No. of Recommendations: 21
The wild market swings of the past couple of weeks settled down somewhat last week. The intense negative reaction to the Trump administration’s actions can be seen in the drop of the SPX starting in February. The administration reacted like a kid who touched a hot stove but didn’t necessarily learn his lesson. To announce that tariffs will be delayed 90 days and “negotiated” is not the same as saying they will not be imposed.
Only time will tell if and when the stock market’s trend reversal from positive growth to negative will reverse back to positive. At the moment the bounce back is just noise.
The outcome of tariffs hasn’t bitten yet. There’s still inventory from the pre-tariff days. It will take time for the shelves to empty as they did in 2000 and for the laid-off government workers to officially become unemployed in September. Initial unemployment claims are still very low.
The markets bounced back because investors are always optimistic. The Fear & Greed Index bounced up from Extreme Fear to Fear. Stocks and junk bonds gained against Treasuries, showing more risk-on behavior. Treasuries, USD and gold stabilized. The Chicago Fed’s National Financial Conditions Index (NFCI), which provides a comprehensive weekly update on U.S. financial conditions in money markets, debt and equity markets, and the traditional and “shadow” banking systems, continued a tightening trend that began in February 2025. This more directly impacts real-world borrowing than Treasuries.
The Atlanta Fed’s GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2025 was -2.5 percent on April 24, down from -2.2 percent on April 17. The alternative model forecast, which adjusts for imports and exports of gold as described here, is -0.4 percent.
The chaos in Washington, DC is impacting ordinary consumer decisions. A “no-buy” minimalist movement is growing which could cause a recession if it deepens. (Frankly, we would hardly have an economy if everyone LBYM’ed like DH and me.)
https://www.nytimes.com/2025/04/25/business/no-buy...More important, people are taking Social Security early.
https://www.wsj.com/personal-finance/retirement/so...Americans Are Claiming Social Security Early, Fearful of Its Future
Waiting to start drawing benefits typically leads to a bigger monthly check, but many don’t want to wait right now
By Anne Tergesen, The Wall Street Journal, April 26, 2025
Americans anxious about the future of Social Security are claiming their benefits earlier than planned, even though it can mean less income over the rest of their lives…
Many effects of the Trump administration’s swift and sweeping changes to federal agencies aren’t yet apparent, but with Social Security, they are already changing households’ financial decisions. Americans have long been anxious about Social Security’s stability, and Trump’s second term is heightening those anxieties…
Social Security’s finances have long been under pressure because of the aging of the population. Unless Congress shores up the retirement program, it is projected to deplete its reserves in 2033, which would trigger a 21% reduction in benefits. … The agency said 82% of benefits were processed on time in March…
Benefits starting at 70 are 76% higher than at 62, according to Laurence Kotlikoff, a Boston University economist and founder of Maximize My Social Security. A person who postpones benefits until 70 instead of 62 would come out ahead if they live to at least 80… [end quote]
DH and I took Social Security at age 62 because health issues make it unlikely that we will live to age 80. (My break-even analysis said age 83.) When to begin Social Security is a personal decision with many inputs but a trend for people to take early SS unnecessarily points to uneasiness with the government. Lower income will dampen future consumer spending which accounts for 70% of the economy.
The METAR for next week is cloudy. It’s impossible to say what cockamamie news will swing the market.
Wendy
https://stockcharts.com/freecharts/candleglance.ht...https://stockcharts.com/freecharts/candleglance.ht...https://stockcharts.com/freecharts/candleglance.ht...https://www.cnn.com/markets/fear-and-greedhttps://stockcharts.com/freecharts/yieldcurve.phphttps://www.chicagofed.org/research/data/nfci/curr...https://www.multpl.com/shiller-pehttps://www.atlantafed.org/cqer/research/gdpnowhttps://fred.stlouisfed.org/series/ICSA 