The Federal Reserve’s next move on interest-rate policy depends on the Trump administration’s next move—or series of moves—on trade policy.

In a statement released Wednesday after the Fed’s May policy meeting, and in Fed Chair Jerome Powell’s comments at a postmeeting press conference, the message was clear: President Donald Trump’s sweeping tariffs have clouded the central bank’s economic outlook, making it nearly impossible to forecast whether inflation or unemployment will prove to be the more urgent threat.

The scale of the White House’s “Liberation Day” tariffs “was significantly larger than anticipated,” Powell said.

That leaves the Fed, which held the federal-funds rate target range steady at 4.25%-4.50%, in wait-and-see mode, so much so that Powell referenced “waiting” more than 20 times during a nearly hourlong press conference. Rick Rieder, chief investment officer of global fixed income at BlackRock, called the Fed’s stance “assertive inaction” in a client note.

The Fed’s dual mandate stipulates that it must foster price stability and full employment. Yet, as the FOMC statement stated, and as Powell’s comments later reinforced, Fed officials judged that “the risks of higher unemployment and higher inflation have risen,” largely due to uncertainty surrounding tariffs.

The economy remains solid enough to justify patience with regard to any monetary policy changes, Powell said, while emphasizing that the cost of waiting to make changes is relatively low. The Fed, Powell said, is in a “good place” to wait and see what happens.

By Thursday morning, futures traders were pricing in about 17% odds of a quarter-percentage-point cut in the fed-funds rate at the June policy meeting, down from 30.5% on Tuesday and 63% a week ago, based on the CME FedWatch tool.

The market’s attention has now shifted to the policy meeting ending July 30. Odds of a rate cut of the same magnitude at that meeting were 59% late Wednesday, up from 35% a week ago.

Much will depend on the scope and duration of tariffs, and whether they result in a one-time bump in prices or more persistent inflation, none of which is clear right now, Powell said. That’s a change in tone from the Fed’s messaging after the March meeting, when officials emphasized the transitory nature of trade policy-induced price hikes.

“We’re going to need to see how this evolves,” Powell said on Wednesday.

Not everyone agrees with the Fed’s current posture. Neil Dutta, head of economics at Renaissance Macro Research, said in a note that Powell’s labor-market views were outdated.

“Powell’s views on unemployment seem very stale, in my view,” he wrote on Wednesday. “Labor market conditions are said to be solid even though labor demand continues to cool, hiring rates are low, and average hourly earnings have slowed. What makes the Fed assume this stabilizes on its own? It can’t and won’t, which means a policy response will ultimately be required.”

In recent months, the unemployment rate has been “moving sideways,” but at 4.2% it is still within the range of maximum unemployment, Powell said.

Powell conceded that a wait-and-see policy means the Fed won’t be able to take pre-emptive action ahead of a potential economic slowdown. “It’s not a situation where we can be pre-emptive because we actually don’t know what the right response to the data will be until we see more data,” he said.

Powell also pushed back at the press conference on recent political and public criticism of the Fed. In response to a question, he said Trump’s public pressure to cut interest rates “doesn’t affect our doing our job at all.”

He added, “We’re always going to only consider economic data, the outlook, and the balance of risks. That’s it.”

Although previous presidents have routinely met with Fed chairs, he confirmed that Trump hasn’t requested a meeting during this presidential term. “I’ve never asked for a meeting and I never will,” Powell said. “It always comes the other way.”

Powell also responded to recent criticism from former Fed Gov. Kevin Warsh, who is widely believed to be Trump’s next pick for Fed head. In a keynote speech last month, Warsh accused the central bank of mission creep and overreach.

“We did things on an emergency footing during the pandemic,” said Powell. “We knew we wouldn’t get everything perfect.”

He acknowledged that the Fed could have done a better job explaining quantitative easing, its strategy of buying assets such as government debt to increase financial-system liquidity, but defended the central bank’s independence and scope.

On climate-related efforts, the Fed’s role is “very, very narrow,” he said, adding that suggestions to the contrary are exaggerated.

The main message of the Fed’s May meeting, however, was pervasive economic uncertainty, and the central bank’s decision to stay the course, watch, and wait.

Read the full article HERE.

China expanded its gold reserves for a sixth straight month in April, underlining its push to boost holdings of the precious metal as prices trade near a record and the trade war rumbles on.

Bullion held by the People’s Bank of China rose by about 70,000 troy ounces last month, according to data on Wednesday. In the latest six-month span, volumes have climbed by close to 1 million ounces, or about 30 tons.

Gold has rallied to successive records this year, supported by concerted central-bank buying as authorities seek to diversify holdings away from the US dollar. Bullion’s upswing — with prices up nearly 30% higher this year — has also been aided by rising investment demand as the US-led trade war unsettles financial markets, raises concern about US assets, and drives haven demand.

