Daily Newsletter 4/30/25
Today is pivotal for markets, with a concentration of major earnings reports-especially from tech leaders-and crucial economic data releases. Market participants are watching closely for signals on corporate health, inflation, and the broader economic outlook.
Several high-profile companies are reporting results today, including: CAT, META, MSFT, QCOM, ALB, NLY,and TW.
So far, the released corporate earnings have done little to alleviate the uncertainty clouding the markets. Companies are struggling to accurately assess the precise impact of tariffs.
Markets are bracing for today’s PCE and GDP data. A cooler inflation print could support expectations for Fed rate cuts later this year, while another upside surprise may reinforce a cautious stance from policymakers. Following the significant drop in consumer sentiment, it remains to be seen how upcoming data will influence market sentiment.
The Personal Consumption Expenditures (PCE) Price Index release is scheduled for today. The data will be published 10:00 a.m. EST and will include figures for March 2025. The PCE Price Index is the Federal Reserve’s preferred measure of inflation and plays a central role in shaping U.S. monetary policy decisions.
The Fed aims for a long-term inflation rate of 2%, using the core PCE Price Index (which excludes volatile food and energy prices) as its benchmark. If core PCE inflation runs significantly above this target, it signals rising inflationary pressures. In response, the Fed may raise interest rates to cool the economy and bring inflation back toward its goal. Conversely, if core PCE inflation is well below 2%, it suggests weak demand or sluggish economic activity, prompting the Fed to consider lowering interest rates to stimulate growth.
Headline PCE inflation has been stable at 2.5% year-over-year for both January and February 2025, down slightly from 2.6% in December 2024.
Core PCE inflation (excluding food and energy) rose to 2.8% in February 2025 from 2.7% in January, indicating a modest uptick in underlying inflation pressures.
The U.S. GDP release for the first quarter of 2025 is scheduled for today at 8:30 a.m. EST. This will be the advance estimate, providing the first official look at economic growth for Q1 2025.
Consensus forecasts expect GDP growth to slow sharply to an annualized rate of around 0.4%, down from 2.4% in the previous quarter, as markets watch for the impact of new tariffs and other economic headwinds
On monetary policy, the Federal Reserve has signaled it will assess incoming data carefully before making further rate decisions.
Any further surprises in today’s inflation or GDP releases could influence expectations for interest rate cuts or the timing of future policy moves.
The market may be moving within a trading range, but the overall direction appears to be downward. Naturally, price fluctuations can make the underlying trend less apparent.
We continue to view a recession as the most probable outcome, and current market prices do not reflect this risk.
FED
The Federal Reserve could begin cutting rates as soon as June, which would provide some support. While a June rate cut is on the table and widely anticipated by markets, it ultimately hinges on economic developments over the next several weeks.
Several Fed officials have indicated that a rate cut could occur as early as June if economic data-particularly on inflation and the labor market-show clear signs of deterioration. Futures markets currently price in a significant probability (around 75%) of a quarter-point rate cut at the June 17–18 FOMC meeting, reflecting expectations of slowing growth and persistent risks from trade policy and inflation.
However, the Fed remains in a "wait and see" mode, emphasizing that any decision will depend on incoming data. If inflation remains sticky or the labor market stays resilient, the Fed may delay cuts until later in the year.
EUROPE
The eurozone economy expanded by 0.4% in the first quarter of 2025, surpassing economists’ expectations of 0.2% growth and doubling the pace seen in the final quarter of 2024. This stronger-than-anticipated performance was partly driven by increased exports to the United States as businesses built up inventories ahead of higher tariffs.
Although the year began on a strong note, we anticipate that growth will decelerate in the upcoming quarters as a result of ongoing trade tensions and additional challenges.
Germany has recently unveiled a sweeping fiscal stimulus package aimed at revitalizing its stagnant economy-a notable departure from its traditionally cautious fiscal policy. This initiative includes amending the constitution to relax the “debt brake,” thereby enabling increased government borrowing and spending for infrastructure, climate projects, and defense. We believe these measures could provide some short-term support for Germany’s economic growth.
We see a significant shift of capital from the U.S. to Europe, which is strengthening the euro and supporting European markets, while adding pressure to U.S. financial assets and the dollar. In the short term, this trend is likely to benefit European markets
While Germany is taking action to address global trade tensions and increasing defense spending in response to the Ukraine crisis and concerns over reduced U.S. support, the economy is still likely to face negative consequences in the long term, particularly starting or intensifying in the second half of 2025.
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