What Happened Last Week?
- U.S. stocks ended the week lower on the heels of Jerome Powell’s comments suggesting the Federal Reserve is not ready to reduce rates given the economic and inflation backdrop. In an environment where global central banks are easing the U.S. remains relatively hawkish.
- 10% of S&P 500 companies have reported Q1 earnings thus far, on average top line growth is 6% and bottom-line growth is 7%. Management guidance has been mixed with the overall trend leaning conservative for the remainder of 2025
- Single-family housing starts have recorded their 2nd lowest monthly figure in the past two years, signaling mounting pressure on the housing market. Given housings significant contribution to GDP, this trend may be an early indicator of rising economic stress.
Key Events This Week
- Important economic datapoints to be released this week include New Home Sales, Initial jobless Claims, and Consumer Confidence.
- Our focus this week will be on corporate earnings as management teams report Q1 earnings and provide commentary as it relates to underlying industry trends and developments. We’ll be paying attention to BA, GE, TXN, IBM and more.
- Government officials have stated that trade negotiations have progressed positively with China, Japan, India, and the E.U., we expect to hear greater details in the coming week/s.
Impact on Client Portfolios
- Fixed income portfolios continue to be tilted towards capital preservation with highly rated and lower duration securities. Short term fixed income securities have less price volatility, and we expect short term rates to be more sensitive to Fed rate cuts.
- Diversification remains key as global trading patterns shift. Interest rates and growth expectations appear to be driving markets, so investors need to focus on high quality companies with clean balance sheets and a clear path to growth.
- Muted economic growth, elevated valuations and interest rates are a unique combination for markets. Fixed income may be a less effective offset to equity performance going forward. Investors should look beyond fixed income to hedge the volatility of equity returns.
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