Institutional investors have once again become headline-driven.  Institutional traders seem to base their daily trading strategy on Trump tweets panicking about this announcement or another.  Most interesting is their little regard for actual economic data. 

They obviously haven’t learned much from President Trump’s first term and his modus operandi.  He regularly makes outlandish statements (typically during the early hours) seemingly just to get a rise out of analysts and the media.  Of course, the intellectuals run to the media outlets to opine on the absurdity of his statements and cite their irrelevant projections.  Then after days of useless programming and speculation, President Trump backs off or completely reverses his position and moves on to the next topic.  This must be an exciting time for President Trump to be able to influence the entire world with just a few tweets.  

Consumers seem to also be sucked into this game.  Today the University of Michigan released their US Consumer Confidence report that illustrates the hyper-sensitivity of consumers to the news vs reality.  Consumers’ confidence has plummeted to 52.2 the lowest level not seen since there were real economic challenges in 2008 and 2022.  April’s reading is the second lowest reading in recorded history dating back to 1950. 

With a strong economy, stable inflation, and more people working in the history of this country, consumers are more pessimistic now than at any other time in history excluding 2022.  Consider that consumers reported higher levels of confidence during past eras of real crisis such as the OPEC oil embargo of the early 1970s, soaring unemployment and inflation of the late 1970s, dot com bust of the 2000s, September 11, 2001, the Great Recession of 2008, and the 2020 pandemic with a coronavirus that threatened the existence of the entire world.

Joanne Hsu, Surveys of Consumers Director, offered this commentary on the report:

• “Consumer sentiment fell for the fourth straight month, plunging 8% from March. While the April decline in current conditions was modest, the expectations index plummeted with drop-offs in personal finances as well as business conditions. Expectations have fallen a precipitous 32% since January, the steepest three-month percentage decline seen since the 1990 recession. While this month’s deterioration was particularly strong for middle-income families, expectations worsened for vast swaths of the population across age, education, income, and political affiliation. Consumers perceived risks to multiple aspects of the economy, in large part due to ongoing uncertainty around trade policy and the potential for a resurgence of inflation looming ahead.”

Note Ms. Hsu’s observation that the primary driver of pessimism is “in large part due to ongoing uncertainty around trade policy”.   The fear of what may come to pass but not the reality.

In fact, if one were to completely ignore Trump's tweets and the major media, one would be hard-pressed to say anything has changed with the US economy.  Last week the US Bureau of Labor Statistics reported that unemployment rose slightly for the month of March to 4.2% and remains at the lowest range since WWII.  The number of newly unemployed people rose by a whopping 31,000 in March while the number of newly hired employed increased by 201,000 for a total of 163.51 million.  The number of people working, referred to as the labor participation rate, increased to 62.5%. 

The number of job openings is declining as more people are being hired.  Today, the US Bureau of Labor Statistics released its Job Openings and Turnover Report that indicated a reduction of 288,000 jobs still leaving a multi-decade high of 7.192 million job openings in March.

Truth be told, what is actually bothering consumers is their declining investment account.  My experience with investors is if the economy is in a recession but their accounts and house values are increasing, well too bad so sad for everyone else. 

President Trump stated on March 10 in an interview with Maria Bartiromo of Fox News that the US will experience “a period of transition” because “what we're doing is very big. We're bringing wealth back to America. That's a big thing… it takes a little time, but I think it should be great for us."

Consumers and investors don’t care about the long term especially if it will cost them anything. There is no tolerance for change in the investment community.  The result is investors have run to the exits selling their stock portfolios.  The S&P 500 is on track for the 2nd worst President’s 100-day performance that ends April 30 to be only surpassed by President Nixon.  Below is a list of stock market returns dating back to President Roosevelt and Truman's term in 1945 who had the best 100-day performance as WWII ended.

The major stock indices appeared to have bottomed out on April 8 and have since recovered almost 50% of the YTD decline.  Below are the YTD stock and bond indices returns through today:

• S&P 600 Small Cap: -14.67%

• S&P 400 Mid Cap: -11.84%

• NASDAQ: -11.05%

• S&P 500: -7.27%

• Dow Jones Industrial Average: -6.81%

• S&P Bond: 2.48%

Note that even in the rebound, the small and mid-cap indices continue to lag behind the S&P 500.  Only the bond market has a positive YTD return.

What Does This Mean to Me?

In the next couple of weeks, many of the largest tech companies report their Q1 2025 financials and earnings.  As of April 18, 70% of the S&P 500 reporting companies have beaten Street estimates according to Investopedia.  We will be monitoring many of the key company earnings reports to evaluate the health of corporate America.  We intend to hold our portfolio positions until there is actual data indicating that US businesses are slowing down, and jobs are being cut.  Consumer confidence can rebound quickly, especially if people remain employed along with slowing inflation.

Meanwhile, the Federal Reserve has opportunities to assist with rate cuts if a slowing economy-induced tariffs come to fruition.

The current market volatility is an excellent period for retirement participants who have new deposits invested every two weeks or so.  Buying during periods when stock prices are fluctuating creates opportunities for lower average cost basis of stock holdings that can potentially result in larger profit margins when market conditions improve.

Let us know if you have any questions about your account and financial plan.  Volatile markets have historically provided the best opportunities for new investments.  We welcome the opportunity to assist you and your family in achieving your goals.