist calls for recession across the board including Strategas, Golman Sachs, and BCA Research all reducing their recession calls last week.
• Consumer sentiment fell to 50.8 in May, the second lowest reading in survey history while 1-year inflation expectations rose to 7.3% and 5-10yr expectations hit 4.6%. Retail Sales slowed from March 1.7% level to 0.1% but did show some resiliency.

Bullish Asset Allocation Narratives

• Administration officials, bond markets, and public opinion have and will continue to push for expedient resolutions to trade disputes. Peak tariff panic is in the rearview mirror.
• A brief growth slowdown remains much more likely than sustained stagflation given the man-made nature of the trade crisis and ability to course correct/save face abruptly.
• Swift course correction on tariff policies, possible fiscal stimulus (tax cuts), and likely business friendly deregulation encourages focus on the intermediate term horizon.

Bearish Asset Allocation Narratives

• Uncertainty can translate to deferring new hires and negative consumer sentiment risking declines in employment, capex, and consumption.
• The Fed overstaying restrictive policy due to pipeline inflation, high inflation expectations, and strong labor market poses risks to growth in the event tariff de-escalation happens quickly.
• Fundamental and technical factors in U.S. bond markets (upward pressure on rates) present unique challenges for investors and overall cost of capital implications across the economy.

Weekly Market Report: May 9th, 2025

Last week, markets digested another large dose of trade/tariff headlines, several central bank policy meetings, a relatively light economic calendar, and the last legs of 1Q earnings reports. Global financial markets were relatively calm with welcome indications of tariff de-escalation the driving force. Equity markets closed the week largely unchanged while interest rates, commodities, and the USD all moved higher.

Market Anecdotes

• The equity market bounce of the prior two weeks consolidated slightly last week with the S&P 500 closing down slightly but U.S. equity markets exhibiting some improving breadth. The S&P is now trading back up to 21x, relatively fully priced given the uncertain path forward.
• The FOMC left rates unchanged in the May meeting given resilient employment and inflation concerns. With hard data not yet capitulating, the Fed is in a wait and see mode, but tight policy and tariff driven growth drag may prove problematic after the tariff shock fades.
• Markets have pushed Fed Funds rate cut expectations back to July, now pricing in three 25bps cuts for the remainder of 2025.
• The PBOC took action last week including a 10bps cut to its policy rate and 50bps cut to reserve requirements. The BoE lowered rates by 25bps to 4.25%.
• Markets eagerly anticipating a stand down in the U.S. vs ROW trade/tariff tax negotiations received the first deal narrative, announcing the conceptual framework of a U.S.-U.K. agreement.
• Another tariff indication last week was POTUS signaling that 80% (60%) may be a better tax than 145% on certain Chinese goods imports.
• The S&P 500 earnings calendar is now 90%

Bullish Asset Allocation Narratives

• Administration officials, bond markets, and public opinion have and will continue to push for expedient resolutions to trade disputes. Peak tariff panic is in the rearview mirror.
• A brief growth slowdown remains much more likely than sustained stagflation given the man-made nature of the trade crisis and ability to course correct/save face abruptly.
• Potential for swift course correction on tariff policies, possible fiscal stimulus (tax cuts), and likely business friendly deregulation encourages focus on the intermediate term horizon.

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 Fed overstaying restrictive policy due to pipeline inflation, high inflation expectations, and strong labor market poses risks to growth in the event tariff de-escalation happens quickly.
• Technical factors in U.S. bond markets (upward pressure on rates) present unique challenges for investors and overall cost of capital implications across the economy.

