This Week in Review | Tech & the Fed in Focus, China Q1 GDP, US Consumer Spending (Apr. 18, 2025)

Transcript

Tim Schluter:

Hello, and welcome to This Week in Review. This weekly segment is designed to highlight a few important developments you may have missed this week, what they may mean for markets, and most importantly, the potential impact for investors.

Now, let's review what happened this week.

First, Tech turbulence and Fed uncertainty.

It's been a choppy, holiday shortened week in markets. Tech stocks, especially semiconductor companies, took a hit partly due to concerns about new US export controls squeezing their profits. Headlines also focused on a speech from Fed Chair Jerome Powell, who on Wednesday shared that the central bank could find itself in a dilemma between controlling inflation and supporting economic growth. But as a long-term investor, we'd caution you from changing up your investment strategy tied to either of these headlines or current volatility.

While tariffs and export controls have added some uncertainty for big Tech firms, we don't think this means Tech stocks are destined to keep falling. While we expect more value oriented non-US stocks to lead the market this year, big Tech and semiconductor companies still have strong fundamentals, including wide profit margins, low debt and cash rich balance sheets. Couple that with generally lower sentiment, we see room for them to rise.

Shifting to Fed concerns, we think that what matters more for forward-looking stocks is how inflation and GDP end up, versus what is already priced into markets. If stocks recent declines reflect overly pessimistic inflation and growth projections, it increases the chance reality proves better than expected, which should help the bull market recover.

Next, China's economic momentum.

On Wednesday, China announced 5.4% year over year GDP growth for the first quarter, surpassing expectations. This growth came from a combination of exports, consumer spending and business investment, highlighting broader economic strength. Still, concerns remain over how escalating US-China tariffs might weigh on China's outlook and the global economy. Though we think there's reason to believe these tariffs could have a smaller impact than feared.

For one, the actual collection of tariffs has fallen well short of projections limiting their real-world effect. Secondly, while the US is a key trading partner, exports to America now make up a smaller share of China's GDP compared to a decade ago. Lastly, businesses have adapted by finding ways to work around tariffs, such as rerouting goods through other countries, reducing their potential damage.

If the trade pressures prove less severe than expected, global markets and investors may well have more cause for optimism than concern.

Finally, surging US consumer spending.

This Wednesday, the US reported a 1.4% jump in retail sales for March, the largest monthly increase in two years. With autos playing a front and center role, it seems many consumers rushed to buy vehicles ahead of looming tariffs. But even without auto sales, retail spending still grew slightly across most categories, suggestive of a healthy US consumer.

While there are concerns about high earners potentially pulling back on spending, we'd encourage investors to remember that most consumer spending goes towards essentials like housing, healthcare and utilities, which don't waver much even in difficult times.

Sure, discretionary spending might feel some pressure if high earners tighten their budgets, but this doesn't necessarily signal broader trouble. For now, the data suggests consumer spending remains steady, a good sign for the economy.

That's it for this week.

Thanks for tuning in to This Week in Review. If you're looking for more insights, then don't miss our other series, 3 Things You Need to Know This Week, released every Monday. You can also visit FisherInvestments.com anytime for our latest thoughts on markets.

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