Weekly Market Note_05.16.2025
Global Markets & Economic Data:
A de-escalation of global trade tensions and easing inflationary data reads in the US are supporting an uptick in investor’s risk appetite.
US: A sharp decline in services helped ease inflationary pressures last month, but goods inflation is rising. The market is now pricing in two rate cuts this year. Tariffs are blamed for a slowdown in April retail sales. Q2 GDP nowcasts are estimating over 2% growth.
Europe: UK manufacturing measures slowed in March, but services activity rose. EU March industrial production was far above expectations. The DAX index hit another record high.
Asia: Japan's Q1 GDP was negative driven by slow consumer spending and a fall in net exports. Long dated JGBs yields continue to move higher. China's bank loan growth continues to trend lower. Chinese corporate credit spreads hit record tight levels.
Loosening FCI, reversion to the mean
A loosening of FCI signals the growing acceptance of Trump’s policies by the capital markets. The billionaire businessman’s pro-growth agenda can be made possible by a loosening of liquidity, especially if the Fed delivers rate cuts later in the year. However, this “cake-ism” of high growth, high liquidity and stable inflation will need a release valve.
Macro managers continue to believe higher US long-term rates and a weaker dollar will be the ultimate consequences of Trump’s policies.