Liberation Day Arrives
The much anticipated “Liberation Day” announcement of U.S. tariff policy, including reciprocal tariffs, arrived this week. It had an immediate impact on financial markets as equity market futures and interest rates declined post-announcement. For the week domestic stocks fell 1.9% as measured by the Russell 3000 Index. Within the broad U.S. market, value stocks continued to outperform growth stocks and small caps declined more than large caps as the Russell 2000 Index fell 2.3% for the week. Equity market weakness was offset by bond market strength as the broad benchmark for bonds returned 0.9% for the week and currently sits at a year-to-date return of 3.0%. This positive year-to-date return from bonds compares favorably with the -3.65% return for U.S. stocks.
Foreign equity markets also experienced declines for the week with the MSCI EAFE Index of developed markets returning -2.3% and the MSCI Emerging Market Index registering -1.6%.
Another Good Quarter for GDP
Economic data releases for the week were overshadowed by the ongoing attention paid to the prospective announcement on tariff policy. However, included in these releases was the final figure for fourth quarter gross domestic product (GDP). The result came in at 2.4%, slightly higher than consensus forecast of 2.3%. One of the components that saw its contribution to GDP growth for the period increase was consumer spending. In the prior estimate, consumer spending was reported to have grown 3.7% and the final report revealed an even more robust increase of 4.0%.
Another key piece of data released was the current reading of the University of Michigan’s Consumer Sentiment Survey. The survey came in with a reading of 57.0, the third-consecutive decrease and the lowest level seen since the reading of 56.7 in November 2022. One of the survey’s components, the expectations index, fell 18.0%, reflecting growing concern by consumers regarding their personal finances, business conditions, unemployment and inflation.
Soft vs. Hard Data
While surveys like the one compiled by the University of Michigan indicate growing concern, other releases pointed to a more stable economic environment. This differentiation reflects a current disconnect between the “soft data” that comes from surveys versus “hard data” that represents actual results for economic activity. An example of hard data is the Wards Auto Report that indicated light vehicle sales in March. The report registered a seasonally adjusted annualized rate of 17.8 million, the highest level for the month of March since 2021. This stronger level of buying, while still a favorable piece of hard data, may have difficulty advancing in the future if the weakening consumer sentiment translates into a lower level of consumer economic participation.
Investor focus, and ours, will continue to be on the recently announced tariff policy and its potential impact on the U.S. and global economies, as well as the financial markets.
 |
 |
Sources: BTC Capital Management, FactSet Research Systems Inc., Federal Open Market Committee (Federal Reserve) LSEG I/B/E/S, FTSE Russell (an LSEG Group company), S&P Global, U.S. Bureau of Labor Statistics, U.S. Census Bureau
The information provided has been obtained from sources deemed reliable, but BTC Capital Management and its affiliates cannot guarantee accuracy. Past performance is not a guarantee of future returns. Performance over periods exceeding 12 months has been annualized.
This content is provided for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Statements in this report are based on the views of BTC Capital Management and on information available at the time this report was prepared. Rates are subject to change based on market and/or other conditions without notice. This commentary contains no investment recommendations and should not be interpreted as investment, tax, legal, and/or financial planning advice. All investments involve risk, including the possible loss of principal. Investments are not FDIC insured and may lose value.