Market Insights Recap — Week of April 21, 2025

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

A slower news cycle last week gave us a chance to catch our breath. And breadth. More on that in a moment. What's happening in the real world? What's next for interest rates? Should we be making any adjustments to our portfolios? Tariff turmoil has certainly thrown a wrench in many of our clients' workflow and business planning. We can't blame them for not knowing what to do. Our forecast back in December called for Congress to tackle taxes and depreciation updates along with the budget, well before tariffs. Renewal of the 2017 tax cuts is in the current budget package. We might see some details in early May. That's moving at impressive speed for Congress. We wonder how much tariff trauma, though, has side-tracked members. 

The hard data for March suggests consumers are still spending as retail sales and credit card usage has held steady. Import levels from shipping companies suggest that the big wave of toys, shoes and other goods that were rushed over ahead of tariffs is now over. Shipping loads and pricing are coming down. The survey, or soft data coming in from regional-fed banks, leans toward slowing activity in the coming months. Just like here in Texas, businesses around the country are either sitting on their hands or canceling some orders. So let's put the economy in the neutral zone for now: Downshifting to first gear, but definitely not teetering on recession. 

How about interest rates? The Federal Reserve's last move, just before the election, was to cut rates by a half a percent to a range of 4.25 to 4.5%. So Wall Street leans towards further rate cuts. After all, they're fixated on 2% inflation, and short-term rates historically do sit somewhere near inflation. Fair enough. But inflation, depending on how you measure it, is between 2.8 and 4% right now. So a low 4% short rate is okay for now. And the Fed will sit tight waiting to see if tariffs slow the economy further. Long-term interest rates, like the 10- and 30-year Treasury rates, are crawling higher since Labor Day of last year. They tell you inflation and growth may be higher years down the road. Okay, for now. But of course, if you're trying to buy a house, you'd like those mortgage rates to come down. Only a tough recession would do that. No thanks. 

So back to our favorite topics: stocks and portfolios. Most U.S. indices slid a percent or two last week. Not enough for a trend change - just grinding back and forth in a roughly 3% range, waiting on earnings news. We sit about 7% above the recent bottom set on April 7th. The S&P 500 and, to an extent, its big brothers like the Nasdaq, are rebuilding energy. This takes a while, and for those scoring at home, winners are just starting to outpace losers on a daily basis. So market breadth or its internal heartbeat is slowly improving. We still think in the coming months there'll be an attempt to drive stock prices down again, but not below that early April low. 

So let's wrap up. The economy appears to be downshifting from second gear to first gear. No recession. In fact, 38 states are expanding, and at least ten of the rest are doing okay. Interest rates represent some value, especially if you need income, especially cash paying around 4% right now. We think we'll get some good entry points in stocks once DC drama gets past the tax and budget negotiations. Let's call July 4th an early victory for tax rates and Labor Day for several big tariff deals. Let us know how we can help you. Till next time.