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WEEK AHEAD
April 21-25, 2025
Volatility may have come down, but let’s not pop the champagne just yet—it’s still loitering well above what anyone would call “normal.” As for our trend-following signals, they’re staying in neutral territory (60/40) until the market decides whether it’s more afraid of what’s coming, or just tired of being afraid.
Markets on Pause, Policy on Hold, and Stagflation in the Wings
Markets moved through the week with the nervous energy. With no new U.S. trade tariff policies since the reciprocal pause announced on April 9, Wall Street appears to be in “deal-watch” mode—expectant, but patient. Investors are hopeful that President Trump’s inaugural trade accord will set the tone for subsequent negotiations, but capital seems content to shuffle its feet in the meantime.
Volatility and a Reluctant Rally
The VIX remains elevated at 29—still above historical norms—but has notably calmed since its panic attack on April 8, when it soared past 52. Equity markets remain gripped by a “nowhere to hide” syndrome: the S&P 500 is down 5.81% so far in April, as investors have run for cover with little success. One notable exception: gold, the old crisis companion, is up 5.86% this month, glittering once again in times of uncertainty.
Powell Throws Cold Water on Rate Cut Fever
Speaking on April 16 to the Economics Club of Chicago, Federal Reserve Chair Jerome Powell tamped down hopes of imminent easing. His sobering words—“The level of tariff increases announced so far is significantly larger than anticipated… [with] higher inflation and slower growth”—sent a clear signal that the Fed is prepared to stay the course. Investors hoping for a May 6th FOMC pivot may want to reassess their expectations.
Stagflation: The Ghost of the ‘70s Returns?
As Powell’s comments sunk in, whispers of the most dreaded portmanteau in macroeconomics—stagflation—began to echo louder. Inflationary pressures continue to build, but growth is losing steam. The 10-year Treasury yield tightened by 14 basis points to 4.34%, suggesting some flight to safety. Meanwhile, Freddie Mac’s average 30-year mortgage rate jumped 21 bps to 6.63%, an ominous signal of tightening credit conditions for households.
Further cementing the “higher-for-longer” theme, the 3-month T-bill auction yielded 4.225%—5 bps higher than last month—as the bond market bakes in elevated inflation expectations and a prolonged Fed pause.
The latest economic releases are painting a slowing economic picture ahead of the impact of tariffs:
Even as jobless claims ticked lower to 215,000 from 224,000, the overall tone from the data was softening—a slow exhale from an economy bracing for impact.
Outlook
Markets remain suspended between hope and caution. Without clarity on tariffs or monetary policy, risk assets may continue to drift until a more concrete narrative emerges. For now, gold glitters, rates climb, and equities shuffle in place, waiting for the next act in this uncertain economic play.
Next week could break the standstill—or deepen it. We’re heading into an earnings deluge from companies like Comerica, Verizon, Boeing, AT&T, Procter & Gamble, Alphabet, AbbVie, and Merck. But let’s be clear: the earnings aren’t the story anymore. It’s all about the forward guidance. What CEOs say about pricing power, demand curves, and global exposure will matter far more than last quarter’s EPS. Because in this phase of economic evolution, clarity is currency.
Still, the biggest geopolitical wildcard remains in Washington. If the Trump administration announces a trade deal—especially one that signals a strategic shift rather than just a tactical pause—it could reset expectations for markets and the broader U.S. posture in global commerce.
We’re not just watching for data points—we’re watching for direction. In a world this interconnected and this jittery, the next move isn’t just economic—it’s narrative. And the market is starved for a good story.
Yahoo Finance chart of VIX over a 6-mo period: https://finance.yahoo.com/quote/%5EVIX/
“Reconciliation is not quantum physics. It’s about lower prices. To lower prices you got to do three things. You’ve got to reduce government spending, so you have less stimulus. You’ve got to deregulate the economy, so the price of goods and services goes down. And you have to design your tax code that looks like somebody designed it on purpose to stimulate growth.”
– Senator John Kennedy, Fox News, April 9, 2025
Global Trade Made America Richer, Not Poorer
As we debated the merits of the Trump tariffs, many argued that global trade and the US deficit—Americans buying from foreigners—have made the US poorer.
Many quoted our $35 trillion government debt as evidence of American poverty driven by foreigners, outsourcing, and trading.
We think people are confused. American households, in aggregate, have a total wealth of ~ $170 trillion.
For comparison:
In aggregate, the United States is the wealthiest country by a wide margin.
And on a per-person basis, one of the wealthiest still.
So please, do not think the United States has spent itself into poverty. Nor believe the rise in the wealth of the export-oriented Asian economies occurred at the detriment of US prosperity.
Global trading is not some weird zero-sum competition. Yes, there are losers and winners. But in aggregate, America is winning—and has won big.
The fact that we have poor, struggling people in the world's richest country is a social problem, not a global trading problem.
Source: Voronoi, "Ranked: Highest GDP Per Capita in 2024," October 4, 2024. https://www.voronoiapp.com/economy/Ranked-Highest-GDP-Per-Capita-in-2024-2605
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.