In China, there have been signs investors are piling into gold, with volumes on the Shanghai Futures Exchange surging to a record in recent weeks. The voracious onshore appetite has also seen the PBOC issuing fresh quotas for commercial banks to import bullion.

At the same time, the Chinese authorities have moved to shore up support for the economy, and set the stage for trade talks with senior US officials later this week. On Wednesday, Beijing reduced its policy rate and lowered the amount of cash lenders must keep in reserve, highlighting efforts to buttress growth.

Central banks have increased their gold purchases roughly five-fold since 2022, after a freeze on Russian reserves, according to Goldman Sachs Group Inc., which has been among the most vocal bullion bulls in recent months. The trend is likely “a structural shift in reserve-management behavior, and we do not expect a near-term reversal,” analysts said in a March note.

At that time, the bank estimated that the PBOC held around 8% of its reserves in gold, below the global average of about 20%, and also far lower than the elevated share seen in some developed economies. If Beijing were targeting an allocation of 20%, and maintained an average pace of about 40 tons a month, it would take about three years to reach a that level, the analysts said.

“The modest volumes bought over the last few months suggest that while they are buyers, they will only do so if the price is attractive,” said Ross Norman, chief executive officer at Metals Daily. “Likely we will see ongoing purchases of gold by PBoC, as they scale back on US dollar denominated assets such as Treasuries.”

Read the full article HERE.

The sharp moves higher in the Taiwanese dollar and other Asian currencies against the U.S. dollar in the past couple of days are giving global investors flashbacks of the late 1990s Asian currency crisis, adding to concerns that investors are rethinking their appetite for U.S. assets.

These moves have made the dollar weaker, with the U.S. Dollar Index down 8% so far this year. That runs counter to the conventional wisdom that the dollar strengthens on the back of tariffs, which make foreign goods more expensive for U.S. currencies and theoretically narrow the trade deficit and reduce the amount of dollars going abroad.

However, some of the tamest currencies in Asia are seeing wild swings higher. Take the Taiwanese dollar  which strengthened against the U.S. dollar 4.4% in a single session and 5.8% for the week for its biggest single-day and one-week gains in history. It strengthened another 4% on Monday, and Taiwan’s central bank urged calm overnight.

Other Asian currencies have also been volatile, with the Korean won strengthening 2.5% Friday; and up another 1.5% Monday. The Singaporean dollar SGDUSD+0.10% is up and Japanese yen USDJPY-0.80% also climbing.

Initially chalked up to low volumes due to a holiday for Buddha’s birthday on Friday, the strength of these currencies versus the dollar again on Monday “points to an important shift in policy,” Louis Gave, head of Gavekal Research, wrote in a note to clients.

Others agree. Jens Nordvig, founder of macro research consulting firm Exante Data, writes in a social media post Monday that these “aren’t tactical shifts” but strategic ones, imploring investors to manage their risk accordingly.

Another data point that sticks out to Nordvig: risk reversals—the difference in pricing for dollar-denominated puts versus calls—are “suddenly in a new regime” and back to levels not seen in the post-global financial crisis period.

Such sharp moves in typically tame currency markets raises concerns of trouble among those who own a lot of dollar-oriented assets, like Taiwanese insurers, and the prospects they sell dollars to deal with the pain. That in turn could roil the U.S. bond market.

From a bigger picture view, these shifts add to the notion that foreign investors are rethinking their hefty allocation to U.S. assets in the wake of Donald Trump’s efforts to reorder global trade and alliances.

Global strategists are also paying close attention to past comments from the likes of Treasury Secretary Scott Bessent that floated the idea Asian countries voluntarily revalue their currencies in some new version of the Bretton Woods agreement.

With many Asian currencies “seriously undervalued,” Gave says that made sense in theory though could be painful in practice, especially as Taiwan already is seeing weak tourism, and a 10% revaluation in its currency would hurt domestic producers’ profitability.

But global investors see parallels to the late 1990s currency crisis, which was sparked by Thailand’s devaluation. Gave says there is the possibility of a “reverse Asian crisis” where the currencies strengthen instead of tumble against the dollar as they did in the 1990s.

Taiwan and South Korea’s dependence on the U.S. for security could make them more willing to revalue their currencies. However, it’s unclear if Japan, southeast Asian currencies or China would follow, he says. Overnight, the Taiwanese central bank pushed back against speculation the U.S. had asked them to revalue their currency.

Read the full article HERE.

May 5 (Reuters) – Gold prices rose more than 2% on Monday, helped by a weaker dollar and safe-haven inflows after new tariffs from U.S. President Donald Trump reignited worries about the effects of a global trade war.

Spot gold was up 2.3% at $3,313.21 an ounce, as of 1144 GMT. U.S. gold futures climbed 2.4% to $3,322.

The dollar index was down 0.4% against its rivals, making gold more attractive for other currency holders.
On Sunday, Trump announced a 100% tariff on movies produced outside the U.S. but offered little clarity on how the levies would be implemented.

