1. Global equity markets declined sharply in early April in response to the surprisingly high tariffs announced by U.S. President Donald Trump. Equity markets rebounded, led by non-U.S. developed markets, when it became apparent the proposed tariffs would be reduced and implementation delayed.
Year-to-date, non-U.S. equity markets continue to significantly outperform U.S. equites, in a reversal of the prior multi-year trend.
2. All that glitters is not gold, but gold has performed exceptionally well year-to-date as the U.S. Dollar has depreciated versus other currencies.
3. The rate of inflation, excluding food and energy, dipped below 3% after having plateaued around 3.25% for several months.
The Atlanta Federal Reserve Bank’s measure of “sticky price” inflation (think rent, insurance and medical care) continues to decline.
4. Corporate earnings reports looked solid but companies have yet to face the impact of tariffs.
For the first quarter of 2025, S&P 500 companies have reported year-over-year earnings growth of 12.9%, driven by strong margin expansion and revenues increasing 4.9% (with 96% of companies having reported).
The challenge for companies will be maintaining earnings growth, when profit margins are near all-time highs as a percentage of GDP and revenues and profit margins face the headwinds of tariffs and potentially reduced government spending.
