Outlook for the Week Ahead

Monday, April 14, 2025

WHAT WE'RE SEEING…

Stock market: This week the stock market surged when the White House announced a 90-day pause on its global reciprocal tariff policy. Notably, China was not included in the policy pause, and, in fact, the trade war with China became more intense. Nevertheless, the buyers came out of their storm cellars and pushed stock prices higher. The Dow Jones Industrial Average gained almost 2,000 points, closing just above the 40,000 level. The more widely followed S&P 500 Index popped 5.7%, ending the week at 5,363, while the technology-focused Nasdaq Composite gained 5.3%, closing at 16,724. While this week’s gains are certainly welcome, we don’t think the “fog of uncertainty” has lifted completely. Consequently, we are remaining in our seats and keeping our seat belts securely fastened – mindful of the risks that linger beneath the surface.

After a winning week, it’s no surprise that the CNN Fear and Greed (investor) Index recorded a modest drop in its extreme fear reading. On its scale of 0 to 100, the Index moved up 10 points from 3 points to 13 points. It is still in the extreme fear zone, which suggests that despite last week’s market rally, many investors are still on the sidelines. This situation sets the stage for further stock market advances if the “fog of uncertainty” begins to lift. While the primordial human tendency is to ask ourselves, “what could go wrong?”, we also need to ask ourselves, “what could go right?”

While the primordial human tendency is to ask ourselves, "what could go wrong?", we also need to ask ourselves, "what could go right?"

Interest rates: The bond market drew significant attention last week. Despite favorable inflation data that typically would have pushed interest rates lower, rates unexpectedly surged. Most notably, the yield on the 10-year Treasury bond jumped from 4.0% to 4.5%. The 2-year Treasury note yield also climbed, rising from 3.6% to 4.0%. This surprising move may be linked to comments made by Treasury Secretary Scott Bessent during a Wednesday interview with Fox Business. Bessent pointed to a complex investment strategy known as the “basis trade.” While we’ll delve deeper into the mechanics of the “basis trade” in future letters if it gains traction, for now, it appears to be yet another variable contributing to the “fog of uncertainty.” We will continue to monitor developments in the bond market closely, as we believe bonds and stocks will remain intertwined amid this uncertain environment. Our preferred money market fund yield ticked down to just under 4%.

Gold and Oil: Gold resumed its march upward last week, gaining 6.5%, closing at $3,255 per ounce. Oil prices were fractionally lower, closing at $61.50.

WHAT WE'RE WATCHING…

We are beginning the “earnings season” for Q1 of 2025. Next week, security analysts and investors will be dialing in to company conference calls to hear management’s commentary on the rapidly changing economic backdrop. Our expectation is that many corporate managers will reference different variations of the “fog of uncertainty” in their outlooks for the remainder of 2025. We don’t expect these comments to propel stock prices higher.

Next week’s macroeconomic news includes reports on import/export prices, industrial production, and housing. Since these reports cover activity in March, which predates the tariff announcements on April 2, we will be more focused on the forward-looking commentary and news flow.

During times like these, patience, discipline, and perspective are super important. We see our role as risk managers on behalf of our clients. We work to steadfastly preserve and grow your capital while navigating through rapidly changing conditions. Asset allocation and diversification continue to serve as our foundation. While our stock market risk indicators remain in caution zone, even after the recent rally, we are staying committed to a balanced investment strategy that considers both sides of the question: “what could go wrong?” and “what could go right?”.

Please don’t hesitate to reach out with any questions. We know that feedback is the breakfast of champions. Our goal is to be focused, informed, and always looking ahead on your behalf.

A thought for the week from The Passion Translation (circa 2020) from the Book of Proverbs: “Love overlooks the mistakes of others, but dwelling on the failures of others devastates friendships.” (17:16)

Sources: LPL Financial, CNBC.com, CNN.com, and Stockcharts.com.

Bruce Robinson, CFP Managing Principal, Corsicana

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors. Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments. References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.