“The U.S. dollar is slowing down and that is a positive for gold, more investors are betting that the Fed will cut rates relatively soon after last week’s U.S. GDP data came below expectation and now with what’s going on with oil,” said Carlo Alberto De Casa, external analyst at Swissquote.

Although the U.S. Federal Reserve is widely expected to leave rates steady on Wednesday, market focus will be on economic projections, clarity on future rate cuts and Chair Jerome Powell’s remarks.

Trump said he will not remove Powell as Fed Board Chairman before his term ends in May 2026, while reiterating his call for the central bank to cut interest rates.

Non-yielding gold acts as a hedge against global uncertainty and inflation and tends to thrive in a low-interest-rate environment.

Trump on Sunday said the U.S. was meeting with many countries, including China, on trade deals, and his main priority with China was to secure a fair trade deal.

“With Chinese solar production now slowing amid oversupply, high U.S. recession risk and central bank gold buying remaining strong in 2025, we expect gold to continue outglittering silver,” Goldman Sachs said in a note.

Elsewhere, spot silver rose 1.3% to $32.38 an ounce, platinum was up 0.1% to $961.41 and palladium gained 0.7% to $960.13.

Read the full article HERE.

Big Money pros are more anxious now than during the bursting of the dot-com bubble, the 2008-09 financial crisis, and the Covid-19 pandemic.

America’s money managers are more bearish today than they have been in nearly 30 years. Barron’s latest Big Money poll of professional investors finds 32% of respondents bearish on the outlook for stocks over the next 12 months—the highest percentage since at least 1997.

Just think about all the crises investors have weathered since then: the bursting of the dot-com bubble, the 9/11 terrorist attacks, the collapse of Lehman Brothers and the 2008-09 financial crisis, the Covid-19 pandemic. And yet the Big Money pros are more anxious now than during any of those painful points for the financial markets, the economy, and the country.

The bulls’ ranks also stand at historic levels in our spring survey—historically low, that is. Just 26% of respondents call themselves bullish on the market’s prospects, the smallest percentage since 1997.

A full 50% of managers were bullish last fall, while only 18% were bearish. The change in sentiment largely reflects worries about the potential impact of the Trump administration’s tariffs on corporate earnings and the economy. Although President Donald Trump has softened his stance since announcing tariff hikes on April 2, and has shown a willingness to make deals with both traditional allies and China, the managers remain concerned about the possibility of a global trade war.

“Trump may have overplayed his hand on tariffs,” says Harris Nydick, managing member and co-founder of CFS Investment Advisory Services in Totowa, N.J. “This is one of the top five times in my career for fog and murkiness. There are so many unknowns.”

The S&P 500 index has fallen about 4% this year after two years of double-digit gains. Tariff worries are only partly to blame, however. Equity valuations were unsustainably high at the start of the year, and investors’ concentrated bets on beneficiaries of artificial-intelligence technology were rocked in late January when China’s DeepSeek revealed an AI model built more efficiently, and at far lower cost, than U.S. models.

Although stocks have rebounded from the lows reached after Trump’s tariff announcement, the Big Money managers think more selling may be in store. Some 58% say the stock market is overvalued, while 38% call stocks fairly priced. Only 4% say the market is undervalued.

The managers’ clients are even more pessimistic than the pros; 56% say their clients are bearish.

Bill Smead, founder and chief investment officer of Smead Capital Management in Phoenix, calls this “one of the craziest junctures for the markets” that he has ever seen. “We needed to unwind growth-stock mania,” he says, but adds that the tariff news led investors to “slaughter things that should do better,” namely industrial and consumer stocks that have been hit hard by trade-war concerns.

Barron’s conducts the Big Money poll twice a year, in the spring and fall, with the help of Erdos Media Research in Ramsey, N.J. The latest poll was mailed out in late March, with supplementary tariff-related questions added in early April. The spring survey drew 119 respondents.

The optimists expect the Dow Jones Industrial Average, S&P 500, and Nasdaq CompositeCOMP+1.11% to end the year about 4% to 7% above recent levels, based on their mean forecasts. But the bears see a 7% decline for the Dow and low-double-digit losses for the S&P 500 and Nasdaq. Forty-two percent of respondents describe themselves as neutral in the latest poll.

Only 20% of Big Money managers indicate they approve of Team Trump’s tariff policy, while about 80% put the odds of a tariff-related recession at 40% or higher. Still, 60% consider the market’s tariff-related tempest a buying opportunity.

Several respondents lamented the fact that the White House isn’t focusing on policies that might spur more immediate growth. “I hope the administration begins to take a look at the process of deregulation,” says John Stoltzfus, chief investment strategist at Oppenheimer Asset Management, based in New York.

He isn’t alone: 38% of poll respondents say deregulation ought to be the administration’s top economic priority this year.

Simply put, much of the optimism about a second Trump administration unleashing animal spirits on Wall Street has evaporated since stocks surged shortly after Trump defeated former Vice President Kamala Harris in November.

