US Economy: Weekly Commentary – April 21, 2025.
US Market Review
Bond yields normalized after a sharp selloff. Equities were mixed; oil and gold rose, the dollar softened, and Bitcoin posted modest weekly gains.
Following the sharp selloff of the previous week, bond markets rebounded as the yield curve began to normalize. Apart from a mild inversion at the short end, the curve has shown no major surprises. As of this week, Treasury yields stand at 3.8% for the 2-year, 4.3% for the 10-year, and 4.8% for the 30-year.
Equity markets delivered mixed results. Large-cap stocks declined by over 1%, whereas small- and micro-cap stocks posted gains of 1.15% and 2.40%, respectively. The "Magnificent 7" slid 5.30%, weighing on the Nasdaq, which closed the week down 0.47%. Sector performance was uneven: real estate and energy led with gains of over 3%, while technology and consumer discretionary sectors fell by more than 2%.
In currency and commodities markets, the U.S. dollar eased 0.17% against the euro. WTI crude oil surged 5.20%, fuelled by renewed U.S. sanctions on Iran and OPEC’s decision to cut production in response to oversupply. Gold rose 2.25% amid sustained investor demand, and Bitcoin edged higher, posting a weekly gain of 0.60%.
Following the sharp selloff of the previous week, bond markets rebounded as the yield curve began to normalize. Apart from a mild inversion at the short end, the curve has shown no major surprises. As of this week, Treasury yields stand at 3.8% for the 2-year, 4.3% for the 10-year, and 4.8% for the 30-year.
Equity markets delivered mixed results. Large-cap stocks declined by over 1%, whereas small- and micro-cap stocks posted gains of 1.15% and 2.40%, respectively. The "Magnificent 7" slid 5.30%, weighing on the Nasdaq, which closed the week down 0.47%. Sector performance was uneven: real estate and energy led with gains of over 3%, while technology and consumer discretionary sectors fell by more than 2%.
In currency and commodities markets, the U.S. dollar eased 0.17% against the euro. WTI crude oil surged 5.20%, fuelled by renewed U.S. sanctions on Iran and OPEC’s decision to cut production in response to oversupply. Gold rose 2.25% amid sustained investor demand, and Bitcoin edged higher, posting a weekly gain of 0.60%.
US Market Views Synopsis
US retail sales rose 1.4% in March, driven by pre-tariff purchases, while the housing sector faces challenges with declining starts, affordability issues, and rising construction costs.
US retail sales rose 1.4%, driven by pre-tariff purchases, especially in the auto sector, which saw an 11% increase. However, concerns about rising tariffs, the job market, and wealth decline are expected to slow future growth. The "control group" (excluding volatile categories like autos and fuel) grew by 0.4%, falling short of expectations. Meanwhile, the housing sector faces challenges with a decline in single-family home starts and permits, reflecting affordability issues and rising construction costs. Although multi-family permits rose slightly, starts and completions dropped, signalling potential future supply shortages. Builders are struggling with high material costs, labour shortages, and tariffs, which could worsen affordability. Despite a slight improvement in builder sentiment, the outlook for both single-family and multi-family markets remains cautious, with ongoing supply-side constraints and economic uncertainties expected to dampen future market activity.
US retail sales rose 1.4%, driven by pre-tariff purchases, especially in the auto sector, which saw an 11% increase. However, concerns about rising tariffs, the job market, and wealth decline are expected to slow future growth. The "control group" (excluding volatile categories like autos and fuel) grew by 0.4%, falling short of expectations. Meanwhile, the housing sector faces challenges with a decline in single-family home starts and permits, reflecting affordability issues and rising construction costs. Although multi-family permits rose slightly, starts and completions dropped, signalling potential future supply shortages. Builders are struggling with high material costs, labour shortages, and tariffs, which could worsen affordability. Despite a slight improvement in builder sentiment, the outlook for both single-family and multi-family markets remains cautious, with ongoing supply-side constraints and economic uncertainties expected to dampen future market activity.
Retail sales
US retail sales rose 1.4% in March, driven by advanced purchases ahead of tariffs, but concerns over rising prices, job market, and wealth may slow growth.
US retail sales surged 1.4% MoM in March, in line with expectations, driven by consumers advancing purchases of high-cost imported items in anticipation of tariffs. Notably, auto sales spiked nearly 11%, contributing to a 5.3% increase in the sales value for March. Electronics, however, showed only a modest increase of 0.8%, while internet sales rose by a mere 0.1%. The "control group," which excludes volatile categories like autos, fuel, and building supplies, grew by 0.4%, falling short of the 0.6% consensus forecast. The previous month's "control" number was revised slightly upward from 1.0% to 1.3%. While the surge in retail sales suggests the US may avoid a negative first-quarter GDP print, growth in the second quarter is expected to be limited. Rising tariffs, coupled with concerns over reduced purchasing power, a weakening job market—exacerbated by government spending cuts—and declining wealth due to a sell-off in equity and bond markets are likely to dampen consumer confidence and spending, potentially leading to a slowdown in economic growth later in the year.
We expect slower consumer spending in the coming months as rising tariffs, reduced purchasing power, and concerns over the job market and wealth dampen consumer confidence.
