Alternatively, the arduous information, which displays precise exercise, has been sturdy. Retail sales hit a document excessive in March, and weekly card spending information — which you’ll be able to see under in TKer’s weekly overview of macro crosscurrents — recommend that energy has continued into April. Sturdy items orders and shipments proceed at elevated ranges. In the meantime, key labor market metrics together with job creation, unemployment, and claims for unemployment insurance coverage proceed to development at ranges related to financial growth.
This narrative of contradictions is illustrated properly on this chart from Goldman Sachs, which exhibits how smooth information has been stunning to the draw back whereas arduous information has been stunning to the upside. In different phrases, sentiment has been weaker than anticipated whereas realized exercise has been stronger than anticipated.
The arduous information has been surprisingly good regardless of the smooth information being surprisingly unhealthy. (Supply: Goldman Sachs)
Renaissance Macro’s Neil Dutta wrote about these “information discontinuities” in his April 21 be aware.
“It’s possible that a lot of the current upside surprises in arduous information mirror pulling ahead exercise within the anticipation of tariffs,” Dutta wrote. “Shoppers pulled ahead auto gross sales and consumption on different family durables, for instance. Corporations doubtless pulled ahead some orders too. That doubtless offers the veneer of energy within the current high-frequency dataflow.”
Throughout a lot of the financial growth that started in 2020, it’s paid off to give attention to what consumers and businesses did (i.e., the arduous information) over what they mentioned (i.e., the smooth information). The Federal Reserve just published research explaining this phenomenon.
“[R]ecent arduous information within the U.S., largely for March, are overstating exercise and it’s price noting that circumstances weren’t particularly sturdy to start with,” Dutta added. “The collapse throughout a spread of survey-based measures of exercise recommend that precise exercise will proceed to slowdown, in a probably abrupt method. Recession could already be right here.”
We’ll solely know with the advantage of hindsight whether or not or not we’re in a recession or going right into a recession.
Importantly, as long run traders, we should always perceive that recessions and market downturns will occur as you construct wealth with shares.
The economic system has been in growth about 80% of the time. Equally, shares have been in a bull market about 80% of the time. Perhaps we’re at present going by way of an disagreeable interval that has traditionally occurred about 20% of the time.
There have been a number of notable information factors and macroeconomic developments since our last review:
🏭 Enterprise funding exercise rises. Orders for nondefense capital items excluding plane — a.ok.a. core capex or business investment — rose 0.1% to a document $75.1 billion in March.
Core capex orders are a leading indicator, that means they foretell financial exercise down the highway. The expansion fee had leveled off a bit, however they’ve perked up in current months.
💳 Card spending information is holding up. From JPMorgan: “As of 18 Apr 2025, our Chase Client Card spending information (unadjusted) was 3.3% above the identical day final yr. Based mostly on the Chase Client Card information by way of 18 Apr 2025, our estimate of the US Census April management measure of retail gross sales m/m is 0.51%.”
(Supply: JPMorgan)
From BofA: “Up to now, Financial institution of America card information by way of April 19 suggests that customers are persevering with to spend at a wholesome fee, with spending up YoY all through many of the month. Within the week ending April 19, complete card spending per family was up 3.1% YoY, with the YoY partly being boosted by the later timing of Easter this yr. “
💼 Unemployment claims tick greater. Initial claims for unemployment benefits rose to 222,000 in the course of the week ending April 19, up from 216,000 the week prior. This metric continues to be at ranges traditionally related to financial progress.
💳 Financial institution accounts stay in fairly fine condition. From BofA: “Whereas family median deposit ranges have declined since 2021, they elevated throughout the revenue spectrum final month and stay no less than 40% greater than 2019 ranges on a nominal foundation and 15% above inflation adjusted ranges, in keeping with Financial institution of America checking and financial savings account information. … Moreover, the speed of decline in deposits is considerably slower in comparison with two years in the past, reflecting easing inflation over the identical interval. That is very true for lower-income households. Whereas median deposits fell round 3% YoY in March, that’s a noteworthy enchancment from the 15% YoY decline that occurred three years in the past.”
👎 Pay expectations are deteriorating. From the New York Fed: “The typical reservation wage — the bottom wage respondents could be keen to just accept for a brand new job — sharply retreated to $74,236 from a collection excessive of $82,135 in November. This lower was most pronounced for males and respondents over age 45.”
