(Download the full report HERE)

• Economy – Trade/tariffs shake soft data and begin to weigh on growth estimates going forward 
  • Consumer survey data has shown quickly deteriorating sentiment and increased inflation expectations as some of the realities of the new administration’s policies materialize.
  • As of March 31, tariffs on goods from Canada, Mexico, and China had been announced with broader tariffs on the way that will raise the effective tariff rate in the U.S. to levels not seen for a century.
  • Most academic assumptions on the impact of a new trade war call for a period of increased inflation and lower growth, although there are too many unknowns to make reliable predictions.
    • The Atlanta Fed GDPNow tracker dipped into negative territory late in Q1.
• Equity – Recent trends reverse during a volatile quarter for stocks in Q1
  • The S&P 500 fell -4.27% in Q1 as the Magnificent 7 all pulled back significantly from recent highs.
  • A possible rotation took shape as U.S. Value stocks significantly outperformed U.S. Growth names, and International markets outperformed U.S. markets by the widest margin in years.
    • The MSCI EAFE Index was up +6.86% in Q1 as EU nations and the European Central Bank both signaled a willingness to provide support/investment domestically.
• Fixed Income – Bond markets grapple with implications of fiscal policy on Fed and broader economy
  • The 10-year Treasury yield fell modestly in Q1, helping the Bloomberg Aggregate Bond Index to a +2.78% return
  • The implied Fed Funds rate moved lower, and credit spreads widened slightly from historically tight levels, signaling that traders may be starting to brace for a possible slowdown in economic growth.
• Risks/Other Considerations
  • Tariffs and trade war escalation are the center of gravity for markets right now. Recession risk has risen, which would likely lead to further pain for risk assets if hard economic data weakens over the next several months.

Download the full report HERE to see index returns and more:

• Market Index Review
• Q1 2025: Tariffs Dominate the Headlines 
• Tariff Tumult 
• An Attempt to Reverse Trade Deficit & Manufacturing Decline
• Second Order Effects of Tariffs & Policy Uncertainty
• Employment: Not Bad, But Not as Good as Headlines Suggest
• Volatility Returns With S&P 500 Correction During Q1 2025
• Market Corrections Are More Common Than Many Think 
• Not So Magnificent Seven 
• Which Indexes and Sectors are Most at Risk to Tariffs?
• A Style Rotation During the First Quarter…
• And a Geographic Rotation is Underway Too
• Rate Cut Expectations Return, But Bond Markets Less Worried 
• Risks: U.S. Leadership in Artificial Intelligence Under Pressure 
• Appendix: Even More on Tariffs

Sources:

• Morningstar
• ACG
• Federal Reserve
• Factset
• Hedgeye
• World Trade Organization
• Evercore ISI
• The Budget Lab at Yale
• Bureau of Economic Analysis
• Capital Economics 
• FT.com
• Schwab
• White House
• Charles Schwab
• University of Michigan
• Conference Board
• Bloomberg
• Bureau of Labor Statistics 
• CBOE
• Standard & Poor’s
• Oxford Economics
• Charlie Biello
• Trivariate Research
• Goldman Sachs
• FactSet
• Russell Investment Group
• Strategas
• Morgan Stanley
• Citigroup
• STOXX
• MSCI
• AllianceBerstein
• Artificial Intelligence Index Report 2024
• UC Berkeley
• Stanford University
• World Intellectual Property Organization
• JP Morgan