Uncertainty surrounding trade is causing businesses to delay or cancel capital spending plans. The deteriorating earnings outlook likely isn’t helping either. Equity markets showed signs of stress in the week following “Liberation Day.” The S&P 500 has avoided a bear market so far, but we’re not out of the woods yet. The Dollar is having a poor start to the year. Perhaps foreign money leaving the U.S. is to blame. Travel is slowing down, could this be a canary in the coal mine?
1. Businesses were planning on increasing capex, but those plans are on hold for now:
2. The earnings outlook is highly uncertain. United Airlines recently issued two profit outlooks, one for a normal environment and one for a recessionary environment:
3. Correlations going to one is a classic sign of fear and capitulation among investors:
4. Market makers demanded a premium for their services:
5. If the trade talks aren’t fruitful and tariffs remain at current levels it may lead to a recession, the traditional catalyst for a cyclical bear market:
6. Outside of 2022, bonds have helped to cushion the blow during equity market drawdowns:
7. Recent action in the U.S. Dollar suggests that money is leaving the U.S.:
8. Foreign investors who piled into U.S. equities at the end of 2024 have had a poor experience so far:
9. Travel spending is highly discretionary:
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The federal funds rate is the interest rate at which banks lend money to each other overnight. A treasury yield is the interest rate the U.S. government pays on its debt, and the annual return that investors can expect from holding a U.S. government security. The U.S. Dollar Index is a geometrically-averaged calculation of six currencies weighted against the U.S. dollar. Regional manufacturing future capex indexes are surveys conducted by Federal Reserve Banks that gauge the outlook for capital expenditures (CapEx) in the manufacturing sector within specific regions. These indexes, like the Dallas Fed Manufacturing Survey, Empire State Manufacturing Survey, and Philly Fed Manufacturing Business Outlook Survey, measure the percentage of manufacturers reporting that they expect to increase or decrease their capital spending over the next few months.
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