by Bryan Perry
April 22, 2025
As volatility rules the investing landscape, there are tariff cross currents, conflicting soft and hard economic data, little if any forward corporate guidance, a ticked-off President (at his Fed Chairman), and a first-quarter earnings season that so far has offered glimmers of hope that a recession is not in the cards.
The situation is so fluid that no one can blame investors for wanting to maintain a lower market weighting by holding some powder dry, but at the same time, no one wants to be out of the market if Trump and Xi decided to start negotiations and suddenly the market rallies 5%-7% in reaction.
Investor surveys are downright negative, reflecting fears of inflation being re-stoked and job security being under threat. Of the Fed governors that have publicly spoken about tariffs, the consensus is that they are net inflationary, with Jerome Powell being last week’s most prominent exponent of this position.
Trump has no friends here, especially with his latest comments. It is no secret that Trump sees the Fed’s 50-basis point cut before the election as the Fed playing politics against him, but at the time, the unemployment data softened, and downward revisions of the prior month and year were a bit alarming.
As the job market did not fall apart, the recent weak consumer surveys point to some traditional concerns as well as a new one – AI replacing multiple lines of work – as reasons to be fearful about job security. The probability of a higher unemployment rate within a year surged to 44%, the highest level since April 2020. Also, 15.7% of respondents expressed concerns about losing their jobs in the next year. Inflation expectations have risen, and pessimism about household finances and income growth has increased. The ongoing trade wars and tariffs are also fueling inflation concerns and adding to economic unpredictability.
To the consumer’s credit, these are all very legitimate concerns. However, despite these concerns, and the financial media talking up recession and stagflation, the broader economy and job market have shown resilience, but the pessimistic outlook could impact consumer spending and business investments, characterized by a “wait and see” attitude that exemplifies a typical herd mentality.
One indicator that investors should be watching like a hawk is the weekly jobless claims data, which tends to track the labor market in a more “real time” sense. Considering that much of the tariff details that were announced in early March went into full effect earlier this month, one could argue that employers would have taken some early actions and tightened their work forces as a precaution. Conversely, the latest weekly initial jobless claims for the week ending April 12 decreased by 9,000 to 215,000, with the four-week moving average also trending lower. For now, the labor market looks intact and healthy.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
It is crucial that the 10-year Treasury market also maintains a healthy-looking chart. The yield on the benchmark 10-year rate closed last week with a 4.33% yield, down from 4.60%, where Powell and other Fed officials recently addressed concerns about banking liquidity, emphasizing that markets are functioning as expected, despite heightened uncertainty.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Powell noted that the bond market remains orderly, and there is no immediate need for intervention. He also highlighted the importance of maintaining price stability to ensure long-term economic health. This seems a bit odd, considering that the 90-day pause was announced the same day corporate bond spreads were widening out sharply where the market was anything but stable.
In any regard, seeing the 10-year Treasury yield moving lower again last week is a positive development and the investment grade corporate debt market has also firmed back up to some extent with more work to be done, especially in the junk bond arena. Building on this recent recovery in the fixed income market will depend heavily on the economic calendar in the next two weeks.
Leading up to the May 7 FOMC meeting and the fact that the tariff wars will be closing in on a full month of activity, all this data will likely make for another two weeks of market turbulence. Over the next two weeks, most of the companies that matter the most to the market’s plumbing will be reporting Q1 results and talking about the current state of business conditions with zero expectations of forward guidance.
Key reports for investors to hone in on during the next two weeks include S&P Global Manufacturing and Services PMI for April, Initial Claims for the week ending April 19, Conference Board Consumer Confidence, Advanced GDP for Q1, ADP Employment Change, PCE Prices, Non-Farm Payrolls, Factory Orders, CPI and PPI for April and Retail Sales for April. (I’ll include the complete schedule below. You can save this list as a guide for key indicators coming out between tomorrow, April 23, and May 7th).
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
As this list implies, when the Fed meets, they and investors will have a higher degree of clarity regarding the current state of the economy as well as the tariff situation. While soft data put the market on its heels, it is now up to the hard data to prove the recession and stagflation camps wrong – and time will soon tell.
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