Above The Noise: Policy Uncertainty Persists

2025-04-25 02:45:00 ET

Summary

• The market’s best days almost always occur during the worst times.
• Missing them can seriously erode long-term performance.
• A reasonable approach may be to diversify into parts of the market that don’t appear overpriced, like value, mid-cap, and European stocks.
• The Federal Reserve should be inclined to respond to economic weakness as long as long-term inflation expectations remain anchored.

By Brian Levitt, Global Market Strategist

The bond market remains undefeated. A 50-basis point spike in the 10-year US Treasury rate over five days was enough for the Trump administration to pause its reciprocal tariffs. ² Markets expressed relief (or went nuts as if a chicken jockey appeared), learning (hoping?) that there was a pain point for the administration. ³ As James Carville famously quipped, “If there was reincarnation, I would like to come back as the bond market. You can intimidate everybody.” Personally, I would probably still pick Tom Brady or Bruce Springsteen, but maybe I’m biased as a Michigan alum and a New Jersey resident.

Speaking of Springsteen, do investors still believe in The Promised Land? Being negative on the US has become the trendy (and easy) stance. Policy uncertainty persists, and the longer it takes to negotiate trade deals with much of the world, the bigger the hit to sentiment and investment. If I had a hard time planning for this month’s Above the Noise, then I can only imagine the challenges currently facing business leaders. Compounding the problem, markets have quickly priced for pain but may not be priced for recession. ⁴ ...

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