Weekly Research Briefing: Slow Now

Donald Trump’s trade war is taking a “significant toll” on the global economy, the OECD has warned, as it cut growth forecasts for a dozen G20 countries.

Global growth will slow this year and next, from 3.2 per cent last year to 3.1 per cent and 3 per cent in 2025 and 2026 respectively, while inflation will be stickier than previously expected, the Paris-based OECD said in its interim outlook as it urged countries to avoid a “ratcheting up of retaliatory trade barriers.

GDP growth in the US will decelerate from 2.8 per cent last year to 2.2 per cent this year and 1.6 per cent in 2026, the OECD said. Higher trade barriers will contribute to persistent inflation, leading the Federal Reserve to keep interest rates unchanged until the middle of 2026, it predicted.

"The message is clearly that trade uncertainty and economic policy uncertainty are having a significant toll,” OECD chief economist Álvaro Pereira told the Financial Times.

JPMORGAN: “Lowering 2024 growth forecast from 1.9% to 1.6%, raising unemployment peak from 4.2% to 4.4%... Forecast anticipates headwinds from tariff actions, weaker sentiment, and more policy uncertainty, with potential downside risk to growth after April 2.”

"Where we stand now is with a heightened concern about the U.S. economy," Bruce Kasman, the U.S. investment bank's chief global economist, told reporters in Singapore on Wednesday.

He said he has not yet revised any forecasts, but put a roughly 40% recession risk into the outlook - up from about a 30% chance he had reckoned on at the start of the year.

Economists at Goldman Sachs and Morgan Stanley last week downgraded their U.S. GDP growth forecasts and now see growth at 1.7% and 1.5% this year, respectively.

Kasman said the recession risk would rise, probably to 50% or above, if reciprocal tariffs that Trump has threatened to impose from April were to meaningfully come in to force.

"If we would continue down this road of what would be more disruptive, business-unfriendly policies, I think the risks on that recession front would go up," Kasman said.

Builder confidence in the market for newly built single-family homes was 39 in March, down three points from February and the lowest level in seven months, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today.

“Builders continue to face elevated building material costs that are exacerbated by tariff issues, as well as other supply-side challenges that include labor and lot shortages,” said NAHB Chairman Buddy Hughes, a home builder and developer from Lexington, N.C...

“Construction firms are facing added cost pressures from tariffs,” said NAHB Chief Economist Robert Dietz. “Data from the HMI March survey reveals that builders estimate a typical cost effect from recent tariff actions at $9,200 per home. Uncertainty on policy is also having a negative impact on home buyers and development decisions.”

The Empire manufacturing index declined by 25.7pt to -20.0, significantly below expectations for a more moderate decrease. The composition of the report was weak, as the new orders (-26.3 to -14.9), shipments (-22.7pt to -8.5), and employment (-0.5pt to -4.1) components all fell back into contractionary territory. The prices paid measure (+4.7pt to 44.9) and the prices received measure (+2.8pt to 22.4) both increased. The delivery time component declined by 4.4pt to 1.0. The 6-months-ahead business conditions index declined by 9.5pt to 12.7.

CAPITAL SPENDING: Fifty-eight percent reported capital outlays in the last six months, unchanged from January. Of those making expenditures, 37 percent reported spending on new equipment (down 4 points), 30 percent acquired vehicles (up 6 points), and 13 percent improved or expanded facilities (down 3 points). Twelve percent spent money on new fixtures and furniture (unchanged), and 5 percent acquired new buildings or land for expansion (unchanged). Nineteen percent (seasonally adjusted) plan capital outlays in the next six months, down 1 point from January. The last time capital outlay plans fell below 19 percent was April 2020.

The drop in tender rejections over the past week is highly concerning. A lot of the bullishness post-election among supply chain executives has turned into confusion and dismay. The biggest frustration is not understanding the end game. Business leaders are confused about what's next.

"With overall industry railcar deliveries held steady at roughly 42,000 units, order activity for the trailing 12 months totaled around 25,000 units, well below typical replacement demand." — FreightCar America CCO Matthew Tonn

Canadians are skipping trips to Disney World and music festivals. Europeans are eschewing U.S. national parks, and Chinese travelers are vacationing in Australia instead.

