At the moment, there are many cross currents impacting stock prices, resulting from the ongoing trade negotiations between the Trump Administration and several other countries. The ebbs and flows of which will continue to affect the currency markets, the direction of interest rates and ultimately the stock market. Despite the ninety-day reprieve granted by the administration to these other countries and the rally that followed, we believe that there will be several bumps along this three-month road as we negotiate with them and they negotiate with each other.
· Despite the recent turmoil in the financial markets, unless there is a major policy mistake, there are three positive notes that should keep the U.S. Economy from entering any prolonged recession, not the least of which includes an Unemployment Rate that despite inching up lately, still sits at a low 4.2%. In addition, at least for now, inflation is coming down (see Producer Price Index and Consumer Price Index below) which, should tariffs eventually be deployed, will have less of an impact on American consumers. Finally, after having most likely completed its tightening for at least this economic cycle, the Federal Reserve has room to cut, if necessary. We see the latter as complicated, at best.
· Timing the market is impossible. Period. As an alternative, we add and subtract from our exposure to asset classes on an incremental basis which prevents major, long lasting mistakes should we be on the wrong side of sentiment.
· No safe haven. Historically, during times of market stress, domestic and foreign investors alike flock to the U.S. Dollar and U.S. Treasuries, in search of safety. However, somewhat of concern was that since the impositions of the tariffs on April 2, the U.S. Dollar has fallen 3.88% while the interest rate on the 10-Year U.S. Treasury Note has surged from 4.20% to 4.48%. As the currency markets and fixed income markets are the largest in the world, this bears watching.
It’s The Economy…”
· Prices at the wholesale level as measured by the Producer Price Index fell 0.4% during March, this after edging up 0.1% during February. Over the past year the PPI has risen 2.7%, down from 3.2% in February and from a peak rate of 11.7% during March 2023. Energy prices fell 4.0% during March (-3.7% y/y) after sliding 1.3% in February. Finished food prices fell 2.1% during March (0.9% y/y) after rising 1.8% in February. (Source, U.S. Bureau of Labor Statistics)
· The University of Michigan reported that the Preliminary April Reading of Consumer Sentiment fell to 50.8 (-34.2% y/y) from a final March level of 57.0. The preliminary April expectations component fell to 47.2 (-37.9% y/y) from a final March 52.6 while the preliminary April current conditions component fell to 56.5 (-28.5% y/y) from a final March 63.8. According to the Survey of Consumers Director, Joanne Hsu, “year-ahead inflation expectations surged from 5.0% last month to 6.7% this month, the highest reading since 1981 and marking four consecutive months of unusually large increases of 0.5 percentage points or more.” (Source, University of Michigan)
· The Consumer Price Index fell 0.1% during March (2.4% y/y), after rising 0.2% during February. The CPI has fallen from a y/y high of 9.1% during June 2022 and matches the cycle low set in September. Energy prices fell by 2.4% during March (-3.3% y/y) after rising 0.2% in February. Food and beverage prices rose 0.4% during March (3.0% y/y) after rising 0.2% during February. The cost of shelter rose 0.2% during March (4.0% y/y), after rising 0.3% during February. (Source, U.S. Bureau of Labor Statistics)
Upcoming Economic Reports scheduled to be released this week include the following; on Wednesday, March Retail Sales, March Industrial Production; March Capacity Utilization and March Business Inventories; on Thursday, March Housing Starts along with the Weekly Report of Initial Claims for Unemployment Benefits.
Q1-2025 Earnings Season Has Begun To Ramp Up Us. Several companies of note are scheduled to report, to include – Goldman Sachs (GS), Citigroup (C), Johnson & Johnson (JNJ), Bank of America (BAC), Abbott Laboratories (ABT), ASML Holding (ASML), Progressive (PGR), Blackstone (BX), Charles Schwab (SCHW), American Express (AXP), Taiwan Semiconductor (TSM), United Health Group (UNH) and Netflix (NFLX).
General Disclosure:“This presentation is not an offer or solicitation to buy or sell securities. The information contained in this presentation has been compiled from third party sources and is believed to be reliable, but its accuracy is not guaranteed and should not be relied upon in any way, whatsoever. Fagan portfolio characteristics and holdings are subject to change at any time and are based on a representative portfolio. Holdings and portfolio characteristics of individual client portfolios may differ, sometimes significantly, from those shown. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities listed.
Additional information including management fees and expenses is provided on our Form ADV Part 2. The actual return and value of an account fluctuate and, at any time, the account may be worth more or less than the amount invested. Bond Investments are affected by interest rate changes and the credit-worthiness of the issues held in the portfolio. A rise in interest rates will cause a decrease in the value of fixed income positions. Past performance results are not indicative of future results.”