However, the onerous information, which displays precise exercise, has been robust. Retail gross sales hit a file excessive in March, and weekly card spending information — which you’ll be able to see beneath in TKer’s weekly assessment of macro crosscurrents — recommend that energy has continued into April. Sturdy items orders and shipments proceed at elevated ranges. In the meantime, key labor market metrics together with job creation, unemployment, and claims for unemployment insurance coverage proceed to pattern at ranges related to financial enlargement.
This narrative of contradictions is illustrated properly on this chart from Goldman Sachs, which exhibits how mushy information has been stunning to the draw back whereas onerous information has been stunning to the upside. In different phrases, sentiment has been weaker than anticipated whereas realized exercise has been stronger than anticipated.
The onerous information has been surprisingly good regardless of the mushy information being surprisingly unhealthy. (Supply: Goldman Sachs)
Renaissance Macro’s Neil Dutta wrote about these “information discontinuities” in his April 21 be aware.
“It’s possible that a lot of the current upside surprises in onerous information replicate pulling ahead exercise within the anticipation of tariffs,” Dutta wrote. “Shoppers pulled ahead auto gross sales and consumption on different family durables, for instance. Corporations probably pulled ahead some orders too. That probably offers the veneer of energy within the current high-frequency dataflow.”
Throughout a lot of the financial enlargement that started in 2020, it’s paid off to concentrate on what customers and companies did (i.e., the onerous information) over what they mentioned (i.e., the mushy information). The Federal Reserve simply revealed analysis explaining this phenomenon.
“[R]ecent onerous information within the U.S., largely for March, are overstating exercise and it’s value noting that circumstances weren’t particularly robust to start with,” Dutta added. “The collapse throughout a spread of survey-based measures of exercise recommend that precise exercise will proceed to slowdown, in a doubtlessly abrupt method. Recession could already be right here.”
We’ll solely know with the good thing about hindsight whether or not or not we’re in a recession or going right into a recession.
Importantly, as long run buyers, we should always perceive that recessions and market downturns will occur as you construct wealth with shares.
The economic system has been in enlargement about 80% of the time. Equally, shares have been in a bull market about 80% of the time. Perhaps we’re presently going by way of an disagreeable interval that has traditionally occurred about 20% of the time.
There have been a number of notable information factors and macroeconomic developments since our final assessment:
🏭 Enterprise funding exercise rises. Orders for nondefense capital items excluding plane — a.ok.a. core capex or enterprise funding — rose 0.1% to a file $75.1 billion in March.
Core capex orders are a main indicator, which means they foretell financial exercise down the street. The expansion price had leveled off a bit, however they’ve perked up in current months.
💳 Card spending information is holding up. From JPMorgan: “As of 18 Apr 2025, our Chase Shopper Card spending information (unadjusted) was 3.3% above the identical day final yr. Primarily based on the Chase Shopper Card information by way of 18 Apr 2025, our estimate of the US Census April management measure of retail gross sales m/m is 0.51%.”
(Supply: JPMorgan)
From BofA: “Thus far, Financial institution of America card information by way of April 19 suggests that buyers are persevering with to spend at a wholesome price, with spending up YoY all through many of the month. Within the week ending April 19, complete card spending per family was up 3.1% YoY, with the YoY partly being boosted by the later timing of Easter this yr. “
💼 Unemployment claims tick greater. Preliminary claims for unemployment advantages rose to 222,000 in the course of the week ending April 19, up from 216,000 the week prior. This metric continues to be at ranges traditionally related to financial progress.
💳 Financial institution accounts stay in fairly good condition. From BofA: “Whereas family median deposit ranges have declined since 2021, they elevated throughout the revenue spectrum final month and stay not less than 40% greater than 2019 ranges on a nominal foundation and 15% above inflation adjusted ranges, in line with Financial institution of America checking and financial savings account information. … Moreover, the speed of decline in deposits is considerably slower in comparison with two years in the past, reflecting easing inflation over the identical interval. That is very true for lower-income households. Whereas median deposits fell round 3% YoY in March, that’s a noteworthy enchancment from the 15% YoY decline that occurred three years in the past.”
👎 Pay expectations are deteriorating. From the New York Fed: “The typical reservation wage — the bottom wage respondents can be keen to just accept for a brand new job — sharply retreated to $74,236 from a sequence excessive of $82,135 in November. This lower was most pronounced for males and respondents over age 45.”
