Bounce Back

The market had a chance to digest the panic and is looking forward

Summary: The major US stock indexes officially bounced back from "tariff derangement syndrome" this week. The economic environment looks a lot calmer, but there has no doubt been a lasting impact. Many businesses still feel uncertainty about trade. Europe is focused on disentangling from the US and has stepped up its defense spending. China now realizes just how much leverage it can get from its control of rare earth metals.

---

Editor’s Note: We have reserved the sections after Macro for our premium subscribers. If you’re not a premium subscriber already, please consider subscribing.

---

Macro

The stock market has bounced all the way back
"So we found out today this episode from April 3 to today is the fastest bounce-back after a 15 percent decline in S&P history, fastest bounce-back ever. So, we, the administration, don’t look at the stock market every day. What we tried to do was set in place economic fundamentals. And, presumably, the market had a chance to digest the panic and is looking forward." - U.S. Treasury Secretary Scott Bessent

Were tariff fears exaggerated?
"So I think it is telling you that the tariff panic, or, as I like to call it, tariff derangement syndrome, was overdone. We’re seeing earnings growth. We’re seeing a good path for interest rates. So I think the economy is looking pretty good." - U.S. Treasury Secretary Scott Bessent

Companies are still dealing with uncertainty, but no signs of recession
"We are observing a mix of both optimism and uncertainty within the market and our client base. Many businesses are frozen as they wait for more clarity about a number of macro issues such as tariffs, inflation and taxes. The hard data continues to indicate that small businesses remain fundamentally healthy despite the headlines. Our small business employment watch revealed stable employment levels with moderation in hourly wage inflation in the recent months. Our data does not currently show any signs of recession." - Paychex (PAYX 0.00%↑) President John Gibson

"Let me just say this much. I think over the next 30 to 60 days, the trade environment will change. And so we will see how that evolves and it was very dynamic. And at that point, we'll be able to be more prescriptive." - FedEx (FDX 0.00%↑) CEO Rajesh Subramaniam

"On the demand side, we would separate the effect of the tariffs into near-term observed impacts and longer-term expected impacts. In the near term, as I already mentioned, there is increased uncertainty causing delays in some projects not under contract." - Commercial Metals (CMC 0.00%↑) CEO Peter Matt

Powell is staying vigilant for tariff-driven inflation
"Even so, increases in tariffs this year are likely to push up prices and weigh on economic activity. The effects on inflation could be short-lived, reflecting a one-time shift in the price level. It is also possible that the inflationary effects could instead be more persistent." - Federal Reserve Chair Jerome Powell

He's keeping the Fed on hold
"For the time being, we are well-positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance." - Federal Reserve Chair Jerome Powell

“With all this uncertainty, the current posture of monetary policy, which has been characterized as 'wait-and-see,' is appropriate. Certainly, with the inflation of the past couple of years still in people’s minds, I will be carefully watching the monthly price data for signs of broad-based price increases that might further challenge an already fragile price-setting psychology. The resilience of the economy gives us the time to observe how prices and the economy develop. Policy will need to remain nimble as the FOMC balances the two sides of its mandate." - Kansas City Fed President Jeff Schmid

But there's more chatter about lowering rates soon
"Should inflation pressures remain contained, I would support lowering the policy rate as soon as our next meeting in order to bring it closer to its neutral setting and to sustain a healthy labor market. In the meantime, I will continue to carefully monitor economic conditions as the Administration's policies, the economy, and financial markets continue to evolve." - Federal Reserve Governor Michelle Bowman

Powell will become a lame duck in a few months
"There will be two seats opening -- or there will be one seat definitely opening in the beginning of the year, when board member Kugler leaves, and then the chairmanship will open up in May, when Chair Powell leaves. So, Chair Powell doesn’t have to leave. He could stay on the board, not as chair. So there is a chance that the person who is going to become the chair could be appointed in January, which would probably mean an October-November nomination." - U.S. Treasury Secretary Scott Bessent

International