Stock and GDP Outlook, for Week Ending 04/18/2025
Markets predict lower growth, not default or high inflation.
Stock prices and the mean expected NGDP growth rate rose sharply after a wild week of continued tariff drama. The US mostly delayed implementation of new tariffs on every country, but China Wednesday, and issued exemptions Friday for some categories of Chinese-made products. This was after again raising the tariff rate on China, now at 145%, in response to another round of Chinese retaliation. A new across-the-board minimum 10% tariff reportedly remains in effect during the pause.
There was also much news about a sudden pronounced spike in Treasury yields on Wednesday, with wide speculation that this reflected falling confidence in US willingness and/or ability to meet its debt obligations. However, this spike doesn’t seem very concerning in the context of recent yield history, mild inflation expectations and reports, and subdued decreased confidence expressed in credit default swaps.
More telling is the sharp decline of the dollar during this period, with the dollar index having fallen more than 9% since shortly after Trump took office.
For reasons just mentioned, this mostly does not reflect increased default or inflation fears, but lower real GDP growth expectations. It is in-line with falling market-based GDP forecasts (available to paid subscribers).
While the outlook for stocks and the economy looks somewhat better than a week ago, the trade war(s) are not over, and nor is the pressure Trump could potentially put on the Fed, among countless other reckless actions he may take. For now, the outlook remains extremely concerning.
PS: I chose a bad time last week to say I no longer wanted to quote the US dollar index on my dashboard. It is certainly interesting right now, and I’ve decided to revert to the usual indicators generally.
Note: This post, as is the case with all my posts, should not be construed as offering investment advice. Such advice should be tailored to the individual investor by qualified professionals who, ideally, are fiduciaries.
Economic Data Sources:
https://fred.stlouisfed.org/series/SP500
https://www.wsj.com/market-data/stocks/peyields
https://www.barchart.com/futures/quotes/ES*0/futures-prices
https://ycharts.com/indicators/sp_500_earnings_per_share_forward_estimate#:~:text=Basic%20Info-,S&P%20500%20Earnings%20Per%20Share%20Forward%20Estimate%20is%20at%20a,28.27%25%20from%20one%20year%20ago.
https://www.cnbc.com/quotes/.VIX
https://fred.stlouisfed.org/series/DTWEXBGS
https://fred.stlouisfed.org/graph/?g=Ee9i
https://fred.stlouisfed.org/series/T10Y3M#0
https://fred.stlouisfed.org/series/DGS10
https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
https://tradingeconomics.com/commodity/crb?user=nunote
https://www.cnbc.com/quotes/@CL.1
https://www.cmegroup.com/trading/en
https://www.spglobal.com/spdji/en/documents/additional-material/sp-500-eps-est.xlsx
https://www.cmegroup.com/markets/interest-rates/stirs/30-day-federal-fund.quotes.html