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This Week’s Market Recap… 📊

A little over a month ago, as Trump was preparing to take office, the 10-year yield hit 4.80%. At the time, nearly every economist and strategist predicted it would push past 5% due to inflation concerns stemming from tariffs.

A month ago, I wrote a piece titled “The 10-Year Will Not Pass 5%.” In it, I argued that inflation fears tied to tariffs were overblown and that, under current market conditions, a sustained 5% yield was unlikely.

Since then, Scott Bessent was confirmed as Treasury Secretary, and the administration has shifted its focus to the 10-year yield rather than the Fed Funds rate. This approach makes sense for Trump, given his priority to lower mortgage rates, which are directly tied to the 10-year.

As the administration’s attention turned to the 10-year, yields dropped from 4.80% to 4.25%. In my view, the primary driver of this decline is growing concerns about an economic slowdown. Recent economic data has been relatively weak, and consumer confidence has softened.

Some investors are raising concerns about stagflation, but I disagree. Even if growth slows slightly, I don’t believe inflation will surge. If bond investors were truly worried about inflation, the 10-year yield wouldn’t be falling, it would be climbing. A drop of 11.5% in the 10-year yield suggests the market isn’t pricing in a resurgence of inflation.

From an investment perspective, I see the decline in yields as a positive for equities. Once tariff-related fears settle, this could serve as a catalyst for the market. I also believe concerns about slowing growth are overstated. The University of Michigan Consumer Confidence report, which rattled investors on Friday, showed heightened economic worries, but digging deeper, the data was skewed by political sentiment, particularly among Democrats.

That said, I do expect continued market choppiness in the near term. With constant headlines and policy updates from Washington, volatility will likely persist. However, as investors gain more clarity on the administration’s economic direction by summer, I believe the market will ultimately have a strong year.

Best,

WOLF

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Disclaimer: Wolf Financial does NOT offer financial advice. All content provided is strictly for informational purposes. Wolf Financial is not registered as an investment, legal, or tax advisor, nor as a broker/dealer. Please be aware that trading any stock or crypto-related asset carries inherent risks and may lead to substantial capital losses.