Financial markets have had a relatively jittery Q1 25: (i) US equities fell c.10% peakto-trough, underperforming other major regions, (ii) the US 10-year bond yield dipped over 60bps to fall briefly below 4.2% and (iii) global bonds outperformed global equities. Is the equity dip worth buying? Underlying macro trends can help answer this question. In the US, a growth scare (or even a stagflation scare) is visible in select data. The high-frequency Atlanta Fed GDPnow indicator dropped sharply into negative growth territory in February. At the same time, the University of Michigan’s five-year inflation expectations indicator spiked to the highest since the early 1990s. This data, alongside heightened uncertainty ahead of the 2 April US reciprocal tariff announcement, helps explain market volatility. However, we are reluctant to draw a very negative conclusion. A broader sweep of data is more supportive of growth and risky assets. The US lead economic indicator, while still negative, is recovering from last year’s lows, the job market appears resilient to the fear of US government cost cutting and the Atlanta Fed’s GDPnow indicator is likely explained by a one-off factor (front-running of imports). We acknowledge tariff policy uncertainty warrants a modest recalibration and keeping a close watch on highfrequency data, but our central scenario remains one of positive growth, not recession Homepage.
Back To Homepage