“Companies are frozen; CEOs are wondering if they should play the long game or short game,” says Matthew Neyland, chief investment officer at SK Wealth Management in Providence, R.I. “There are things that could be done to make the mergers and acquisitions process easier that would help.”

Neyland says banks might be willing to lend more if they had more flexibility with regard to capital requirements. At the same time, “burdensome reporting” regulations make it more complicated for public companies to do business and have led more companies to stay private, he says.

Deregulation and tax-cut extensions may be coming, but Trump has given the market “the spinach first,” says Eric Green, chief investment officer at Penn Capital Management in Philadelphia. Green says he expects “more shoes to drop” before the market selloff is over.

He also expects a rebound in M&A activity, but notes that companies don’t want to announce major transactions until there is more clarity about tariffs. “They’ve been overwhelmed by tariffs,” he says of the White House and Congress. “Everything else might be happening, but slowly. It’s a matter of time.”

What is the biggest risk the stock market will face in the next six months? Among survey respondents, 24% cite an economic slowdown, 19% say a recession, and 14% say political turmoil in the U.S. Carter Randolph, CEO of the Randolph Company in Cincinnati, is the sole poll participant who sees no chance of a recession in the next year. Although investor and business sentiment hasn’t been good, consumer spending has held up, he says, adding that “sentiment isn’t a good investment tool.”

But others aren’t as dismissive of widespread worry on Wall Street and Main Street. Joe Gilbert, a portfolio manager at Integrity Asset Management in Rocky River, Ohio, says the economy looks to be headed toward a downturn. “Tariffs have caused things to come to a standstill,” he says. “It makes it tough to have confidence, and confidence is fuel for the economy, so a recession is more likely than not.”

The Bureau of Economic Analysis reported on Wednesday that gross domestic product, adjusted for inflation, fell at an annualized rate of 0.3% in the first quarter, largely due to a surge in imports ahead of the implementation of tariffs. Real GDP grew 2.4% in last year’s fourth quarter.

Economic concerns are a big reason for gold’s record-breaking rally this year. Bullion has gained almost 27% year to date, to a recent $3,312 an ounce. Gold is often viewed as a defensive holding, a commodity with currency-like qualities that performs well when the dollar is weakening. The Big Money managers are fans: 58% say they are bullish on gold.

Oppenheimer’s Stoltzfus says he thinks it’s fine for investors to own a little gold, noting the price has gotten a boost largely due to buying by the central banks of China, India, and other emerging markets seeking to diversify beyond the dollar. But Tom Forester, manager of the Forester Value fund, says gold miners might be a better play.

Forester’s fund owns Agnico Eagle Mines and Alamos Gold. Both are trading below their five-year average forward price/earnings multiples, he says, and are benefiting from lower oil prices, which reduces costs. Both are Canadian companies.

Many Big Money participants say they are looking beyond the U.S. for better values this year, with 70% calling themselves bullish on non-U. S. stocks. Charles Zhang, founder and president of Zhang Financial in Portage, Mich., tells Barron’s that he likes both developed and emerging market stocks, and favors the iShares MSCI EAFE Value exchange-traded fund and the Vanguard FTSE Emerging Markets ETF. “The U.S. dollar is weaker; that and a stronger euro are helping international stocks,” he says.

Zhang, No. 1 in the Barron’s ranking of independent advisors, also sees potential for Chinese stocks to keep rising, noting that Alibaba Group Holding and other leading Chinese stocks still look reasonably priced. Alibaba is up more than 40% year to date but trades for just 13 times the next 12 months’ expected earnings.

Better prices elsewhere, coupled with frustration about U.S. trade policies, have led some investors to throw in the towel on U.S. assets. “Some clients are apoplectic,” says Sandra S. Martin, managing director of Martin Investment Management, which has offices in Palm Beach Gardens, Fla., and Evanston, Ill. She says some of the firm’s Asian clients are now focusing more on international stocks.

It isn’t all doom and gloom in the investment world. A volatile start to 2025 has created better buying opportunities in some stocks that had become too rich. “The average investor needs to think for the long term,” says Joseph Parnes, president of Technomart Investment Advisors in Baltimore. He calls himself a contrarian, and bullish. “You should take advantage of downturns, and within two to three years we should see solid growth,” he says.

Sharon Hill, a senior portfolio manager at Vanguard, likes dividend-paying stocks, particularly in the banking and pharmaceutical industries, and especially as bond yields retreat. “High-yielding stocks are already more attractive as a safety play,” Hill says.

She expects volatility in the bond market to make them even more so.

Many Big Money men and women are upbeat about the outlook for bonds. Nearly 75% of the survey participants say their weighting in fixed-income assets is higher than six months ago, while 70% say they are bullish on bonds. “There is still value in bonds,” says Erica Snyder, CEO of Hunter Associates, with offices in Pittsburgh and Salem, Ohio. “We see the Federal Reserve stepping in to cut interest rates a little bit a few times this summer.”