International travel to the United States is expected to slide by 5 percent this year, contributing to a $64 billion shortfall for the travel industry, according to Tourism Economics. The research firm had originally forecast a 9 percent increase in foreign travel, but revised its estimate late last month to reflect “polarizing Trump Administration policies and rhetoric.”...

The number of overseas visitors to the United States fell 2.4 percent in February from a year earlier, government data shows, with the biggest drops in travelers from Africa (down 9 percent), Asia (7 percent) and Central America (6 percent). Meanwhile, travel from China — a frequent target of the president’s ire — is down 11 percent...

The number of Canadians driving back from visits to the United States fell by 23 percent in February, while air travel from the United States was down 13 percent compared with a year earlier, according to government figures from Statistics Canada.

Altogether, Tourism Economics expects a 15 percent decline in travel from Canada this year, translating to $3.3 billion in lost spending.

"We anticipated an 8% growth rate in terms of top line. We're going to come in at a 4% growth rate. So it hasn't snuck on backwards. But it's not growing as fast as we were anticipating...the outlook has been impacted by the recent reduction in consumer and corporate confidence caused by increased macro uncertainty, driving softness in domestic demand." — Delta CEO Ed Bastian

"Economic uncertainty is a big deal, and we have really seen some weakness in March. So that has led to the guide that we issued earlier today, and you've seen this...This is disappointing." — American Airlines Group President Robert Isom

"We are lowering our RASM guide today by 3 points to an increase in the 2% to 4% range year-over-year...2 points are primarily due to softness in bookings and demand in large part due to the macro environment." — Southwest Airlines CEO Bob Jordan

"There's certainly -- we have also seen weakness in the demand market. It started with government...we've seen some bleed over to that into the domestic leisure market. Good news is that international, long haul, Hawaii, premium, all remain really strong. But we have seen government and some low-end consumer leisure weakness, which also appears consistent to me with a lot of other data that they look at." — United Airlines CEO Scott Kirby..

@LizAnnSonders: UMich inflation expectations spiked this month ... 1y up to 4.9%; 5-10y up to 3.9%

‬‪“Our consumer in particular is just stressed right now and that is reflected in our guidance this year,” Chief Executive Jackie Ardrey said. “Especially in our outlet channels, we have a greater proportion of customers who are under $75,000 household income, and they’re just not coming to the outlet stores.”

@RenMacLLC: Consumers have been cutting back on their discretionary purchases. Over the last three months, restaurant sales have collapsed 8.5% at an annual rate.

Americans are stopping for gas, but they aren’t grabbing their usual snacks or smokes.

The change in behavior is hurting U.S. sales of Doritos, Twinkies, Heath bars and Newports.

U.S. convenience-store sales volume fell by 4.3% as prices rose in the year ended Feb. 23, according to market-research firm Circana...

At a Circle K store in suburban Chicago, adult customers with children in tow hurry out the door before they get talked into buying a snack, said sales representative David Guerino. Shoppers are picking up fewer items in a range of categories from ice cream to cigarillos, he said. A large bag of chips there now costs $7.

“People can’t afford it anymore,” Guerino said. “If it’s not a necessity, they’re not as willing to splurge.”

A falloff in mergers and acquisitions was a plus for issuers in the leveraged loan market over the past year or so as yield-hungry investors snapped up any deals that came to the market, many of which were repricings. Money managers are now becoming more selective, pushing back on aggressive pricing and credits with lower ratings with five deals pulled from syndication in recent weeks.

One consequence of a softer economic growth outlook, higher uncertainty, and elevated market volatility will likely be weaker completed M&A activity than we and many market participants had expected a few months ago. We update our forecast for completed M&A growth to incorporate expectations for slower economic growth and lower CEO confidence than previously anticipated, leading to a revised forecast for completed 2025 US M&A growth of +7% in 2025 compared with +25% previously. Our revised pace of M&A growth in 2025 still represents a slight acceleration from the 6% growth in 2024.

Wall Street’s confidence in Corporate America’s profit engine is fraying, threatening more turbulence ahead for a badly bruised US stock market.

Though the broad outlook for corporate earnings remains strong, analysts have been steadily trimming their expectations for company results in the next 12 months. Profit forecasts for S&P 500 Index companies have seen more downgrades than upgrades for 22 of the past 23 weeks, according to Bloomberg Intelligence, the longest stretch since early 2023.

