Despite macro headwinds and cloudy corporate guidance, Q1 earnings delivered a fundamental spark, helping equity markets recover from April lows. We break down the numbers, explore what’s driving investor optimism, and examine why AI may be the next tailwind.
The latest twists in 2025’s economic policy soap opera came from a federal court this week striking down the bulk of U.S. tariffs…only for a higher court to put that ruling on hold less than 24 hours later. While we wait for the appeals process to play out and anticipate alternative tariff measures from the Trump administration, we will focus this week on the U.S.’s enduring source of economic strength, its consumers.
Global bond markets let out a primal scream this week that was reminiscent of a fully-“seen” millennial singing along to The Tortured Poets Department at max volume (IYKYK).
Can you make grown men and women (and equities) weep tears of joy by implementing the highest tariff rates since the 1930s Smoot-Hawley? The answer is yes, you can, as long as it is preceded by the threat of incredibly high, onerous tariffs.
“Slightly lower taxes for some, similar taxes for others” doesn’t sound like an exciting policy platform. But any time we’re talking about a major U.S. tax and spending bill, the stakes are high.
The question going forward is what this self-inflicted tariff uncertainty will morph into as time goes on. Will tariffs prove to be a mere inconvenience to U.S. consumers and corporations, with these entities being able to absorb and navigate the impacts without a significant hit to the economy?
The U.S. economy sustained a significant shock on Liberation Day, one that has already shown up clearly in consumer and business survey data. We now brace for the impact on corporate earnings and real economic activity, assuming the tariffs are not withdrawn in the interim.
This week felt like a breakup on two fronts: first, the trading relationship between the U.S. and China on the trade front, and second, the financial relationship between U.S. financial assets and the rest of the world’s desire to hold them.
Much like the exasperated runner at the end of Radiohead’s iconic “Karma Police” music video, this week President Trump effectively threw a lit match into a stream of gasoline that was connected to global markets.
The Street has started coming around to our view of more challenged equity market returns and lower GDP growth for the year, singing “Goodbye, Sunshine” to bright S&P 500 targets and cutting estimates for the full year. The median YE 2025 forecast for the S&P 500 has been trimmed from 6,600 in mid-February to 6,430 today (Bloomberg).