👎 Shopper sentiment is tumbling. From the College of Michigan’s April Surveys of Shoppers: “Whereas this month’s deterioration was notably robust for middle-income households, expectations worsened for huge swaths of the inhabitants throughout age, training, revenue, and political affiliation. Shoppers perceived dangers to a number of points of the economic system, largely resulting from ongoing uncertainty round commerce coverage and the potential for a resurgence of inflation looming forward. Labor market expectations remained bleak. Much more regarding for the trail of the economic system, customers anticipated weaker revenue progress for themselves within the yr forward.”
🏚 Residence gross sales fall. Gross sales of beforehand owned properties fell by 5.9% in March to an annualized price of 4.02 million models. From NAR chief economist Lawrence Yun: “Residence shopping for and promoting remained sluggish in March as a result of affordability challenges related to excessive mortgage charges. Residential housing mobility, presently at historic lows, alerts the troublesome chance of much less financial mobility for society.”
💸 Residence costs rise. Costs for beforehand owned properties elevated from final month’s ranges and yr in the past ranges. From the NAR: “The median existing-home gross sales worth for all housing varieties in March was $403,700, up 2.7% from one yr in the past ($392,900). All 4 U.S. areas registered worth will increase.”
🏠 Mortgage charges tick decrease. In response to Freddie Mac, the typical 30-year fixed-rate mortgage declined to six.81% from 6.83% final week. From Freddie Mac: “The typical mortgage price decreased barely this week. During the last couple of months, the 30-year fixed-rate mortgage has fluctuated lower than 20 foundation factors, and this stability continues to bode effectively for patrons and sellers alike.”
⛽️ Fuel costs tick greater. From AAA: “The nationwide common for a gallon of normal is barely greater than per week in the past and 5 cents greater than a month in the past. A rise in demand – because the climate will get nicer and extra individuals get out and about – is pushing costs up barely. However at $3.17, the nationwide common stays effectively beneath what drivers had been paying this time final yr. That’s as a result of the worth of crude oil is on the decrease aspect at $62 a barrel in comparison with $82 a barrel one yr in the past.”
🏢 Places of work stay comparatively empty. From Kastle Programs: “Peak day workplace occupancy was 63% on Tuesday final week, down six tenths of a degree from the earlier week. Washington, D.C. skilled the most important single-day drop, falling greater than eight factors on Wednesday as native authorities places of work had been closed to look at Emancipation Day. New York’s excessive was 62.9% on Tuesday, down almost six factors from the earlier week. The typical low was on Friday at 35.2%, down 1.1 factors from the earlier week.”
👎 Exercise surveys look unhealthy. From S&P World’s April U.S. PMI: “The early flash PMI information for April level to a marked slowing of enterprise exercise progress at first of the second quarter, accompanied by a stoop in optimism concerning the outlook. On the identical time, worth pressures intensified, making a headache for a central financial institution which is coming beneath rising stress to shore up a weakening economic system simply as inflation appears set to rise.”
🇺🇸 Most U.S. states are nonetheless rising. From the Philly Fed’s March State Coincident Indexes report: “Over the previous three months, the indexes elevated in 43 states, decreased in 4 states, and remained steady in three, for a three-month diffusion index of 78. Moreover, up to now month, the indexes elevated in 39 states, decreased in seven states, and remained steady in 4, for a one-month diffusion index of 64.”
Actions communicate louder than phrases: We’re in an odd interval provided that the onerous financial information has decoupled from the mushy sentiment-oriented information. Shopper and enterprise sentiment has been comparatively poor, at the same time as tangible client and enterprise exercise proceed to develop and pattern at file ranges. From an investor’s perspective, what issues is that the onerous financial information continues to carry up.
Shares usually are not the economic system: Analysts anticipate the U.S. inventory market may outperform the U.S. economic system, thanks largely resulting from optimistic working leverage. Because the pandemic, corporations have adjusted their value buildings aggressively. This has include strategic layoffs and funding in new tools, together with {hardware} powered by AI. These strikes are leading to optimistic working leverage, which implies a modest quantity of gross sales progress — within the cooling economic system — is translating to sturdy earnings progress.
