April Economic Outlook

Traditions Wealth Advisors
Greysen Golgert/Brien L. Smith CFP®
Economic Analyst Intern/Chief Investment Officer
April 24, 2025

It’s no secret that economic outlooks have shifted in the previous month as policy change generates extreme uncertainty in the United States and abroad. Optimism and all-time stock market highs in February have now finally shifted to bearish sentiment and more reasonably-priced equities. Uncertainty has more to do with this rapid change than any sign of fundamental weakness in the economy. American exceptionalism may have taken a hit over the last month in financial markets, but economic indicators have something to say about that. Labor market data remains strong as initial jobless claims ticked down from 224,000 in February to 215,000 in March, below the 225,000 claims that economists expected. The current 4.2% unemployment rate is well below the long-term average unemployment rate in the United States (5.68%) and the range of rates in which an economy is considered to be at full or normal employment (4.5-5.5%). The most recent employment situation report from the Bureau of Labor Statistics did begin to witness the effects of federal job cuts, but strength in other sectors led to a robust 228,000 jobs added in March. On the flip-side, both core and headline inflation seem to be moving in a favorable direction. Headline inflation ticked down to 2.4% year over year, and core inflation, which excludes volatile food and energy prices, hit its lowest 12-month increase since March 2021, dropping to 2.8%. Jobs and inflation are only part of the picture, but they are indicative of an economy that continues to chug along despite the trade turmoil.

​President Trump has been open about his desire for the Federal Reserve to lower the interest rates. Economists, and especially those at the Federal Reserve, seem hesitant. The rate range has held steady at 4.25-4.5% through multiple FOMC meetings, underscoring the Fed’s commitment to its dual mandate of stable prices and maximum sustainable employment. Cutting the interest rate now would almost certainly guarantee higher inflation because of tariffs. If inflation gets out of control, then the Fed will be forced to raise interest rates back to an even more restrictive point than they are now. Investors know this and markets experienced a significant drop when Trump threatened to fire Fed Chair Jerome Powell. It is best for this economy if rates are held pat until significant weakness materializes in the labor market.

The price of gold futures briefly topped $3,500 per Troy ounce this week before pulling back slightly to $3,300 per Troy ounce as investors seek to hedge against equities risk or as a long-term safe haven. Gold is considered to be a good safety net during periods of extreme uncertainty. It has proven to be a solid investment since the 1990s, outperforming bonds consistently through the past three decades. The geopolitical implications of the trade policy blitz have been the primary driver of record-breaking demand for the commodity in recent weeks. Gold has also managed to challenge the performance of equities markets as well, outpacing the performance of the S&P 500 significantly when considering 3 and 10-year splits. It is now hovering around the highest price it has ever been, suggesting that investors should wait to buy it at a discount or consider it for portfolio diversification in the long-term or risk mitigation in the short-term.

Sources:
https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/market-updates/notes-on-the-week-ahead/recession-risks-resilience-and-american-exceptionalism/
https://www.reuters.com/markets/commodities/gold-maintains-record-rally-following-trumps-criticism-fed-chief-2025-04-22/
https://www.sofi.com/learn/content/dead-cat-bounce/