US retail sales surged 1.4% MoM in March, in line with expectations, driven by consumers advancing purchases of high-cost imported items in anticipation of tariffs. Notably, auto sales spiked nearly 11%, contributing to a 5.3% increase in the sales value for March. Electronics, however, showed only a modest increase of 0.8%, while internet sales rose by a mere 0.1%. The "control group," which excludes volatile categories like autos, fuel, and building supplies, grew by 0.4%, falling short of the 0.6% consensus forecast. The previous month's "control" number was revised slightly upward from 1.0% to 1.3%. While the surge in retail sales suggests the US may avoid a negative first-quarter GDP print, growth in the second quarter is expected to be limited. Rising tariffs, coupled with concerns over reduced purchasing power, a weakening job market—exacerbated by government spending cuts—and declining wealth due to a sell-off in equity and bond markets are likely to dampen consumer confidence and spending, potentially leading to a slowdown in economic growth later in the year.
We expect slower consumer spending in the coming months as rising tariffs, reduced purchasing power, and concerns over the job market and wealth dampen consumer confidence.
Housing sector
Housing starts and building permits are declining due to cost and affordability challenges. Multi-family permits are increasing slightly. However, lower completions signal potential future supply shortages.
Single-family home starts and permits have declined, with permits dropping by 2% in March after several months of stagnation, while completions have seen a slight increase. The slowdown in permits suggests a reduced pace of new construction in the coming months, largely driven by higher inventory levels in key markets and ongoing challenges related to costs and affordability. This decline in starts aligns with builder sentiment, which remains negative despite a slight uptick in April from 39 to 40. Optimism about single-family sales for the next six months fell by four points to 43, the lowest level since November 2023, while current sales conditions improved slightly from 43 to 45. Prospective buyer traffic saw a modest increase from 24 to 25, though it remains negative. These improvements in current conditions are likely due to recent declines in mortgage rates, which may help entice more buyers into the market. However, the outlook for future sales remains pessimistic, with builders facing rising costs and affordability issues. Supply-side challenges persist, including elevated material costs, which are over 40% higher than pre-pandemic levels, and a shortage of skilled labour. Recent tariffs could further increase costs, with builders estimating an additional $10,900 per home. If these tariffs continue, builders may be forced to pass on the higher costs to consumers, who are already grappling with housing affordability.
On the multi-family side, permits increased by 10% MoM, while starts remained flat, and completions dropped by 8%. Despite a strong pace of completions throughout 2024, the trend has since reversed, with multi-family permits and starts remaining low. Given the size of the current backlog, multi-family builders are facing their smallest relative backlog since the aftermath of the global financial crisis, signalling a potential future supply shortage unless starts increase. The multi-family market, however, may see tailwinds from a depleted project pipeline and growing apartment demand, as affordability constraints persist in the for-sale market and the prime renter-aged population continues to rise.
We expect the real estate market to remain challenging due to affordability issues, labour shortages, high prices, and the potential for an economic slowdown.
Single-family home starts and permits have declined, with permits dropping by 2% in March after several months of stagnation, while completions have seen a slight increase. The slowdown in permits suggests a reduced pace of new construction in the coming months, largely driven by higher inventory levels in key markets and ongoing challenges related to costs and affordability. This decline in starts aligns with builder sentiment, which remains negative despite a slight uptick in April from 39 to 40. Optimism about single-family sales for the next six months fell by four points to 43, the lowest level since November 2023, while current sales conditions improved slightly from 43 to 45. Prospective buyer traffic saw a modest increase from 24 to 25, though it remains negative. These improvements in current conditions are likely due to recent declines in mortgage rates, which may help entice more buyers into the market. However, the outlook for future sales remains pessimistic, with builders facing rising costs and affordability issues. Supply-side challenges persist, including elevated material costs, which are over 40% higher than pre-pandemic levels, and a shortage of skilled labour. Recent tariffs could further increase costs, with builders estimating an additional $10,900 per home. If these tariffs continue, builders may be forced to pass on the higher costs to consumers, who are already grappling with housing affordability.
On the multi-family side, permits increased by 10% MoM, while starts remained flat, and completions dropped by 8%. Despite a strong pace of completions throughout 2024, the trend has since reversed, with multi-family permits and starts remaining low. Given the size of the current backlog, multi-family builders are facing their smallest relative backlog since the aftermath of the global financial crisis, signalling a potential future supply shortage unless starts increase. The multi-family market, however, may see tailwinds from a depleted project pipeline and growing apartment demand, as affordability constraints persist in the for-sale market and the prime renter-aged population continues to rise.
We expect the real estate market to remain challenging due to affordability issues, labour shortages, high prices, and the potential for an economic slowdown.
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No representation or warranty, express or implied, is made by Dolfin Fund Management Ltd or any of its directors, officers or employees as to the accuracy, completeness or fairness of the information in this document and no responsibility or liability is accepted for any such information (save in respect of fraudulent representation or warranty).
This document may not be reproduced, redistributed or passed on to any other person or published, in whole or in part, for any purpose without the prior written consent of Dolfin Fund Management Ltd.
Dolfin Fund Management Ltd, a company registered in Malta (registered number C71750), authorised and regulated by the Malta Financial Services Authority (licence number IS71750)
Copyright © 2025 Dolfin Fund Management Ltd. All rights reserved