Market Insights Recap — Week of April 14, 2025

Hi, I'm Steve Orr, Chief Investment Officer at Texas Capital's Private Bank.

Now, what is the landscape after last week? How does the landscape affect our portfolio decisions? How should we be looking at markets, and what detours and potholes should we be looking for? We've had three short Bear markets this decade. The 2022 Bear took nine months, fell 23% while the Fed was raising rates a full 3% in five steps. GDP growth was negative for two quarters. The other two Bears, March-April 2020 and March-April so far 2025, were created by government policy. So score this decade one real Bear and two government stumble Bears. No surprise, either type of Bear is just as frustrating and painful to go through. 

Negotiations are underway for tariffs, but that July 9th pause looks like a very ambitious date to us in order to get some deals done. The tariff deadline was probably going to be kicked out to the fall. But the underlying goal of China isolation will continue. Recall when the tariff levels were first announced, we thought the odds of a recession would be around 50% by year-end. Those odds will likely fall depending on the speed and size of tariff deal announcements. Our base case remains slowing growth. Tariffs would only be a minor boost to inflation however. We think inflation ends this year around 3.5%. So the landscape looks marginally better today than a week ago. Stocks have responded with a positive week, rising between 3 and 5%, but bonds have been all over the place, as a number of players were forced to raise money when stocks and currencies dropped more than they anticipated. 

How about our portfolios? We're sticking with our positions. See no reason to change exposures at the moment. Or why no change? What about risk off and selling stocks? As investors, we're all about getting the intermediate and long-term waves correct in the markets. Earnings are on track to grow this year. Unemployment and inflation are relatively tame, so we should not react as much to short-term events. 

What about markets this week? Last week's pause on Wednesday ignited the second-highest up volume day on record. The S&P 500's 9.5% jump was the ninth biggest one-day gain since 1928. So is this mini Bear over? Thanks to those up days, Wednesday and Friday? No, sorry. Now, I do think the low was put in before Wednesday's rally, but never say never. We're still in a news-dependent grind that's going to see up and down days. Are there more detours and potholes ahead for portfolios? You bet. 

Earnings season for the first quarter is underway, and we expect a number of companies to guide 2025 forecasts lower. Five wars are still in the background. And remember, things like wars are news events that can rattle markets but rarely change the long-term trend. The recent drop in oil prices, that'll help at the pump. But they also reflect supply glut courtesy of OPEC's renewed effort to gain market share at our expense here in Texas. 

In summary, there's plenty of bricks in our market's wall of worry. It's tempting to think tariff trauma is over. But tariffs are sitting on the side burner, ready to jump to the boil again. Inflation, jobs and other hard data suggest the economy is rolling along, perhaps more in first gear than instead of second, but not in recession. The storm phase for markets likely passed, and traders are focusing on what companies' forecasts are over the next couple of weeks in their earnings calls. 

Let us know how we can help you; 'til next time.