Weekly Market Update: April 28, 2025
The U.S. economy is beginning to slow. A confluence of factors, including weakening consumer sentiment amid the ongoing global trade war; inflation still for the most part running above the Federal Reserve’s comfort level; and uncertainty about fiscal and monetary policies, exacerbated by President Trump bickering with Federal Reserve Chairman Jerome Powell over the direction of interest rates, are hurting domestic output. These events have roiled the global equity and fixed-income markets, and pushed the value of the dollar down versus other currencies, to a three-year low.
The U.S. consumer sector is weakening. True, March retail sales rose a better-than-expected 1.4%, but a good portion of the advance was likely driven by shoppers buying ahead of the Trump Administration tariffs. On point, the University of Michigan’s consumer sentiment reading fell to 50.8 in April, marking the second lowest reading, dating back to 1952. Likewise, The Conference Board’s Consumer Confidence Index fell by 7.2 points in March, to 92.9, the fourth-consecutive monthly decline. It also is worth noting that the Expectations Index, which is based on consumers’ short-term outlook for income, business, and labor market conditions, dropped to 65.2, the lowest level in 12 years and well below the threshold of 80 that usually signals a recession ahead.
The housing market also is struggling, as reflected by recent declines in residential construction activity. Specifically, March privately owned housing starts came in at a seasonally adjusted annualized rate of 1.324 million, which was down 11.4% from the prior-month tally. Homebuilders continue to worry about the impact of high mortgage rates and trade tariffs on the psyche of the homebuyer.
Wall Street is watching first-quarter earnings season. In the early stages, profit growth slowed considerably from the torrid (+18%) pace recorded in the final quarter of 2024. This, along with the ongoing macroeconomic uncertainty, may impact the near-term valuation of the S&P 500 Index.
Conclusion: Equity market volatility remains elevated, as investors are worried that the global trade war will hurt the performance of the U.S. economy. Given this uncertain backdrop, investors should not flee from stocks, but we suggest they concentrate on high-quality companies with reliable cash flows and solid balance sheets.
Source: ValueLine.com