Rate cuts could put more downward pressure on the 10-year Treasury yield, which has fallen in recent months to a current 4.17%. Sixty-two percent of Big Money respondents expect the 10-year yield to be 4% or lower a year from now.

Lower bond yields are a boon to risk assets, prominently including equities. Jose Medeiros, a managing partner at Stonerise Capital Partners in San Francisco, likes the prospects for Meta Platforms, Amazon.com, and Alphabet. “Tech isn’t a fad; it is a growing part of the global economy, and that isn’t going to change,” he says. “Tech companies are growing earnings at a much faster rate than the broader market, with much higher margins and better cash-flow generation. Tech stocks should trade at higher multiples on that alone.”

John Maffei, chief investment officer at MFM Capital Management in Orlando, Fla., says he has been “looking to scoop up values,” particularly dividend payers, as the market has fallen. “The selloff in some stocks has been overdone with this market volatility,” he says, adding that his clients aren’t panicking.

Still, 2025 is likely to remain a year of surprises. And if subsequent quarters mirror the first, investors could be in for a tumultuous ride. “It is a difficult market,” says Ken Laudan, manager of the Buffalo Blue Chip Growth fund. “You have to be comfortable being very uncomfortable.”

If the Big Money managers are preparing for more market turbulence, the rest of us should be, too.

Read the full story HERE.

First-quarter demand up 1 per cent to 1,206 tonnes as World Gold Council highlights uncertainty premiums associated with US assets

Growing economic risks and uncertainties pushed first-quarter demand for gold to the highest level since 2016, with prices expected to remain strong for the rest of the year, according to two outlook reports.

“The broader economic landscape remains difficult to predict, and that uncertainty could provide upside potential for gold,” Louise Street, senior markets analyst at the World Gold Council, said in a reported released on Wednesday that showed global gold consumption increased by 1 per cent year on year to 1,206 tonnes in the first three months of the year.

“As turbulent times persist, safe haven demand for gold from institutions, individuals and the official sector could climb higher in the months to come,” she said.

The council’s report echoed one released by the World Bank on Tuesday that said strong safe-haven demand for gold is expected to persist in the near term, buoyed by uncertainty, geopolitical tensions and concerns about volatility in major financial markets.

Chen Zhiwu, chair professor of finance at the University of Hong Kong, said: “Gold has benefited tremendously from the erratic exercise of power by [US] President [Donald] Trump, making the US dollar and dollar assets less trustable and forcing international investors to diversify away.”

He said investors were likely to keep turning to gold unless developments in Washington showed signs of stabilisation.

Central banks have entered their 16th consecutive year of net gold purchases, adding 244 tonnes to global reserves in the first quarter – just under a fifth less than in the same period last year.

The World Gold Council predicted that central banks are likely to continue purchasing gold in quantities similar to those seen over the past three years, driven by elevated trade-related risks and uncertainty premiums associated with US assets.

The World Bank forecast that gold prices are expected to remain more than 150 per cent above their 2015–19 average this year and next, sustained by strong safe-haven demand amid elevated uncertainties and tensions, and by further increases in central bank holdings.

“Gold prices are projected to increase by 36 per cent in 2025, year on year, before softening somewhat in 2026, assuming that policy uncertainty will start to abate,” its report said.

Peng Peng, executive chairman of the Guangdong Society of Reform think tank, said: “Gold prices are up mainly because of the US tariffs on the whole world. Also, the US dollar has gone into a down trend, with US bonds under pressure. Gold is a hedge.”

He said high prices meant Chinese institutions were more likely to buy gold than individual investors.

The price of gold bullion, which hit a record high of more than US$3,500 an ounce last week before losing some ground, remains about a quarter higher this year, Bloomberg reported on Thursday.

The World Gold Council report said demand for gold bars and coins increased by 3 per cent year on year in the first quarter to 325 tonnes, largely spurred by a surge in retail investment in China, which recorded its second-highest quarter of retail demand, offsetting weakness in Western markets.

Gold jewellery demand, however, fell to its lowest point since 2020, reaching 380 tonnes, a 21 per cent year-on-year decline, as gold prices hit 20 all-time highs during the period, affecting affordability.

The report said that with Chinese consumers facing a challenging economic environment, China was the only market to see the value of gold jewellery purchases fall in the first quarter.

Due to slower economic growth and high gold prices, the council said it expected jewellery demand to be weaker in the second quarter, while demand for bars and coins was likely to remain resilient, as investors favoured them in an environment of elevated risk.

Read the full article HERE.

The reading fell short of the 0.4% growth that economists surveyed by The Wall Street Journal expected

The U.S. economy contracted in the first three months of 2025, as businesses rushed to stock up on imports ahead of tariffs.