Weekly Market Report: May 2nd, 2025

Market Anecdotes

• Equity markets continued to rebound from the April tariff tantrum, stringing together nine consecutive positive days bolstered by earnings, labor market strength, and cautious optimism that global trade conflicts are beginning to move toward compromise.
• U.S. – China trade remained under a spotlight last week, moving from a stonewall response from China to reciprocal gestures as each exempted similar amounts of imports.
• One of the initial reverberations from the trade wars include U.S. Q1 GDP contracting 0.3% – vulnerable but not collapsing. The print was largely due to net exports detracting 4.83% but uncertainty also saw personal consumption fall to 1.8% from 4.0%.
• Another trade war ripple effect was evident in April new export orders which plunged to 43.1, a level associated with recessions and Trump 1.0 trade war.
• Bond market characteristics remain a key focus with modest credit spreads, a relatively friendly corporate bond maturity profile, and technical forces in treasuries all under close watch.
• Q1 earnings reports last week, which included most major technology companies, were encouraging with a blended bottom line at 12.8% and top line at 4.8%.
• Encouraging labor market indications came across last week including monthly payrolls, JOLTS, and ECI reports showing continued resiliency, a pillar of strength for investors and policy makers.

Bullish Asset Allocation Narratives

• Administration officials, bond markets, and public opinion have and will continue to push for expedient resolutions to trade disputes. Peak tariff panic is in the rearview mirror.
• A brief growth slowdown remains much more likely than sustained stagflation given the man-made nature of the trade crisis and ability to course correct/save face abruptly.
• Potential for swift course correction on tariff policies, possible fiscal stimulus (tax cuts), and likely business friendly deregulation encourages focus on the intermediate term horizon.

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.
• Pressure on risk assets may persist until trade, monetary, and fiscal policy become more clear.
• Technical factors in U.S. bond markets (upward pressure on rates) present unique challenges for investors and overall cost of capital implications across the economy.

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.

Weekly Market Report: April 18th, 2025

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.

Weekly Market Report: April 11th, 2025

Market Anecdotes

• Crazy gyrations in the bond market and the fear premium fed into a midweek decision to surrender to reality, announcing a 90 day pause (except for China) on the demolition day “reciprocal” tariffs sparking a torrential rally in equity markets. So, what’s in place today?
• Volatility and scope of this market dislocation is unprecedented with the world anxiously awaiting clarity and/or relief through diplomacy, legal/constitutional, fiscal, or monetary.
• The trade war is in full effect as both China and the EU announced retaliatory tariffs. POTUS responded to China’s retaliation with a return volley on Chinese imports, now totaling 125%.
• The Fed provided markets some much needed assurance that it stands ready to step in if needed to maintain market functioning and liquidity.
• FOMC meeting minutes released last week were unremarkable but comments regarding tariff impact on the inflation outlook including “heightened risks of unanchoring inflation expectations”, higher “hurdle to adjusting rates”, and higher inflation outlook are notable.
• First quarter earnings season kicked off on Friday with the Street looking for 7.3% YoY growth.
• Over the past couple of weeks where we’ve seen -11% in two days and +10% in one day, Cliff Clavin reminds investors the best move is no move as opposed to needing to get two moves right, both the sell and the buy.

Bullish Asset Allocation Narratives

• Capitulation levels became evident in bond markets last week while equity markets continue to look for
  clarity and progress toward trade normalization.
• An economic slowdown is widely expected as obstacles to global trade weigh on growth but the scale will be
  determined by the duration of the structural imbalances.
• The private sector (corporate, labor market, consumption) remains relatively healthy.
• Market volatility, poor POTUS approval ratings, or concessions will ultimately trigger trade deals.
• 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.
• Depending on relative weights of tariff related inflation and tariff related sentiment/demand destruction,
  we may see a more rapid removal of restrictive monetary policy .
• Fiscal stimulus and structural reform are set to boost growth in Europe, Germany in particular.
• AI efficiencies are in the early innings of impacting productivity, inflation, and growth.
  Bearish Asset Allocation Narratives
• Risk aversion 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 retaliation would accelerate deterioration in sentiment and
  economic growth, representing a key risk to markets and the overall economy.
• A slowing labor market and negative business and consumer sentiment have the potential to lead to a selffulfilling
  decline in business spending and hiring as well as personal consumption.