Alternatively, the onerous knowledge, which displays precise exercise, has been robust. Retail sales hit a file excessive in March, and weekly card spending knowledge — which you’ll see beneath in TKer’s weekly assessment of macro crosscurrents — recommend that power 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 enlargement.
This narrative of contradictions is illustrated properly on this chart from Goldman Sachs, which exhibits how mushy knowledge has been stunning to the draw back whereas onerous knowledge has been stunning to the upside. In different phrases, sentiment has been weaker than anticipated whereas realized exercise has been stronger than anticipated.
The onerous knowledge has been surprisingly good regardless of the mushy knowledge being surprisingly dangerous. (Supply: Goldman Sachs)
Renaissance Macro’s Neil Dutta wrote about these “knowledge discontinuities” in his April 21 be aware.
“It’s possible that a lot of the current upside surprises in onerous knowledge mirror pulling ahead exercise within the anticipation of tariffs,” Dutta wrote. “Shoppers pulled ahead auto gross sales and consumption on different family durables, for example. Companies probably pulled ahead some orders too. That probably offers the veneer of power within the current high-frequency dataflow.”
Throughout a lot of the financial enlargement that started in 2020, it’s paid off to give attention to what consumers and businesses did (i.e., the onerous knowledge) over what they mentioned (i.e., the mushy knowledge). The Federal Reserve just published research explaining this phenomenon.
“[R]ecent onerous knowledge within the U.S., largely for March, are overstating exercise and it’s price noting that situations weren’t particularly robust 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 might already be right here.”
We’ll solely know with the good thing about hindsight whether or not or not we’re in a recession or going right into a recession.
Importantly, as long run buyers, we must always perceive that recessions and market downturns will occur as you construct wealth with shares.
The economic system has been in enlargement about 80% of the time. Equally, shares have been in a bull market about 80% of the time. Perhaps we’re presently going by an disagreeable interval that has traditionally occurred about 20% of the time.
There have been a number of notable knowledge 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 file $75.1 billion in March.
Core capex orders are a leading indicator, that means they foretell financial exercise down the street. The expansion charge had leveled off a bit, however they’ve perked up in current months.
💳 Card spending knowledge is holding up. From JPMorgan: “As of 18 Apr 2025, our Chase Client Card spending knowledge (unadjusted) was 3.3% above the identical day final yr. Primarily based on the Chase Client Card knowledge by 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: “To date, Financial institution of America card knowledge by April 19 suggests that buyers are persevering with to spend at a wholesome charge, with spending up YoY all through many of the month. Within the week ending April 19, whole 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 larger. Initial claims for unemployment benefits rose to 222,000 throughout the week ending April 19, up from 216,000 the week prior. This metric continues to be at ranges traditionally related to financial development.
💳 Financial institution accounts stay in fairly good condition. From BofA: “Whereas family median deposit ranges have declined since 2021, they elevated throughout the revenue spectrum final month and stay at the very least 40% larger than 2019 ranges on a nominal foundation and 15% above inflation adjusted ranges, based on Financial institution of America checking and financial savings account knowledge. … 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 prepared to just accept for a brand new job — sharply retreated to $74,236 from a sequence 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 notably robust 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 features of the economic system, largely because 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, shoppers anticipated weaker revenue development for themselves within the yr forward.”
🏚 Residence gross sales fall. Sales of previously owned homes fell by 5.9% in March to an annualized charge of 4.02 million models. From NAR chief economist Lawrence Yun: “Residence shopping for and promoting remained sluggish in March as a result of affordability challenges related to excessive mortgage charges. Residential housing mobility, presently at historic lows, indicators the troublesome risk of much less financial mobility for society.”
💸 Residence 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 house gross sales rise. Sales of newly built homes rose 7.4% in March to an annualized charge of 724,000 models.
🏠 Mortgage charges tick decrease. In accordance with Freddie Mac, the common 30-year fixed-rate mortgage declined to six.81% from 6.83% final week. From Freddie Mac: “The typical mortgage charge 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 properly for patrons and sellers alike.”
⛽️ Gasoline costs tick larger. From AAA: “The nationwide common for a gallon of normal is barely larger than every week in the past and 5 cents larger than a month in the past. A rise in demand – because the climate will get nicer and extra individuals get out and about – is pushing costs up barely. However at $3.17, the nationwide common stays properly beneath what drivers have been paying this time final yr. That’s as a result of the value of crude oil is on the decrease aspect at $62 a barrel in comparison with $82 a barrel one yr in the past.”
🏢 Places of work stay comparatively empty. From Kastle Systems: “Peak day workplace occupancy was 63% on Tuesday final week, down six tenths of a degree from the earlier week. Washington, D.C. skilled the most important single-day drop, falling greater than eight factors on Wednesday as native authorities places of work have 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 dangerous. From S&P International’s April U.S. PMI: “The early flash PMI knowledge for April level to a marked slowing of enterprise exercise development at the beginning of the second quarter, accompanied by a hunch in optimism concerning the outlook. On the similar time, value pressures intensified, making a headache for a central financial institution which is coming beneath rising strain to shore up a weakening economic system simply as inflation seems set to rise.”
🇺🇸 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, prior to now 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 development estimates are monitoring destructive. The Atlanta Fed’s GDPNow model sees actual GDP development declining at a 2.5% charge in Q1. Adjusted for the impact of gold imports and exports, they see GDP falling at a 0.4% charge.
Actions converse louder than phrases: We’re in an odd interval on condition that the onerous financial knowledge 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 file ranges. From an investor’s perspective, what matters is that the onerous financial knowledge continues to carry up.
Shares will not be the economic system: Analysts count on the U.S. inventory market may outperform the U.S. economy, thanks largely because of positive operating leverage. For the reason that pandemic, firms have adjusted their price buildings aggressively. This has include strategic layoffs and investment in new equipment, together with {hardware} powered by AI. These strikes are leading to constructive working leverage, which implies a modest quantity of gross sales development — within the cooling economic system — is translating to robust earnings growth.
Suppose long run: For now, there’s no motive to imagine 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 buyers can count on to proceed.
