3 Things You Need to Know This Week | Eurozone Inflation, Tariffs, US Jobs Report (Mar. 31, 2025)

Transcript

Paige Tyson:

Hello, and welcome to 3 Things You Need to Know this Week, our regular series designed to help you sift through the noise across financial media and understand what really matters for markets.

And now, here are three things you need to know this week:

First up, eurozone inflation.

On Tuesday, the eurozone will release its first estimate of March consumer inflation. Recent inflation trends have caused some to worry it may accelerate again in part tied to tariffs. But current expectations suggest headline inflation will decelerate slightly from February. And while monthly data routinely bounces around, eurozone inflation has remained below 3% since October 2023. More broadly, inflation is one of several headlines that have weighed on investors, leading many to begin 2025 with a gloomy outlook for Europe. And while forecasters expect lower economic growth for Europe than the US, when you actually look at the numbers, eurozone economic data has been beating expectations so far in 2025, while US data has moderately disappointed. Conditions in Europe aren't perfect, but we believe low sentiment for the region likely leaves room for upside surprise, a positive for European stocks.

Next, more tariff news.

On Wednesday, the Trump administration is expected to release an update on reciprocal tariffs, an attempt to equalize US tariffs with duties charged by its trading partners. As tariff developments continue to evolve quickly, we believe their effects should prove less sweeping than many feared. So far, we've seen multiple instances of tariffs being threatened or implemented, but then quickly walked back or paused. And while some investors may think we're entering uncharted territory here, over the past eight years, we've actually seen rising tariffs and trade restrictions across both the first Trump and Biden administrations. Yet, world trade volume didn't collapse. Increased trade barriers between particular countries, such as the US and China, appear to have largely diverted trade rather than lowering it overall. And while uncertainty remains over how tariffs will or won't be implemented, their scale appears unlikely to upend global trade or trigger a recession.

Finally, US March jobs reports.

This week, the US releases a slate of labor market data, including Friday's employment report containing March nonfarm payrolls and unemployment data. February's unemployment data showed a slight increase in the unemployment rate, and investors are preparing for March's jobs data to reflect more government layoffs. We expect heated discussion to quickly follow as pundits debate the Trump administration's efforts to reduce the federal workforce. This topic is charged with emotion, but we urge investors to set aside partisan viewpoints and try to assess these developments as objectively as possible. From that vantage point, we believe the layoffs announced don't have the size or scope to materially impact the broader US economy. Even if federal jobs losses increase further, and federal employment shrinks by 100,000 or even 200,000, this would take federal job levels down to around 2.8 million. But this wouldn't be unprecedented. The federal workforce shrank from about 3.1 million in 1993, to less than 2.8 million inches 1997, a 10% decline over a generally good economic and market backdrop. We don't discount the uncertainty federal layoffs create or the human impact it can have on those affected. But these actions don't seem likely to result in recession.

And that's it for this episode of 3 Things You Need to Know This Week.

For more of our thoughts on markets, check out This Week in Review, released every Friday. You can also visit fisherinvestments.com. Thanks for tuning in and don't forget to subscribe!