Weekly Market Note_05.02.2025
Global Markets & Economic Data:
Perhaps investors should just periodically check-in on market price action. Those offline for the past 30 days would have missed the April volatility given equity indices are closing out the month flat to positive. There is growing visibility that a risk rally could be materializing as Trump policy related volatility cools and resilient fundamentals coupled with ample investor liquidity take over.
US: Q1 headline GDP figures were down due to a surge in imports ahead of tariffs. However, domestic demand remained strong, supported by business investment, which was partially negated by cool consumer spending. Prices rose more than expected in Q1. Jobs numbers remain mixed as the April payrolls were above estimates leaving the US unemployment rate at 4.2%.
EU: Euro area Q1 GDP figures were higher than expected, but inflation picked up during the quarter as well. Germany's unemployment rate hit 6.3%, up from a 5% 2022 trough.
Asia: The BoJ left rates unchanged amid a rapid deterioration in consumer confidence. Taiwan's GDP was ahead of forecasts. Chinese GDP growth estimates for the remainder of 2025 are downgraded due to a slowdown in exports orders.
The times they are a changing
Quant futures strategies struggled recently due to a combination of technical price reversals as well as a dislocation in typical economic relationships. The rally in the euro versus the US dollar cannot be explained by traditional interest rate differentials.
A breakdown in this usual economic relationship highlights the global paradigm shifts occurring, which could significantly impact asset prices.
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