Market Musings 4/24/2025
Quick thoughts on the markets and major portfolio news. Not on Ursa yet? Download Ursa from the App Store!
Companies warn demand is slowing, but markets rallying; what gives?
Markets continue to rally on #Tariffs deal optimism yet companies are slashing outlooks on slowing #ConsumerConfidence. Who’s right?
We’re solidly into the earnings season now and investors are getting some mixed messaging. Obviously, in the last few days, we got some positive news on the macro front with the White House starting to back down on their hardline #Tariffs stance as well as their feud with Fed Chair Powell. Yet, we’re also seeing company after company warn #ConsumerConfidence demand is slowing.
On Thursday, a trio of airlines American, Southwest and Alaska all rescinded their full year outlooks on the uncertainty. Meanwhile, Pepsi, Chipotle and Proctor & Gamble all warned of slowing #ConsumerConfidence demand.
This followed Monday’s meeting where retail giants Walmart, Target and Home Depot lobbied the White House to reduce #Tariffs. They likely drove home their point warning of #Inflation price increases and empty shelves created by shortages from the #Tariffs. Conveniently, the next day on Tuesday, the White House began softening its #Tariffs stance on China.
There seems to be a disconnect between the market’s optimism and company forecasts. Who’s right? Well, it’s unclear…
We do see companies benefiting from being more conservative publicly. Even if companies thought the #Tariffs impact was more short-term, the current macro uncertainty still provides cover for them to lower expectations. There’s no point in raising the bar when the macro will give you a pass for lowering it.
However, the slowdown in #ConsumerConfidence demand is real and will be focused on the next few months.
Meanwhile, markets have turned very bullish betting on an imminent #Tariffs deal with China with a quick #ConsumerConfidence recovery which is why they’re mostly ignoring the company warnings. While not uncharacteristic, market optimism rallied and appears to be already pricing-in the best case scenario.
We’re also cautiously optimistic with the White House’s recent #Tariffs deescalation binge, but it’s still all talk. Or in China’s case, just talking of talk since China has noted no discussions have actually taken place yet. While numerous countries are already in negotiations, China is still the main focus given its large manufacturing footprint and our intertwined economies.
The trillion dollar question is: Can a deal with China to significantly lower or remove the retaliatory #Tariffs on both sides before #ConsumerConfidence feels it?
While the markets seem to be betting yes, this’ll likely be more complicated than the White House just announcing they’re in negotiations. Again, the #Tariffs are already in place and set too high for any real meaningful trade to occur. Current retail inventories are still mostly stocked, but new shipments are likely halted preventing new supply.
How long until consumers see it in stores? That’s unknown, but it might happen sooner rather than later if Americans make a run on supplies and stock up similar to what we saw at the onset of Covid.
In any case, it puts a timer on the China #Tariffs deal negotiations which, at this point, the market is betting comes in on time.
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As of the publish date, Ursa portfolios do not own Southwest, American Airlines, Alaska Airlines, Pepsi, Chipotle, Proctor & Gamble, Walmart, Target or Home Depot with no plans to open any new positions in the next 5 days.
The statements, opinions and analyses presented here are provided as general information. This article is the opinion of the author. Anything within this article should NOT be considered an investment recommendation or advice. See Ursa’s full disclosures here.
Original Photo by Pixabay.