A darkening earnings picture would be an unwelcome development for stock investors, after worries over the economic impact of President Donald Trump’s tariff policies spurred a selloff that has dragged the S&P 500 around 8% from last month’s record. With robust earnings expansion needed to justify the market’s still-elevated valuations, signs that companies may struggle to meet profit expectations in the months ahead could further sour sentiment.

We didn't raise our recession odds today, but we did lower our S&P 500 targets for the end of 2025 and 2026 to 6400 and 7200 from 7000 and 8000. We aren't cutting our earnings outlook yet, but recession fears caused by Trump Turmoil 2.0 are already causing the forward P/E and forward P/S of the S&P 500 to tumble, led by the valuation multiples of the Magnificent-7.

@RenMacLLC: Investors' Intelligence Survey is one of our favorites b/c it starts in the mid-1960s, has maintained a similar methodology thru time, and it works. Bears now outnumber bulls for the first time since the 2022 bottom.

DB's George Saravelos: "European investors are currently losing as much money on their S&P holdings as they did during the ~30% inflation-driven sell-off in 2022" due to the dollar falling in tandem w/stocks. If this continues, it may challenge the idea of the dollar as a haven

So far this year, most foreign stock markets have outperformed the US stock market. This suggests that Trump's tariffs are more likely to depress the US economy than those in the rest of the world.

Europe bull: credit spreads in Europe now tighter than in US, 1st time since 2021 (Chart 10)…corporate bond risk in Europe lower than in US on belief in stronger nominal growth via fiscal stimulus, opposite in US; and rotation from EU government bonds to stocks coming.

President Xi Jinping’s push for economic expansion and tech innovation is feeding optimism that Chinese stocks will continue this year’s advance and widen their lead over churning US equities.

Franklin Templeton Institute sees the emergence of a “Xi put” — akin to the so-called “Fed put” — a view that authorities will deploy market-friendly measures and more stimulus to achieve the about 5% economic growth target set this month. Xi’s ambitious goal comes as Donald Trump’s chaotic rollout of tariffs has raised the odds of a US recession and sent American megacaps into a tailspin.

The idea of a “Xi put” marks a notable shift in investor perception about the Chinese leader, whose power grip had deterred foreign flows over the past few years. In contrast, the belief over a “Trump put” is fast fading.

The MSCI China Index has soared almost 20% so far in 2025 while the S&P 500 Index has shed about 4%. That is on course to be the biggest quarterly outperformance since 2007. With fresh measures anticipated to revive consumption and signs of an earnings recovery emerging, JPMorgan Chase & Co. and Templeton are among those forecasting the rally to widen beyond the tech sector in the coming months.

Warren Buffett's Berkshire Hathaway increased its holdings in five Japanese trading houses to close to 10%, backing up Buffett's earlier stated policy of increasing the stakes gradually.

The stakes were increased to 9.82% from 8.09% for Mitsui & Co., to 9.67% from 8.31% for Mitsubishi, to 9.3% from 8.3% for Marubeni, to 9.29% from 8.23% for Sumitomo, and to 8.53% from 7.47% for Itochu...

Berkshire began investing in the five companies in July 2019. In April 2023, Buffett, who serves as Berkshire's chairman and CEO, visited Japan to meet personally with the five companies' management teams and said he intended to add to his investments. The announcement was a big confidence boost to the Japanese stock market.

At the time of his initial investments, the five companies signified the undervaluation of Japanese stocks, trading at around 0.6 of their book value. Today, much of the undervaluation has been corrected, and whether the companies can pursue higher share prices will depend on their ability to improve profitability and keep their balance sheets lean.

"As the years have passed, our admiration for these companies has consistently grown," Berkshire said in the letter. Greg Abel, the confirmed successor to 94-year-old Buffett, "has met many times with them, and I regularly follow their progress," the letter says. "Both of us like their capital deployment, their managements and their attitude in respect to their investors."

The company said in its earnings on Wednesday after the market close that it expected sales of $330 million to $335 million for its current fiscal quarter, well short of analyst expectations of $367.5 million according to FactSet.

“Over the last several weeks, we have seen increasing global macroeconomic uncertainty, particularly in the U.S. public sector, and this uncertainty is reflected both in our fiscal first quarter and full-year 2026 financial outlook,” Ashim Gupta, the company’s chief operating and financial officer, said in a statement...

