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Week in Review: 14-18 April 2025 - Markets Hold, Uncertainty Remains

 

Financial Markets

This week the S&P500 and the NASDAQ 100 fell slightly by 1.5% and 2.3%, respectively. The S&P is holding support at around ~5200. The small cap index (Russel 2000) was up by 1.6%. Trading volumes were average.



The price action on precious metals was also positive. Gold made another upward move and closed the week at 3327$, another all-time-high. Gold may retrace back to ~3100$, at the top-end of the previous trend. Silver closed at 32.54$/oz, but has a lateral trend and seems stuck in the range 29-34$/oz.




WTI was up by 3.6% for the week, and is holding around 64$/bbl. If it continues falling, the next support level is around 54$.


 

Bitcoin was little changed this week, and is now around 84760$. Bitcoin has been holding up pretty well given that it is usually considered a risk asset and it could have sold off together with the stock market a few weeks ago. It is probably too soon for a Bitcoin selloff as retail investors are not panicking or in the need for liquidity - yet. The key resistance and support levels on Bitcoin, for the short term, are 92k$ and 72-74k$, respectively.



The relative strength of the US dollar (DXY) was essentially unchanged, closing the week at ~99. A weaker dollar may help the US to improve the competitiveness of their exports. The EUR/USD is around 1.139$, the GBP/USD is at 1.329$, and the USD/JPY is at 142.13 JPY.



US M2 money supply at the date of 24th February 2025 was up by 0.5%, showing a slow increase after being unchanged in January. If the money supply was going down, it would be another warning sign for the economy and equities. If financial stress in the banking system continues piling up, we will probably see a decrease of the money supply...let's wait...

The national financial conditions index (NFCI) released on the 7th April 2025 tightened by 9%. Note that this indicator is delayed by two weeks.



US bond yields fell slightly this week, after last week's bond market selloff. Yields now sit at 3.8% for the 2-year and 4.333% for the 10-year. 

The VIX closed the week at ~29, showing a decreasing risk perception in the options market. In our opinion, the overall systemic risk in the stock market and overall uncertainty about the US economy is too high. We wouldn't recommend selling puts unless you are really comfortable buying the underlying asset (cash-secured puts)!


Comment Section

This week was marked by the FED chair Powell speech, in which he was a bit more hawkish than expected, giving more priority to continuing the battle on inflation versus unemployment risks. In the March 2025 FOMC meeting, the Fed raised their expectations for inflation for 2025 and 2026 and downgraded their 2025 growth forecasts, while still anticipating reducing interest rates by around 50 bps this year, the same as in the December projection.

The official numbers from China keep on coming good, with 5.4% YoY GDP growth, 7.7% industrial production growth and 5.9% retail sales growth. Their balance of trade is positive, imports have declined and exports increased on a year-over-year basis.

In Europe, the ECB reduced all three of its key interest rates by 25 basis points, lowering the main refinancing rate to 2.40%, the deposit rate to 2.25% and the marginal lending facility to 2.65%, as expected. The decision reflects growing confidence that inflation is on track to return sustainably to the 2% target. Both headline and core inflation have continued to ease, with services inflation also cooling. Wage growth is moderating, and firms are absorbing some of the cost pressure. However, risks to the Euro Area outlook remain, especially due to rising global trade tensions, which are hurting confidence and tightening financial conditions. The ECB acknowledged that growth prospects have weakened and emphasized a data-dependent approach going forward. It made no commitment to further cuts, underlining that future decisions will depend on economic data, inflation dynamics, and the strength of monetary transmission.

Next week, we should pay attention to earnings, which can continue showing signs of margin contraction, and may include negative forward guidance, which can spook investors and spike volatility. In the US, we have earnings reports from Alphabet, Tesla, Boeing, Intel, IBM, Merck, and P&G. On the economic front, flash PMI readings for US, the Euro Area, and Japan will unveil the initial impact of tariff threats. Durable goods orders and existing home sales will also be released in the US.

We need to be extra careful in tumultuous times like this. We continue being conservative with liquidity, and waiting for some clarity. In the event of a strong equity market correction, we want to be able to take advantage of good assets at discount prices! The time to sell puts aggressively has not come yet.

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