There are genuine signs that some trade deals are getting done and positive news around removing “stacking” tariffs on autos. But at the same time, weakening U.S. data and a surge in pre-tariff imports suggest we may just be watching the calm before a downturn. Some pundits believe the knock on effect of the rush of imports into the U.S. currently is just foreshadowing the major decline that’s on the come, one that will lead to empty jobs and empty shelves. You know a slump that could hit both employment and inventories hard.
Don’t take my word for it, it’s what consumers tell the Conference Board, which reported that “business conditions, employment prospects, and future income—all deteriorated sharply, reflecting pervasive pessimism about the future. Notably, the share of consumers expecting fewer jobs in the next six months (32.1%) was nearly as high as in April 2009, in the middle of the Great Recession.” And they reported that “average 12-month inflation expectations reached 7% in April—the highest since November 2022, when the US was experiencing extremely high inflation.”
Maybe the Atlanta Fed GDPNow is onto something with a negative 1.5% estimate of 1Q2025 GDP? Guess we’ll see if they’re right when we get the first official release of GDP this morning.
Elsewhere in data, job openings fell broadly, but with no indications that firings are rising.
Soft Data, Meet Hard Data
In addition to 1Q GDP we’ll see how inflation is behaving before diving into stage start of earnings from tech behemoths Microsoft and Meta. Which I guess means we’ll get more insight on whether the AI hype is still driving earnings or running out of steam.
We enter the trading day with the S&P index at 5,560, on a little winning streak. While the 2Y and 10Y are both testing year to date low yields at 3.66% and 4.18% respectively.
Before we move into May flowers, let’s pause to remember the April that was.
Circus Apriles Recap
April 2025 was exactly the kind of financial circus we've come to expect, just replace the clowns with talking heads yelling about tariffs and the tigers with volatile market swings that happened seemingly because someone sneezed near a headline.
"Liberation Day" on April 2nd, supposedly the day we'd get clarity on tariffs, arrived with all the fanfare of a damp squib, offering slim odds of actually knowing anything. Markets spent the month ping-ponging around tariff news, including a delightful moment where news of a 90-day pause got promptly "body-slammed by reality".
Treasury yields bounced around like a pinball as markets debated if tariffs meant inflation or recession. Auctions showed tepid demand, and the "safe haven" label felt more like a "hot potato", thanks to the tariff drama.
While the Dollar decided to take a break from its "exorbitant privilege," weakening to under 100 on the DXY for the first time in three years. The Fed, those dependable "Powell Rangers," stuck to their script: solid economy, "somewhat elevated" inflation, "elevated uncertainty," and the ever-popular "proceed cautiously". riveting stuff.
Beyond the daily whipsaws, the month offered plenty of reminders that perhaps we really don't know what's going on, but that's okay because nobody else does either. The existential dread of whether markets are in "bubble" territory lingered, prompting reflections on timeless wisdom like remembering "trees don't grow to the sky" and Howard Marks' evergreen advice that "overpaying is the greatest investment risk". So, as tariffs continued their starring role and the economic picture got murkier, April reinforced the timeless truth that navigating financial markets requires less prediction and more prudence, patience, and a healthy dose of "I Don't Know".
What Timeless Lessons Did We Learn This Month:
Accept "I Don't Know": Certainty is an illusion; uncertainty is the norm, and admitting it is often the most truthful approach.
Patience Over Panic: Focus on long-term goals and underlying business value. Discipline beats drama.
Your Behavior is Your Biggest Risk: Be mindful of emotional biases like fear and greed, and remember overpaying is a major risk.
Filter the Noise: Tune out predictions and commentary, and feed your mind with wisdom, not noise.
Face Reality: Persevere through tough times, learn from mistakes, and face reality as it is.
Embrace uncertainty, maintain patience, and focus on timeless principles of investing over futile prediction and market noise. Sounds reasonable enough.
XTOD’s:
XTOD: Why didn’t electrical engineers forecast the Iberian electricity crisis? Looking forward to reading many op eds in the @FT on how the study of electrical engineering is in a crisis. Researchers should go back to reading Maxwell’s Elementary Treatise on Electricity
XTOD: The jump in consumers' year-ahead inflation expectations over the last three months in the Conference Board survey is as swift as the rise seen over the course of many months in 2020-21
XTOD: The most socially accepted form of self-sabotage: Overthinking. It’s why you can’t make decisions, finish anything, or sleep without scrolling.
XTOD: My brilliant partner Antti Ilmanen’s latest on his lifelong obsession with expected returns. This one on how people actually form them (rational or not). Link below. https://t.co/QZFv1PRUDK
XTOD: Kobe Bryant on why not everyone is up for greatness. https://pbs.twimg.com/media/Gpn-FNfXIAA8o2x?format=png&name=900x900
https://x.com/R2Rsquared/status/1917186959480402001
https://x.com/NickTimiraos/status/1917267816517972240
https://x.com/0xAbhiP/status/1917210910810124666
https://x.com/CliffordAsness/status/1917217161010888896
https://x.com/Cyrushshirazi/status/1916842493385036010
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