The statement makes UiPath one of the first companies in the software sector to single out weakness in U.S. federal exposure, according to KeyBanc analyst Jason Celino, who kept a Sector Weight rating on the stock with no target price.

“Though concerning and with potential negative implications for broader software, we do wonder if it is more company/sub-segment specific,” Celino wrote in a research note titled “DOGE’s First Casualty in Software?

@MikeZaccardi: BofA Consumer Checkpoint @DOGE: In February, MoM card spending growth remained negative in Washington DC, but recovered in other eastern US cities

\While the other markets saw inventory trends remain relatively steady week-over-week, Washington D.C. saw a third straight week of accelerating inventory growth compared to last year. Taking a step back, inventory growth in D.C. hovered between 20% and 30% from June to December 2024. Growth started to accelerate in January (+35.9% YY) and February (+41.0% YY), and has continued into March, landing at 56.2% more for-sale listings last week compared to the corresponding week one year ago.

Harold Hamm, the billionaire wildcatter and a major donor to President Donald Trump, has challenged a claim from the new US energy secretary that domestic oil companies could increase production even at prices as low as $50 a barrel.

Hamm’s words represent one the first signs of public push-back from the US shale industry against the Trump administration’s energy policy. Hamm, 79, was one of the president’s biggest financial backers in last year’s election.

Many in the sector have welcomed the new administration’s policy of cutting regulations and boosting domestic oil and gas production. But that support sits uneasily alongside Trump’s statements calling for significantly lower energy prices.

Energy Secretary Chris Wright told the Financial Times this week that while new supply will push down prices, oil companies will learn to innovate and bounce back.

Speaking Thursday, Hamm, 79, the co-founder and chairman of closely held shale driller Continental Resources, warned that US drillers need $80-a-barrel oil to be able to cover costs at some wells.

“There are a lot of fields that are getting to the point that’s real tough to keep that cost of supply down,” he said in a Bloomberg Television interview. “When you get down to that $50 oil that you talked about, then you’re below the point where you’re going to ‘drill, baby, drill.’”

West Texas Intermediate crude currently trades at around $67, having fallen from $80 in January amid concerns about weak Chinese demand and more supply from OPEC+.

Thibault Liger-Belair was on his French estate—in the midst of deciding which foreign markets would receive his Burgundy wine—when he received word of Trump’s tariff threat.

If the levy is implemented, he said, he will have to scale down his exports to the U.S. to around 5% of sales from 15%. The U.S. will receive only his more expensive bottles, which are priced up to $1,500. Markets such as Baltimore and Chicago, where his clientele is less well-heeled, are likely to be left off his distribution map, Liger-Belair said.

“I’ll be limited to certain states, the ones that economically are the richest,” he said.

Hanging in the balance is an entire ecosystem of U.S. importers, distributors and retailers that producers, from Liger-Belair to conglomerates like LVMH Moët Hennessy Louis Vuitton, rely on to reach consumers.

Harry Root, a wine distributor based in Birmingham, Ala., said he risks getting squeezed by sky-high inventory costs and a struggling customer base of restaurants that depend on markups of European wine to break even.

“I don’t know where we’ll end up if a 200% tariff comes into place,” Root said of the business he co-founded with his wife, Nicki, 23 years ago. “I don’t think our business will last very long.”

BYD Co. unveiled a new system for electric cars that the Chinese automaker says will allow them to charge almost as fast as it takes a regular car to refuel.

BYD’s new battery and charging system was capable of providing 470 kilometers (292 miles) of range in 5 minutes in tests on its new Han L sedan, Chairman and founder Wang Chuanfu said Monday. The manufacturer will start selling vehicles with the new technology next month.

Being able to charge a car in the time it takes a combustion engine vehicle to pull in and out of a gas station could convince drivers who aren’t willing to make lengthy stops to go electric...

The speeds would be comfortably ahead of Tesla’s Superchargers, which can add up to 275 kilometers of range in 15 minutes. Tesla, however, has a much larger network of more than 65,000 Superchargers worldwide. Mercedes-Benz Group AG’s new entry-level CLA electric sedan unveiled last week can add 325 kilometers in 10 minutes of charging.

BYD’s new EV platform will allow cars to reach a speed of 100 kilometers per hour in 2 seconds, Wang said at the event at the carmaker’s headquarters in Shenzhen.