Stocks Higher
The US stock market has clawed back most losses since the initial tariff announcement. The S&P 500 remains down (3.86%) for 2025, and off (8%) from its all-time high, 6147.43 on February 19, 2025, according to the Wall Street Journal.
The lingering debate, are stocks over-valued, under-valued or at fair-value? The current set of data suggests the answer is currently illusive.
The Federal Reserve does not know whether to increase rates because of possible inflation or lower rates due to a slowing economy? Last week the Fed decided to keep rates steady hoping for more clarifying data.
Corporate CEOs are grappling with several moving parts, enough to have them keep their wallets tight for the time being. A positive corporate profit reporting season is winding down however guidance about the near-term future is absent.
Many companies and consumers have made additional purchases anticipating higher costs around the corner.
Are stocks at fair value? In my opinion, it’s not possible to have a firm opinion.
Dysprosium?
Reading through Wall Street Journal on Sunday morning I found an article on Dysprosium. Learning never stops!
Dysprosium is a rare-earth material with a silver metallic luster. It is used in EV motors to guide the spinning portion that turns the wheels. Additional uses include satellites, jet fighters, CT scanners and iPhone speakers.
Why does this matter? China is the source of over 90% of the world’s supply with no other country able to produce them at the same scale and cost.
Our challenge is, there is only one large scale dysprosium mine in the US, and the processing is now only coming online. The Journal article suggests this mine would not be able to meet our needs and new mines would take an average of 29 years.
Makes me reflect on what both prior Democratic and Republican administrations have been prioritizing over the years. I am not suggesting I agree with the methodology of the current administration.
Chinese Automobile Industry
The more research, the greater the revelation. According to the Automotive News dated April 21, 2025, private car ownership in China was nonexistent until Volkswagen launched local output in 1985. For the next 20 years, every major global automaker followed Volkswagen and opened assembly plants in China. The reason: China imposed a 15% tariff on foreign car makers forcing plants to be built there.
By 2020, Buick, Volkswagen and Germany luxury autos dominated the Chinese light-vehicle markets with a 62% market share.
By 2024, less than 5 years, it all flipped with 65% of the market now being captured by Chinese brands. WOW!!
Week Ahead
160 S&P 500 companies will share their 1st quarter results and attempt to provide guidance. So far, earnings have been positive, however many companies will not provide guidance because they simply do not know more than you or me about the short-term future of tariffs and their impact.
This week we will hear from Apple, META, Microsoft Amazon, GM, Coca-Cola and more.
On the economic front data will also be front and center this week. However, I will be waiting anxiously for the same set of data a month from now as the tariff situation will hopefully have greater certainly.
Economic data this week includes retail and wholesale inventories, Housing numbers, Core PCE, Manufacturing, GDP for quarter 1 and on Friday, the all-important jobs report.
Closing Thoughts
We need to see definitive progress with trade negotiations over the next few weeks, not months. Supplies are tightening, consumer confidence is waning, CEOs are pausing plans for hiring/spending and the stock market as of last Friday is anticipating resolution.
I track local restaurant reservations. The trend has changed slightly. As of today, I can make a reservation for next Saturday evening at premier restaurants in the area. As of a few weeks ago, a reservation could only be made for a Saturday evening with a month’s wait.
In addition, movement on the tax bill being debated in Congress would help. We are only months away from current taxation sunsetting back to pre-2017 rates. we can use as much certainty as possible.
It is only a matter of time; the negative soft data can turn into negative hard data. Let’s hope this does not come to fruition.
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All data sourced from Wall Street Journal, April 25, 2025.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested directly. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets. Value investments can perform differently from the market as a whole. They can remain undervalued by the market for long periods of time.