The Commerce Department said U.S. gross domestic product—the value of all goods and services produced across the economy—fell at a seasonally and inflation adjusted 0.3% annual rate in the first quarter. That was the steepest decline since the first quarter of 2022.

Net exports, the difference between imports and exports, were a large drag on growth in the first quarter, stripping 4.83 percentage points from headline GDP. Imports increased at a 41.3% pace in the first quarter as businesses tried to get ahead of tariffs that began to come into effect during the first three months of the year and were dramatically increased in the current, second quarter.

“The headline decline overstates weakness because a lot of that was tariff-induced pull-forward,” said Shannon Grein, an economist at Wells Fargo. “Overall, I think that it was a relatively solid underlying report when it comes to demand.”

The reading fell short of the 0.4% growth that economists surveyed by The Wall Street Journal expected.

Stocks fell sharply in early trading.

The GDP report is the first major economic scorecard for the January-to-March quarter, a period in which the White House changed hands from President Joe Biden to President Trump. January—most of which was before Trump took office—was hit by wildfires in Los Angeles and disruptive winter storms in many parts of the country.

A logistical consideration makes Wednesday’s report difficult to interpret: Imports subtract from the Commerce Department’s calculation of GDP, since they represent spending on foreign-made goods and services.

A measure of consumer and business spending that gauges underlying demand in the economy, final sales to private domestic purchasers, rose at a 3% annual rate.

Consumer spending rose at a 1.8% annual rate, slowing sharply from 4% in the final quarter of 2024. Consumers drive the U.S. economy.

Business spending on software, research and development, equipment and structures rose at a 9.8% annual rate.

The new Trump administration quickly announced levies on Mexico and Canada, which it later paused, as well as tariffs on Chinese imports. The “Liberation Day” announcement of far broader tariffs came on April 2, at the beginning of the second quarter.

President Trump has made tariffs a cornerstone of his economic agenda, saying that they will in the long term make America richer and bring back manufacturing jobs. In March, the trade deficit in goods hit a record as businesses stocked up to get ahead of tariffs.  

The U.S. economy entered the year on a strong footing: It grew at a steady pace in 2024 and inflation continued to ease. The unemployment rate held at 4.1% and employers added 456,000 new jobs in the first quarter, down from 628,000 in the final quarter of 2024.

Still, businesses and individuals are saying they are worried about the economy, due to uncertainty around tariffs and worries they will bring higher prices. Investors also took fright. Concerns about tariffs and the economy sent the S&P 500 and Nasdaq Composite to their worst quarters since 2022. 

The CEOs of major companies including American Airlines, PepsiCo and Procter & Gamble have warned that stop-start tariff announcements are complicating their planning efforts and spooking consumers. Others are slashing costs. General Motors pulled its 2025 profit guidance Tuesday, citing auto tariffs.

“Uncertainty creates a pensive and anxious consumer,” Colgate-Palmolive Chief Executive Noel Wallace said last week, when the company lowered its full-year earnings estimate. “You see consumers destock their pantries and not necessarily buy that extra toothpaste tube or that extra body wash.”

Fears of tariff-induced price increases prompted some consumers to accelerate purchases to get ahead of increased costs. Vehicle sales, for example, jumped in March. 

But even that isn’t necessarily good news for sellers. 

“Those who can are buying ahead of tariffs, that means you’re borrowing demand from the future,” said KPMG’s chief economist Diane Swonk. Such “panic purchases” also suppress growth, she noted: Imports count as a subtraction when GDP is calculated.

The potential for a pickup in inflation from tariffs combined with weaker economic momentum puts the Federal Reserve in a bind. The central bank seeks to balance dual goals of keeping inflation mild and the labor market strong.

Fed Chair Jerome Powell said in mid-April he saw a “strong likelihood” that consumers would face higher prices and that the economy would see higher unemployment as a result of tariffs in the short run.

This would create a “challenging scenario” for the central bank because anything it does with interest rates to address inflationary pressures could worsen unemployment, and vice versa, he said. 

Read the full article HERE.

As recession fears reverberate from Washington to Wall Street, Wednesday will bring the most comprehensive yardstick yet of the health of the U.S. economy when the government releases the first estimate of the country’s gross domestic product over the first three months of 2025.

Key Facts

The Bureau of Economic Analysis will release its estimate of first-quarter gross domestic product (GDP) at 8:30 a.m. EDT Wednesday here.

Consensus economist forecasts peg last quarter’s real GDP growth at a quarter-over-quarter, seasonally adjusted annual rate of 0.4%, according to Dow Jones data, a stark decrease from the prior period’s 2.4% expansion.

That would be the weakest economic growth for the U.S. since 2022’s second quarter.

Data from sources following underlying measures of economic activity suggest Wednesday’s GDP reading could be even worse than that.

The Atlanta Federal Reserve’s GDPNow model calls for -0.4% GDP during Q1 when excluding gold imports and exports, while Goldman Sachs’ tracker indicates a 0.2% contraction.

