Macro Monday April 21, 2025

The U.S. economy is facing significant challenges as we navigate through April 2025. Recent developments have introduced a mix of policy decisions and economic indicators that suggest a period of heightened uncertainty.

President Trump’s administration has proposed a substantial $4.5 trillion tax cut package, raising concerns about the fiscal deficit, which has already reached near-record levels of $1.3 trillion in just six months. This move, combined with aggressive tariff policies, has led to strained global trade relationships, exemplified by South Korea’s 14% drop in exports to the U.S. Additionally, political pressure on Federal Reserve Chairman Jerome Powell to lower interest rates has sparked debates over the central bank’s independence and the stability of monetary policy.

Market reactions have been swift and pronounced. The S&P 500, Nasdaq, and Dow Jones Industrial Average each fell over 2.3%, while the dollar dropped 1.2% against a basket of major currencies, reaching its lowest level since April 2022. Investors have sought refuge in safe-haven assets, with gold prices surging to a record high above $3,400 per ounce. Oil prices also declined, with Brent Crude falling 2.3% and West Texas Intermediate down 2.56%, amid concerns over global economic growth and developments in U.S.-Iran nuclear talks.

Consumer sentiment has taken a hit as well. The University of Michigan’s index indicates a significant drop in consumer confidence, now at levels below those seen during the Great Recession and the early COVID-19 pandemic. This decline is driving a short-term surge in consumer spending on goods like cars and electronics, as people anticipate rising prices. However, economists warn this spending spike is unsustainable and not indicative of long-term economic health.

On the corporate front, earnings outlooks are being revised downward amid the highest uncertainty for U.S. firms since the pandemic. Morgan Stanley’s CIO notes that fears of recession, volatile tariff policies, and high interest rates are contributing to this trend. Projected earnings-per-share growth has dropped from 11.4% to 6.9% since the beginning of the year.

As we navigate these turbulent times, it’s crucial to stay informed and agile in our investment strategies. We will continue to monitor these developments closely to safeguard and grow your investments.