Weekly Market Update 4-21-25
New Week...New Risks!
Last Week
Markets had sort of an eerie calm the first two trading days of the holiday shortened week, until a new risk appeared, Trump vs Powell II ! On Wednesday Chairman Powell spoke at the Economics Club of Chicago. The Chairman described the tough challenge President Trump’s tariff create for the Fed, putting them in a position of uncertainly as to how to respond if the economy weakens but tariffs produce a new round of inflation. Essentially giving a textbook example of Stagflation, Powell said that this potential predicament could keep the Fed from easing policy rates. That statement set off an explosion in the White House as President Trump lambasted Powell saying, “I’m not happy with him. If I want him out of there he’ll be out real fast, believe me.” And with that, along with tariff policy uncertainty produced a risk-off move on Wednesday as stocks sold off hard and credit spreads widened out. Additionally, the once almighty U.S. Dollar set a new year over year low against the Euro and other major currencies. The USD move could be thought of as extreme if we consider that the ECB cut policy rates last week while Powell, and numerous Fed officials pushed back against aggressive easing of US monetary policy. Normally, that would produce USD strength. Additionally, gold continues to set new highs, not just in dollar terms but also in Euro and Yen terms. I would take this as a strong sign of market angst.
· The S&P 500 declined 1.49% for the week. The average daily move was an 0.83%.
· The NASDQ fell 2.62% for the week. The average daily move was 0.97%.
· The 2-year Treasury yield fell 16 basis points, closing at 3.80% on Friday. Year over year high 5.04% and low 3.54%.
· The 10-year Treasury yield declined 16 basis points for the week, closing at 4.33% on Thursday. Year over year high 4.79%, and low 3.62%
· The VIX Index fell 21%, closing at 29.65 on Thursday. Year over year high 55.33 and low 11.86
· The MOVE Index declined 16.48% for the week, closing at 114.64 on Friday. Year over year high 139.88 and low 82.49
· 5-year Investment Grade Corporates (as measured by Markit CDX) spreads tightened 3 basis points for the week, closing at 70 basis points on Thursday. Year over year high 81 and low of 47.
· 5-year High Yield corporate debt (as measured by Markit CDX) spreads tightened 7 basis points for the week, closing at 424 basis points on Thursday. Year over year high 476, and low 289.
· The US Dollar Index (DXY) fell 0.73%, closing at 99.38 on Thursday, a new year over year low. Year over year high 109.65 and low 99.38
· WTI Crude rose 5.11% for the week, closing at 64.01 on Thursday using the June WTI Futures contract. Year over year high of front contract 86.91, and low 60.90
· Gold, as measured by the June futures contract, jumped 2.56 % for the week, closing at 3,328 on Thursday. On Wednesday the gold futures front contract set a new all-time high of 3,326. Year over year high of front contract 3,326, and low 2,299.
The Week Ahead
We come in this morning with global equities off between 0.5% and 1.5%, the USD down sharply and the Treasury yield curve bear-steepening. The latest big-story we are dealing with this week is the battle between President Trump and Chairman Powell. Can the President fire the Chairman? While the early returns say no, there is still a lot of uncertainty and nervousness which is probably why the USD continues to get pounded. In equities, Q1 earnings season rolls on. Investors will be focused less on Q1 results and more on forward projections, which most expect will be cautious at best. Treasury is auctioning 183 billion 2-year, 5-year and 7-year notes starting Tuesday. Similar to the 3-year, 10-year and 30-year auctions 2 weeks ago, these auctions should have major “event risk” for all markets.