The U.S. has not had a quarter of economic contraction since Q1 2022, when GDP contracted by 1%.

Surprising Fact

Negative GDP growth is rare for the U.S., occurring just three times over the last decade: 2020’s first two quarters as the COVID-19 pandemic ground the global economy to a halt, including a record 28% GDP contraction during the second quarter, and Q1 2022, when the Fed enacted its first interest rate hike in more than three years as inflation soared to a multidecade high.

Will Gdp Indicate We Are In A Recession?

If Wednesday reveals subzero GDP growth, the U.S. will be one step closer to entering a recession, at least by one definition. A technical recession occurs when economic output contracts over consecutive quarters, meaning a negative reading during the second quarter would indicate such a downturn. The National Bureau of Economic Research defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months,” meaning consecutive quarters of slightly negative GDP growth may not officially trigger a recession. Some trusted observers of the economy believe the U.S. could already be on the cusp of a recession, such as BlackRock CEO Larry Fink, while major banks largely view it as a tossup whether or not the U.S. enters such a downturn, including the U.S.’ largest bank JPMorgan Chase, whose economists forecast a 60% chance of a recession this year.

Key Background

The GDP reading comes as economists debate the growing disconnect between “hard” and “soft” economic metrics. Hard data such as job growth and retail sales indicate a steady economy while survey-based measures reveal Americans’ faith in the economy has dropped precipitously, as the University of Michigan’s consumer sentiment poll revealed the weakest sentiment since July 2022. The disconnect comes as Trump has pursued the most aggressive tariffs since before World War I during the early stages of his second term. The ever-changing nature of Trump’s trade stances have also complicated analysis of the regularly scheduled updates on the U.S. economy. For example, this week’s GDP reading includes data through March 31 – two days before Trump’s “Liberation Day” tariff announcement which triggered historic stock market losses, and nine days before Trump backpedaled on many of his most aggressive country-by-country import taxes.

Crucial Quote

“Tariffs function like a tax hike, tighten financial conditions, and increase uncertainty for businesses,” Goldman economists led by David Mericle wrote in a Sunday note to clients, explaining how the levies weigh on GDP growth.

Read the full article HERE.

The waiting is the hardest part.

Whether it’s waiting for a delayed flight, to find out if we got that new job, or to see if we won the lottery, long periods of uncertainty are difficult to indulge. There’s a desire to do something—have a stiff drink, send one too many follow-ups, or spend money we don’t have—to make time go faster and to tamp down the anxiety that comes when faced with the unknown. The stock market finds itself in that position now, waiting to see whether President Donald Trump’s tariff policy will cause a recession or whether the U.S. can still emerge relatively unscathed.

Thankfully, the near certainty of doom that seemed apparent just a couple of weeks ago has faded after Trump blinked on tariffs. After gaining 4.6% this past week, the S&P 500 index has now climbed 11% from its April 8 closing low, and the temptation is to consider the worst over.

Resist that temptation. Sure, it’s easy to imagine a bull case—even a long-term one. The president, who this past week said tariffs on China will “come down substantially,” has bought himself time to work out one-on-one deals with countries around the globe, and just one deal, any deal, could cause markets to jump. His dealmaking could also push other countries to strike deals with one another. The result could be a world that hasn’t deglobalized but just reordered itself, as Jawad Mian writes in his Stray Reflections newsletter.

Adding to the case for upside, tech stocks finally showed signs of life this past week— ServiceNow jumped 21%, Texas Instruments gained more than 9%, and even Alphabet rose 7.7%, helped by its own results —good news given the underperformance of the Magnificent Seven since the DeepSeek selloff began near the end of January.

Yet the bear case seems just as reasonable. While Trump has dialed back the tariff rhetoric, the next Truth Social post could send stocks lower. And investors are still waiting to see what damage has already been done by the will-he-or-won’t-he nature of trade policy. The hard data have held up well because the penalties haven’t started yet, and that will probably be true for first-quarter gross domestic product, to be released on April 30, and April’s payrolls report on May 2. That has investors eyeing May’s or June’s results for the first sense of the damage done.

It could go either way. Polymarket puts the chances of a U.S. recession at 55%, and that seems about right, which means picking a direction, either direction, is probably no better than a coin flip. “In the very short term, the equity pain trade likely remains to the upside as the market pre-positions on tariff de-escalation,” writes J.P. Morgan strategist Dubravko Lakos-Bujas. “However, as the summer approaches, we could start to see some softness in activity due to aggressive tariff-related front-loading, lagged effects of other policies, and lower business investment activity.”

Read the full article HERE.

For centuries, gold has been the go-to haven asset in times of political and economic uncertainty. Its status as a reliably high-value commodity that can be transported easily and sold anywhere offers a sense of safety when everything else is in turmoil.

Not everyone’s a fan. Famed investor Warren Buffett has called the precious metal a “sterile” asset, telling Berkshire Hathaway Inc. shareholders in a 2011 letter that “if you own one ounce of gold for an eternity, you will still own one ounce at its end.”

