Weekly Market Note_04.18.2025

Global Markets & Economic Data:

Market volatility moved lower in the four trading days this week. Equity prices declined but are within the MTD range as earnings season kicked off. Crude oil and precious metals were bid higher with gold hitting all-time highs. The downtrend in the US dollar remained in place as the US dollar hit its lowest level in 3 years.

US: Weekly Initial Jobless claims were better than expected. The market is now pricing a 90% chance the Fed will not cut rates on its May 7th meeting. 90bps of cuts are priced in for CY 2025. March retail sales figures surged as consumers stockpiled goods ahead of tariffs, boosted by auto sales. Real-time GDP estimates project Q1 GDP growth to be flat.

Europe: The ECB cut rates, as expected. Eurozone government spending forecasts have surged, especially defense spending projections. Germany's investor sentiment hit the lowest levels since the start of the Ukraine war.

Asia: Japanese exports growth was below expectations, hurt by US steel and aluminum tariffs, but has yet to be reflected in US auto tariffs. The Australian unemployment rate remains low at 4.1%. China's Q1 GDP grew by 5.4%, topping estimates. March Chinese industrial production and retail sales were well above expectations.

Elevated Market Volatility

Hedge funds constantly engage in active risk management. A portion of the MTD losses are from hedges established post “Liberation Day” to protect portfolios against future equity market declines.

Much of these risk adjustments have taken place allowing HF portfolios to better manage through this prolonged period of elevated market volatility.