Economic Update 4-07-2025
Economic data included the announcement of substantial global tariffs by the U.S. administration, which were taken negatively worldwide, but especially in the U.S. Other releases included a weakening of ISM manufacturing and services activity, and JOLTS job openings. The Friday employment situation report came in stronger than expected, with reversals of some earlier seasonal effects.
Equities suffered their worst week since the pandemic, reacting negatively to the U.S. administration’s tariff news. However, government bonds fared positively, as long-term yields fell sharply. Commodities also lost ground across the board, with the combination of uncertain trade and growth impacts.
U.S. stocks began the week on another negative note, as comments from the administration over the prior weekend were taken negatively by markets (notably, those noting a disregard for auto manufacturer pain and possibilities of a recession, brought on by policies). Wednesday’s ‘Liberation Day’ announcement was done after the market close, but stock futures fell immediately afterward and carried over to a decline of nearly -5% on Thursday, one of the worst single days since the pandemic in 2020. The damage continued Friday, with markets down beyond -5%, as markets reacted to China’s retaliatory tariff of 34%. From the peak on Feb. 19, the S&P has fallen over -17% (up to nearly -20% if this morning’s futures are included). As noted separately, the market was prepared for tariffs to some extent, but these came out definitely stronger than expected.
Every domestic sector saw declines last week, led by energy, technology, and financials, which fell beyond -10%. As expected, defensives like consumer staples and utilities held up best, but still lost a few percent each. Real estate declined -6% in line with expected economic weakness, even though yields fell sharply.
Foreign stocks also fared negatively last week across the board, but fared a bit better than U.S. equities. Interestingly, international fared a few percent better during the initial Thur. drawdown but generally caught up by Fri. when investors attempted to absorb the ultimate global economic impact of maximum tariffs. Emerging markets fared best for the week, with lower starting valuations, and seemingly earlier recognition of negative tariff impacts already baked into assumptions.
Bonds were mixed, with U.S. Treasuries gaining over a percent, along with their tradition portfolio save haven status. Investment-grade corporates rose by a fraction of a percent, hampered by widening spreads, which took high yield and floating rate into the negative for the week. Foreign bonds were mixed, with a far weaker dollar boosting foreign developed market government bonds while emerging market debt fared less well with negative returns, along with general risk avoidance.
Commodities generally fared poorly, with expected negative tariff and global economic growth impacts which overwhelmed all else. As expected in that scenario, energy and industrial metals fared the worst, each down almost -10%, with crude oil prices down -11% to $62/barrel. As a safe haven, precious metals also fared negatively, with bonds proving to be a better diversifier last week.
|
Period ending 4/4/2025 |
1 Week % |
YTD % |
|
DJIA |
-7.82 |
-9.53 |
|
S&P 500 |
-9.05 |
-13.42 |
|
NASDAQ |
-10.00 |
-19.13 |
|
Russell 2000 |
-9.64 |
-17.79 |
|
MSCI-EAFE |
-6.90 |
1.58 |
|
MSCI-EM |
-2.90 |
1.69 |
|
Bloomberg U.S. Aggregate |
1.12 |
3.69 |
|
U.S. Treasury Yields |
3 Mo. |
2 Yr. |
5 Yr. |
10 Yr. |
30 Yr. |
|
12/31/2024 |
4.37 |
4.25 |
4.38 |
4.58 |
4.78 |
|
3/28/2025 |
4.33 |
3.89 |
3.98 |
4.27 |
4.64 |
|
4/4/2025 |
4.28 |
3.68 |
3.72 |
4.01 |
4.41 |
Sources: LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research. Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends. Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.