Economic Reality Check: The First 100 Days

Economic Reality Check Podcast Notes

Market Performance (Jan-Apr 2025)

• S&P 500 hit all-time high of 6,250 around inauguration (Jan 20)
• Since Feb 15: S&P down ~18% (bear market territory)
• $7+ trillion in market value erased
• Nasdaq down 22.3% from peak
• Gradual decline unlike 2020 COVID crash

Bond Market Signals

• 10-year Treasury yield: 4.2% → 3.4%
• 2-year Treasury yield: 4.1% → 3.1%
• Flattening yield curve (recession indicator)

Tariff Impact ("Tariffs 2.0")

• Universal 10% tariff on all imports
• Targeted tariffs: up to 60% on Chinese goods, 25% on Mexican/Canadian imports
• Estimated cost: $320 billion annually (~$2,400 per household)
• Walmart raised prices on 2,000+ items by avg 8.3%

International Response

• China: 25% avg tariffs on US exports (agriculture, aircraft, semiconductors)
• EU: Countermeasures on $40 billion of US goods
• Goldman Sachs projection: Could reduce GDP growth by 1 percentage point

Labor Market Decline

• March: First net job loss (-75,000) since pandemic
• Unemployment: 3.7% (Jan) → 4.2% (Mar)
• Q1 tech layoffs: 82,000+ total
  • Amazon: 10,000
  • Microsoft: 8,000
  • Meta: 7,000
• Other sectors affected:
  • Ford: 4,500 jobs cut (citing tariff-related material costs)
  • JPMorgan Chase: 3,200 positions eliminated

Inflation Reversal

• CPI: 2.9% (Dec) → 3.5% (Mar)
• Food prices: +4.2% YoY
• Apparel: +5.7% YoY
• BLS attributes increase to rising import prices from tariffs
• Creates Fed dilemma: cut rates to support growth or address rising inflation

Consumer Response

• U. Michigan Consumer Sentiment: 79 (Jan) → 63.4 (Apr), 20% decline
• Retail sales: -0.8% (Feb), -1.2% (Mar)
• Target CEO: consumers "increasingly cautious and deliberate"
• McDonald's: first quarterly same-store sales decline in four years

Private Credit Markets & Tokenization

• Private credit market: $1.5 trillion globally (25% YoY growth)
• 65% of private loans originating outside traditional banking regulations
• Major players: Blackstone, Apollo, KKR, Ares (collectively manage $700B)
• Last 6 months: $43 billion of private credit tokenized on blockchain platforms
• Daily trading volume of tokenized credit assets: $150M (Jan) → $1.2B (Mar)
• 72% of traditional investment bank executives "don't fully understand the mechanics"
• SEC launching task force to examine these markets

Economic Outlook

• Administration promised 4% annual GDP growth
• Atlanta Fed GDPNow tracking Q1 growth at just 1.2%
• Administration standing firm on tariffs, considering second round of tax cuts
• Fed signaling readiness for further rate cuts if conditions deteriorate

Coming Next Week

• Deep dive into housing market trends

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