Nonetheless, investors have sought refuge in bullion as the trade and geopolitical agendas of US President Donald Trump send equities, bonds and currencies swinging. They’ve piled into gold-backed exchange-traded funds, with inflows reaching $21 billion in the first quarter, according to the World Gold Council, the highest level since the Covid-19 pandemic.

The rush to gold has pushed the spot price to a series of record highs, topping $3,500 in mid-April and extending a ferocious run from last year. The yellow metal has thus far outperformed nearly every other major asset class in 2025.

Demand in China — the top bullion producer and consumer — has been one of the key drivers of gold’s ascent, propelled by concerns about the punitive tariffs Trump has placed on US imports of goods from its largest trading partner.

Gold has a track record of increasing in value in times of market stress. It’s also seen as a hedge against inflation, when the purchasing power of currencies is eroded. Inflation worries are front of mind for many right now as the new duties Trump has imposed on imports into the US, as well as the retaliatory levies introduced by other countries, risk increasing prices across the global economy.

The safe-haven status of gold has been elevated as Trump’s trade agenda shakes confidence in other typical shelters from market gyrations — namely the US dollar and government bonds — and threatens to end the idea of American exceptionalism.

Gold has historically been negatively correlated with the dollar. Because bullion is priced in dollars, when the greenback weakens, gold becomes cheaper for holders of other currencies. In mid-April, the dollar was at a three-year low against other major currencies.

Beyond market movements, owning gold is deeply rooted in Indian and Chinese cultures — two of the world’s largest markets for the metal — where jewelry, bars and other forms of bullion are passed down through generations as a symbol of prosperity and security. Indian households own about 25,000 metric tons of gold, more than five times what’s stored in the US depository at Fort Knox.

They’re famously sensitive to prices, but when gold’s appeal to investors in financial markets starts to fade, physical buyers of jewelry and bars often step in to grab a bargain, putting a floor under prices in the process.

Is it just trade war fears pushing up the gold price?

The metal’s blistering price rally since the start of 2024 was partly driven by huge purchases by central banks, particularly in emerging markets as they seek to reduce their dependency on the US dollar, the world’s primary reserve currency. Gold helps diversify a country’s foreign exchange reserves and guard against currency depreciation.

Central banks have been net buyers of gold for the past 15 years, but the speed of their purchases doubled in the wake of Russia’s invasion of Ukraine. As the US and its allies froze Russian central bank funds held in their countries, it underscored how foreign currency assets are vulnerable to sanctions.

In 2024, central banks bought more than 1,000 tons of bullion for the third year in a row, according to the World Gold Council, and they hold around a fifth of all the gold that’s ever been mined.

The sustained enthusiasm of central banks spurred Goldman Sachs Group Inc. to raise its year-end forecast for the gold price to $3,700 per ounce in April. It anticipates that $4,000 could be reached by the middle of next year.

What could halt gold’s rally?

Following a nearly uninterrupted upward march in the gold price since early last year, there could eventually be some consolidation as investors banks their gains. A major de-escalation of Trump’s tariffs and a peace deal between Russia and Ukraine could also spur a price decline.

But central banks have been the most important pillar of support for gold’s bullish momentum, meaning they have the power to do the most damage if they trim their reserves.

There’s no indication any large holder is considering this. The central banks of developed economies have sold very little gold in recent decades compared to the 1990s, when persistent sales sent bullion prices down by more than a quarter over the decade. Amid concerns that those uncoordinated sales were destabilizing the market, the first Central Bank Gold Agreement was struck in 1999, under which signatories agreed to limit their collective sales of bullion.

Does gold being a physical asset cause any issues for investors?

Owning gold typically isn’t free. Because it’s a physical object, holders have to pay for storage, security and insurance.

Investors buying gold bars and coins will usually pay a premium over the spot price. There can be geographic price differentials too and traders take advantage of these arbitrage opportunities.

That’s what happened earlier this year when fears that Trump could introduce tariffs on bullion imports pushed gold futures on New York’s Comex significantly above spot prices in London. There was a worldwide dash among those in possession of the physical metal to shift it to the US to capture the large premium and potentially hundreds of millions of dollars in profit.

Gold is usually relatively simple to shift, stashed away in the cargo holds of commercial aircraft, unbeknown to the holiday and business travelers in the cabin above. But it’s not as straightforward as loading up a jet from Heathrow Airport to JFK thanks to a quirk in the global gold market: different size requirements. In London, 400-ounce bars are the standard, while for Comex contracts, traders must deliver 100-ounce or 1-kilogram bars.

That means bullion being sent to Comex warehouses has to first go to refiners in Switzerland to be melted down and recast to the correct dimensions, before journeying on to the US. This creates a bottleneck when there’s a particular rush to rejig the location of bullion stocks.

Read the full article HERE.