Weekly Newsletter 04/11/25
Good afternoon,
To quote the great local San Diego anchorman Ron Burgundy, “Boy, that escalated quickly. I mean that really got out of hand fast.” The past 6 trading days have been manic. Last Thursday & Friday and this Monday & Tuesday tallied a -12% S&P 500 mass selloff of everything…stocks, bonds, commodities, you name it, it was for sale. Some sectors witnessed -20%+ declines. Wednesday afternoon was the near opposite. In just over 3 hours the S&P gained 9.3%...the 3rd largest single day percentage gain in the index’s history. Yesterday we gave back -3.4%. Today will be another see-saw day.
The S&P 500 and Nasdaq still on pace for solid weekly gains, though small cap Russell 2000 now negative for the week. Early laggards include banks (particularly regionals), investment banks, custody banks, credit cards, asset managers, cruise lines, apparel, housing-linked retail, cosmetics, trucking, and chemicals. Big tech mixed. Outperformers include industrial metals, China tech, telecom, dollar stores, tobacco, and energy. Treasuries weaker, most notably in the belly of the curve, though yield on 30-year bond on track for biggest weekly backup since the 1980s; 2Y/10Y spread widest since Feb-22. Dollar index down 1.4%, off worst levels, but down more than 3% this week.
Trade continues to dominate the headlines with unrelenting back and forth US-China tensions as Beijing increased tariff rate on US goods to 125%. However, the Chinese did say it will it ignore further US increases and recent Reuters report noted some chipmakers exempt. Legitimate concerns about just how the Trump administration is going to manage to put together a myriad of bespoke trade deals in the next three months. In addition, scrutiny beyond stocks as dollar weakness and backup in Treasury yields partly chalked up to latest dents in US exceptionalism (and safe haven) narrative from Trump 2.0 policy uncertainty. Unwinding of the “basis trade” has also added pressures to the bond market. I won’t bore you with the intricacies of the strategy. Just know it involves massive amounts of leverage. My biggest issue with modern finance is the continual blow ups caused by borrowing crazy amounts of money backed by a relatively small amount of actual capital. Uncertainty increasingly seen as the big theme in the upcoming Q1 earnings season with more companies expected to pull 2025 guidance.
Recent Fedspeak has reiterated patience mantra and highlighted some upside risk surrounding inflation (and expectations) from tariffs.
Q1 earnings season unofficially kicks off today with some of the big banks. Street looking for S&P 500 earnings up +7.0% y/y in Q1. Very little clarity around how tariffs will affect outlook for corporate earnings and CEOs remain worried about costs, falling orders and upended supply chains despite Trump's tariff pause.
March headline PPI fell 0.4% m/m, biggest drop since Oct-23, and well-below consensus for a 0.2% rise and February's revised 0.1% increase (was flat). Annualized PPI at 2.7% vs consensus 3.3% and prior month's 3.2%. Core PPI (ex-Food & Energy) fell 0.1% m/m vs consensus for a 0.3% increase and last month's revised 0.1% rise (was -0.1%). Annualized core sitting at 3.3% vs consensus 3.6% and February's 3.5%. Over 70% of the decrease in the index for final demand can be traced to prices for final demand goods which fell 0.9% (largest decrease since Oct-23). Bulk of March decline in goods linked to 11.1% drop in gasoline prices. Egg prices down 21% m/m. Prices for final demand services fell 0.2% in March, largest decline since Jul-24. Transportation/warehousing services moved down 0.6% m/m. 1.3% decrease in the index for machinery and vehicle wholesaling was major factor in services decline. Today's reading is second cooler inflation report after yesterday's March CPI was also softer, though analysts note data somewhat stale given April's tariff developments.
The deregulatory agenda of the Trump administration, while overshadowed by the recent tax and tariff headlines, made significant advancements this week – especially for the financial services industry. Repealing existing regulations can be done without the notice and comment period historically required, according to a new White House memo. This action is likely to see a legal challenge, but if upheld, it would usher in a much faster and broader deregulatory push than the market expects. The memo directs agency heads to identify “certain categories of unlawful and potentially unlawful regulations within 60 days and begin plans to repeal them” in the wake of recent Supreme Court decisions. At her Senate Banking Committee nomination hearing, Fed Vice Chair for Supervision nominee and current Fed Governor Michelle Bowman reiterated her priorities for the top regulatory role at the Fed, including regulatory tailoring and interagency coordination. Bowman is expected to be confirmed. Highlights from the hearing include:
- Tailoring
- Regulatory burdens
- Regulatory consolidation/coordination
- Basel III
- Stress testing
- Supervision
- Technology
In a Wednesday address, Treasury Secretary Scott Bessent told the American Bankers Association that Trump has “tasked the Treasury Department with ensuring that the financial services regulators fulfill their statutory mandates consistent with his priorities” and that the “Treasury Department intends to play a greater role in bank regulation”. The speech marked the latest episode in an ongoing effort to consolidate financial regulatory powers under the Treasury Department. Bessent is a busy man. Investors are encouraged by Treasury Secretary Bessent assuming role of lead negotiator as they race to secure ad-hoc tariff deals with nearly 70 nations, prioritizing speed over traditional pacts. Regardless of when a perceived positive outcome from all of this happens, I believe it will take time to get back to all-time highs. Historically, non-recessionary bear markets are characterized by swift declines, averaging a 24% drop, and a return to previous highs within approximately 11 months.
I can not express enough gratitude for allowing us to manage the tremendously important dollars you have work so hard for.
The link below contains additional financial articles and resources.
https://www.raymondjames.com/evangelista/resources
The quote today is a poem by Rudyard Kipling written in 1943. Certainly more tying times than today, however, appropriate still.
If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
Or being lied about, don’t deal in lies,
Or being hated, don’t give way to hating,
And yet don’t look too good, nor talk too wise:
If you can dream—and not make dreams your master;
If you can think—and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same;
If you can bear to hear the truth you’ve spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build ’em up with worn-out tools:
If you can make one heap of all your winnings
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breathe a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: ‘Hold on!’
If you can talk with crowds and keep your virtue,
Or walk with Kings—nor lose the common touch,
If neither foes nor loving friends can hurt you,
If all men count with you, but none too much;
If you can fill the unforgiving minute
With sixty seconds’ worth of distance run,
Yours is the Earth and everything that’s in it,
And—which is more—you’ll be a Man, my son!
Thank you,
KYLE CHRISTIANSON, CFP®
Financial Advisor
Raymond James & Associates, Inc.
1421 Pine Ridge Rd, Ste 300
Naples, FL 34109
Toll Free (800) 843-2025 | Direct (239) 513-6525 | Main (239) 513-6500 | Fax (239) 596-5474
Kyle.Christianson@RaymondJames.com
Any opinions are those of Kyle Christianson and not necessarily those of RJA or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. This is not a recommendation to purchase or sell the stocks of the companies mentioned. Leading Economic Indicators are selected economic statistics that have proven valuable as a group in estimating the direction and magnitude of economic change. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stocks of companies maintained and reviewed by the editors of the Wall Street Journal. The NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Sector investments are companies engaged in business related to a specific sector. They are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification. Investing in oil involves special risks, including the potential adverse effects of state and federal regulation and may not be suitable for all investors. Bond prices and yields are subject to change based upon market conditions and availability. Gold is subject to the special risks associated with investing in precious metals, including but not limited to: price may be subject to wide fluctuation; the market is relatively limited; the sources are concentrated in countries that have the potential for instability; and the market is unregulated.
