The Week in Charts (4/21/25)

View the video of this post here.

This week’s post is sponsored by YCharts.

Spend less time researching and more time advising with YCharts’ new AI Chat, built specifically for financial professionals. Instantly access key financial data, SEC filings, and market insights in a single search, seamlessly integrated into your YCharts workflow.

Start using AI Chat today and get 20% off your YCharts Professional subscription when you initially sign up for the service.

The most important charts and themes in markets and investing…

1) Global Trade Chaos

A dark cloud of uncertainty continues to hover over the financial markets with no meaningful resolution to the tariff standoff.

Markets initially cheered the “exemption” on smartphones, computers and various electronics imported from China but within days the durability of these exemptions were called into question after comments from Secretary Lutnick (“They’re exempt from the reciprocal tariffs, but they’re included in the semiconductor tariffs, which are coming in probably a month or two … so this is not like a permanent sort of exemption”) and President Trump (“there was no tariff exception announced. These products are subject to the existing 20% Fentanyl Tariffs, and they are just moving to a different Tariff ‘bucket’”).

Adding to the angst were new restrictions placed on Nvidia’s chip exports to China, leading to a $5.5 billion hit to Nvidia’s bottom line.

Needless to say, the markets loathe this type of uncertainty with the S&P 500’s 10% year-to-date decline serving as exhibit A. This is the 5th worst start to a year in history.

2) A Self-Inflicted Recession?

There are growing concerns that the weakness in the stock market is foreshadowing weakness in the economy, with a self-inflicted recession resulting from the trade wars.

Economists now see a 45% likelihood of a US recession occurring in the next 12 months, up from 22% at the start of the year.

And the Atlanta Fed continues to anticipate a contraction in Q1 with their latest real GDP estimate at -2.2%.

3) The Mag 7 Revaluation

US stocks were not pricing in any recessionary risk whatsoever back in January when President Trump took office. Instead, they were priced for perfection. The S&P 500’s CAPE ratio stood at 37.8, higher than the start of any other presidential term in history.

But much has changed since then as developments have been far from perfect. All 7 members of the Magnificent 7 are underperforming the S&P 500 this year, a 180 degree reversal from 2024…

We’re seeing multiple compression across all seven names and the S&P 500 overall.

While no longer pricing in perfection, US stocks are far from cheap and it would be hard to argue that they are pricing in anything close to a recession.

The same can be said for the bond market, with high yield credit spreads only hitting a peak of 461 bps during worst of the selling this month. During the last 3 recessions spreads crossed above 1,000 bps every time.

4) Are Markets Questioning US Exceptionalism?

At the end of last year, one could make a strong case that financial markets were pricing in peak US exceptionalism with an 86% equity valuation premium over Europe. The narrative: US economic and earnings growth would continue to outpace the world, led by the AI-revolution and the magnificent seven.

Today, that narrative has been called into question with international equities outperforming US stocks by the widest margin in a long, long time.

And the companies most sensitive to the domestic US economy (small caps) have performed the worst, down 16% on the year.

At the same time, the US Dollar has been falling at the fastest pace in thirty years, with the Dollar Index down over 8% on the year.

5) The Golden Age for Gold

The US Dollar’s rapid decline coupled with massive uncertainty over trade policy has been a boon for Gold.

The yellow metal is up 27% on the year, on pace for its best annual return since 1979.

It took 45 years to get there, but inflation-adjusted Gold prices are back at an all-time high, surpassing the prior peak from 1980.

6) A Few Interesting Stats…

a) The Gold ETF is now outperforming the S&P 500 ETF over the last 20 years…

• $GLD: +622%
• $SPY: +571%

b) Since 1950, the average bear market recovery time (low to new high) for the S&P 500 (including dividends) has been 14 months, with the longest recovery taking 48 months. If that seems like an eternity, your time horizon is too short for equities.

c) In 1959, 55% of Consumer Spending was on Goods and 45% on Services. Today, 31% of Consumer Spending is on Goods and 69% on Services. As the US has gotten significantly wealthier over the last 85 years, we’ve transitioned to a service-driven economy. This is a good thing.

d) US Manufacturing Jobs as a % of All Private Payrolls…

• 1945: 43%
• 1955: 35%
• 1965: 33%
• 1975: 27%
• 1985: 22%
• 1995: 18%
• 2005: 13%
• 2015: 10%
• 2025: 9%

e) The US makes up 15% of global manufacturing and 29% of global consumption while China makes up 32% of global manufacturing and 12% of global consumption.

f) The Ratio of US Large Caps to US Small Caps is at its highest level since the April 1999 peak, more than 3 standard deviations above the historical mean.

Every week I do a video breaking down the most important charts and themes in markets and investing. Subscribe to our YouTube channel HERE for the latest content.

Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. Read our full disclosures here.

The post The Week in Charts (4/21/25) appeared first on Charlie Bilello’s Blog.