👎 Client sentiment is tumbling. From the College of Michigan’s April Surveys of Shoppers: “Whereas this month’s deterioration was significantly sturdy for middle-income households, expectations worsened for huge swaths of the inhabitants throughout age, schooling, revenue, and political affiliation. Shoppers perceived dangers to a number of elements of the economic system, largely as a consequence of ongoing uncertainty round commerce coverage and the potential for a resurgence of inflation looming forward. Labor market expectations remained bleak. Much more regarding for the trail of the economic system, customers anticipated weaker revenue progress for themselves within the yr forward.”
🏚 Dwelling gross sales fall. Sales of previously owned homes fell by 5.9% in March to an annualized fee of 4.02 million models. From NAR chief economist Lawrence Yun: “Dwelling shopping for and promoting remained sluggish in March as a result of affordability challenges related to excessive mortgage charges. Residential housing mobility, at present at historic lows, alerts the troublesome risk of much less financial mobility for society.”
💸 Dwelling costs rise. Costs for beforehand owned properties elevated from final month’s ranges and yr in the past ranges. From the NAR: “The median existing-home gross sales value for all housing varieties in March was $403,700, up 2.7% from one yr in the past ($392,900). All 4 U.S. areas registered value will increase.”
🏘️ New dwelling gross sales rise. Sales of newly built homes rose 7.4% in March to an annualized fee of 724,000 models.
🏠 Mortgage charges tick decrease. Based on Freddie Mac, the typical 30-year fixed-rate mortgage declined to six.81% from 6.83% final week. From Freddie Mac: “The typical mortgage fee decreased barely this week. During the last couple of months, the 30-year fixed-rate mortgage has fluctuated lower than 20 foundation factors, and this stability continues to bode effectively for patrons and sellers alike.”
⛽️ Fuel costs tick greater. From AAA: “The nationwide common for a gallon of standard is barely greater than per week in the past and 5 cents greater than a month in the past. A rise in demand – because the climate will get nicer and extra folks get out and about – is pushing costs up barely. However at $3.17, the nationwide common stays effectively under what drivers had been paying this time final yr. That’s as a result of the worth of crude oil is on the decrease aspect at $62 a barrel in comparison with $82 a barrel one yr in the past.”
🏢 Workplaces stay comparatively empty. From Kastle Systems: “Peak day workplace occupancy was 63% on Tuesday final week, down six tenths of some extent from the earlier week. Washington, D.C. skilled the most important single-day drop, falling greater than eight factors on Wednesday as native authorities workplaces had been closed to watch Emancipation Day. New York’s excessive was 62.9% on Tuesday, down practically six factors from the earlier week. The typical low was on Friday at 35.2%, down 1.1 factors from the earlier week.”
👎 Exercise surveys look unhealthy. From S&P International’s April U.S. PMI: “The early flash PMI information for April level to a marked slowing of enterprise exercise progress initially of the second quarter, accompanied by a stoop in optimism concerning the outlook. On the identical time, value pressures intensified, making a headache for a central financial institution which is coming below rising strain to shore up a weakening economic system simply as inflation seems to be set to rise.”
Take into account that throughout occasions of perceived stress, smooth survey information tends to be extra exaggerated than precise arduous information.
🇺🇸 Most U.S. states are nonetheless rising. From the Philly Fed’s March State Coincident Indexes report: “Over the previous three months, the indexes elevated in 43 states, decreased in 4 states, and remained secure in three, for a three-month diffusion index of 78. Moreover, previously month, the indexes elevated in 39 states, decreased in seven states, and remained secure in 4, for a one-month diffusion index of 64.”
📉 Close to-term GDP progress estimates are monitoring unfavorable. The Atlanta Fed’s GDPNow model sees actual GDP progress declining at a 2.5% fee in Q1. Adjusted for the impact of gold imports and exports, they see GDP falling at a 0.4% fee.
Actions converse louder than phrases: We’re in an odd interval provided that the arduous financial information has decoupled from the soft sentiment-oriented data. Client and enterprise sentiment has been comparatively poor, whilst tangible client and enterprise exercise proceed to develop and development at document ranges. From an investor’s perspective, what matters is that the arduous financial information continues to carry up.
Shares usually are not the economic system: Analysts anticipate the U.S. inventory market may outperform the U.S. economy, thanks largely as a consequence of positive operating leverage. For the reason that pandemic, firms have adjusted their value constructions aggressively. This has include strategic layoffs and investment in new equipment, together with {hardware} powered by AI. These strikes are leading to optimistic working leverage, which implies a modest quantity of gross sales progress — within the cooling economic system — is translating to robust earnings growth.
Suppose long run: For now, there’s no motive to consider there’ll be a problem that the economic system and the markets won’t be able to overcome over time. The long game remains undefeated, and it’s a streak long-term traders can anticipate to proceed.
