“The single greatest edge an investor can have is a long-term orientation.”
-Seth Klarman
Here’s what you need to know this week:
· Stocks posted a mild decline last week on Federal Reserve uncertainty
· Markets gain ground on optimistic tariff news
Turmoil Continues
Markets continued their wild daily swings last week, ultimately posting a slight decline. The S&P 500 fell 1.5% while the tech-heavy NASDAQ posted a 2% decline. A less-discussed facet of this year’s selloff has been the decline of the dollar’s value relative to other currencies:
Currencies are affected by a wide variety of factors. In general, currencies tend to fall when investors sell assets denominated in that currency and purchase assets denominated in other currencies. As you can see in the chart above, the dollar’s decline has coincided with the announcement of President Trump’s tariff plans. This makes sense: with the threat of tariffs looming, investors in the US and abroad have dumped US stocks and other assets such as real estate in favor of investing abroad.
However, the dollar’s selloff has steepened over the past week as President Trump has repeatedly criticized Federal Reserve Chairman Jerome Powell and his interest rate policy. Although President Trump actually nominated Powell to the post in 2018, the Federal Reserve is supposed to act independently of the executive branch. President Trump has even threatened to fire Powell although legal scholars are torn on whether such a move is legal.
For his part, Powell has stated he will not step down if Trump asks him to. Investors clearly view the threat to fire Powell as a threat to the Federal Reserve’s independence and thus a threat to investor confidence in the dollar as well. Trump moderated his criticisms of Powell on Monday night and markets rose on Tuesday.
Tariff Progress
Markets have also been bolstered this week on a flurry of news hinting at tariff moderation. Vice President J.D. Vance traveled to India on Monday to negotiate tariff policy with Indian Prime Minister Naredra Modi, and both sides have reported progress on reaching a deal[1]. Vance is slated to travel to Saudi Arabia for further negotiations before his return to the states.
Additionally, markets rose on Tuesday after Treasury Secretary Scott Bessent made optimistic comments at an investor summit in Washington, D.C. Bessent told investors that he expects “significant de-escalation” with China “in the very near future”[2]. China has been the main focal point of President Trump’s tariff plan, and progess towards a deal will undoubtedly boost investor confidence.
Last is the potential of an interest rate cut in the near future. The Federal Open Market Committee will convene in both May and June to determine interest rate policy; as of writing, the markets are assigning a 9% chance of a rate cut in May but a 60% chance of a rate cut in June[3]. This is the most optimistic bond markets have been on rate cuts since last November. Markets are still likely to be volatile in the near term, but these green shoots on tariff negotiations are provided some much-needed optimism.
What Else
· Pope Francis passed away at the age of 88; the papal conclave to select a new pope will begin next month
· The price of gold soared to another all-time high of $3,500/oz before retreating
· Robert F. Kennedy Jr. has directed food manufacturers to phase out eight common food dyes
· A new ceasefire agreement between Israel and Hamas has been proposed although negotiations are still ongoing
What We’re Reading
The papal conclave is an ancient and secretive tradition in which leaders at the Vatican select a new pope. Click below to read an explainer on the process as well as a summary of some of the leading candidates to become the next pope:
What’s Happening Downtown
The annual Festival of the Arts returns to Bicentennial Park this Thursday, April 24th through Sunday, April 27th. This event is free to attend and features hundreds of local artists, performers and food vendors. My wife and I particularly enjoy visiting the festival to discover great restaurants and food trucks from around the city. Click below to learn more, and make sure to say hello if you see us there!
· https://www.artscouncilokc.com/festival-of-the-arts/?mc_cid=837ab616aa&mc_eid=71bf387036
To read more from our blog, click here
Written by: Kane Ogle, CFP®
Steve Beck, Kane Ogle, CFP®, Amber Eduvigen, CFP®, Cale Olbert, CFP®, Brett Valentine, Brandon Ingerson, Jenni Hess