- According to the Bureau of Economic Analysis’ advanced estimate, U.S. GDP contracted 0.3% in Q1 2025, marking the first quarter of negative economic growth since Q1 2022, though it came in meaningfully above the final GDPNow estimate of -2.7% that was released on April 29th. The current GDPNow model estimate for real GDP growth in Q2 2025 sits at 1.1%.
- Core PCE held steady in March, below forecasts for a 0.1% increase and following an increase of 0.5% in the month prior.
- The year-over-year figure rose 2.3%, above forecasts for a 2.1% increase but below an increase of 2.7% in the February reading.
- While trending toward the Fed’s stated target of 2.0%, the impact of tariffs has largely not made its way into the data and markets, along with the FOMC, will be closely monitoring price levels when released each month.
- The labor market is holding relatively stable as nonfarm payrolls increased a seasonally adjusted 177,000 in April, beating estimates of 133,000 but below the 185,000 added in March, while unemployment stayed flat at 4.2%.
- U.S. consumer sentiment fell in April and is now near a five-year low, driven by growing pessimism about economic growth and the labor market due to continued uncertainty about the path forward for tariffs and trade.
- On a positive note, China recently exempted some U.S. imports from tariffs, though the list of goods affected is said to be dynamic and will be adjusted based on China’s needs, which does not materially diminish uncertainty.
- The move echoes the Trump Administration exempting smartphones and other electronics from reciprocal tariffs as both countries appear to be making efforts to soften the blow of the trade war on their respective economies, giving investors hope that a broader deal can eventually be reached.
- Global equity markets faced heightened volatility throughout April as Liberation Day was followed by a broad and swift selloff, though a subsequent tariff pause led to a meaningful recovery. The S&P 500 ended the month down less than –1%, but U.S. equities continue to lag their international counterparts.
- While the aforementioned recovery was a welcomed reprieve, strategists have voiced concern that the trade war’s impact on corporate earnings remains unclear and that investors should continue to proceed with caution.
- There was also volatility within fixed income markets as the yield on 10-year U.S. Treasuries hit a low of 3.86% before jumping to 4.58% a week later and ultimately ending the month at 4.17%.
- Investment grade corporates underperformed government bonds as spreads widened in conjunction with equity market volatility.
- With volatility likely to continue in coming months or even years, the best defense is typically a well-diversified portfolio with overall risk levels aligned with long-term goals. It is important to remember that times of market dislocation can be viewed as opportunities to deploy capital at more compelling valuations, tax loss harvest, or review financial goals.
