Whiplash

Market index returns

Week to date since April 02, 2025 as of April 09, 2025

Index definitions: Global Real Estate = FTSE EPRA/NAREIT Developed Index; Global Infrastructure = Dow Jones Brookfield Global Infrastructure Index; Natural Resource Equities = S&P Global Natural Resources Index; Commodity Futures = Bloomberg Commodity Index; TIPS = Barclays US TIPS Index; Global Equities = MSCI World Index; Real Assets Index = 30% FTSE EPRA/NAREIT Developed Index, 30% Dow Jones Brookfield Global Infrastructure Index; 15% S&P Global Natural Resources Index; 15% Bloomberg Commodity Index, 10% Barclays TIPS Index. Source: Bloomberg, DWS. Past performance is not indicative of future results. It is not possible to invest directly in an index.

Markets took a sharp turn down after Trump’s tariffs were unveiled during a press conference on April 2nd. The magnitude of tariffs was much larger than expected as the tariffs were not sized based on tariffs countries currently place on the U.S., but instead focused on the size of overall trade deficits by country. The estimated tariff rate was raised from roughly 2% of all imports to nearly 20%, based on the now infamous “beautiful” board. Although imprecise, estimated incremental revenues from higher tariffs amounts to roughly $500B to the U.S. Treasury. The resulting market decline, which we detail in a supplemental dashboard this week, unevenly impacted markets as cyclical asset classes and the most highly impacted industries were liquidated indiscriminately. The market continued its downdraft until April 9th when President Trump abruptly announced that any tariffs above 10% would be paused for 90 days to let negotiations take place. However, while most were left to simmer, China tariffs heated up. China struck back at the U.S.’ 145% maximum levy by upping its 34% tariff to a level of 125% on U.S. exports to the country as well as implementing other restrictive measures. Markets had a strong relief rally on April 9th but remain susceptible to the trade war and the potential damage to the global economy.

We have prepared the tariff dashboard (button above) to provide sector returns of the Real Asset market during the drawdown period of April 2 - April 8 as well as commentary by segment detailing our view of tariff impact by sector. If we look at the one-week period that includes the Wednesday (April 9) market bounce, U.S. TIPS (Inflation Protected Securities) outperformed on a relative basis by only losing 0.9%. Global Equities outperformed the Real Asset Index on the strength of the technology sector recovery. Commodity Futures and Global Infrastructure securities also outperformed on a relative basis, while Natural Resource Equities and Global Real Estate lagged the Real Asset Index. One measure of the market action was the spike in the VIX, an index that measures the expected volatility of U.S. stocks, which started the period at 21.5, more than doubled to 52.3 (a 58% jump), before settling down to 33.6 (ultimately a 36% jump). Credit spreads also increased to levels not seen since 2023 as below-investment grade spreads widened 75 basis points (bps), a 21% move, and investment grade spreads widened 17 bps, a 14% move. Regarding some of the other measures we track, oil prices also had a sharp decline, briefly falling below $60 per barrel, before ending the period at $62 per barrel, a 13% drop. Inflation expectations were lower, as measured by 5 & 10-year breakevens, which fell 8 bps and 4 bps, respectively. While tariffs are expected to provide an impulse to inflation, the likely negative associated growth impact would probably dampen future inflation.^[1]

Why it matters: We continue to monitor economic data, as well as sentiment indicators, as they could eventually feed through to the hard data. The markets have spoken and have voiced their displeasure about uncertainty and the possibility for a protracted trade battle and the impact that these have on the economy.

• Inflation Watch: In the U.S. CPI data for March was released showing headline inflation that rose 2.4% year-over-year (YoY) and -0.1% month-over-month (MoM). These readings were slower than expected, as core services ex-shelter aided the deceleration. The potential for tariff-driven inflation could delay further rate cuts by the U.S. Federal Reserve. Fed officials have voiced their preference for holding rates steady as they monitor economic data and continue to work towards their 2% inflation target. While the overall inflation rate may have slowed, a prominent psychological indicator and key performance indicator for the U.S. President, egg prices, continued to rise. The average price for a dozen eggs hit $6.28, double the price from a year prior. U.S. flocks, which have been decimated by bird flu, are expected to take up to nine months to normalize, if the virus is contained.^[1]
• News from Europe: The German economy registered a decline in Industrial Production of -1.3% for February MoM, and -4.0% YoY. Both measures registered worse than expectations, as well as the prior reading for January. Investors looked for signs of resilience in the data ahead of trade impacts. Exports and Imports both rose in February,  a possible sign of activity being accelerated ahead of tariffs. Exports rose 1.8% MoM, which was ahead of the -2.5% decline for January. Imports rose 0.7% MoM over the same period, which was slower than the revised increase of 5.0% for January.^[1]
• Jobs: Initial Jobless Claims rose to 223k for the period ending April 5, up from 219k in the prior period. Continuing claims ended the period March 29 at 1850k, which was a bit lower than the higher revised figure of 1903k for the prior period. The headline jobs data have remained stable, but the DOGE cuts have yet to be fully realized in the numbers. The DC-area insured unemployment rate is running 70 bps higher than the national average, which could portend future weakness.^[1]

Real Assets, Real Insights:  This week we will look at innovation hub vacancy dynamics, shipping and port proposals, and potential threats to future copper supplies.

• Life Science (Real Estate): Recent life science reports showed annual increases in vacancy rates versus the first quarter of 2024 for Boston, San Francisco, and San Diego. However, the supply pipeline has slowed and could aid future supply/demand and net absorption dynamics as available space is worked through. One possible headwind is the delay/cancellation of NIH and collegiate research funding, although potential tariffs on foreign pharmaceuticals could stimulate demand for space in these markets.^[1]
• hips ahoy (Infrastructure): The proposed plan to charge higher docking fees to China-built shipping fleets could be tempered by the U.S. administration. The initial plan would have included a flat port fee for fleets linked to or built by Chinese firms. The goal is two-fold; first to spur U.S. shipbuilding efforts, and second, to reduce the reliance on imports from China. The high flat fee would be a headwind to imports and penalize many ships that make multi-port delivery stops. The proposed shift could calculate fees based on the age and weight of the ships so as not to overly punish fleet owners who purchased ships well before the tension arose. However, discussions are ongoing, and the final form is far from certain.^[1]
• Tarnished outlook? (Commodities): The trade war is raising fears that investments in the copper industry could imperil future supply. The additional demand for grid enhancements to fuel data center demand and energy transition is estimated to require 7.5 million metric tons of copper over the coming decade. Tariffs moved from a tailwind to a headwind for U.S. copper prices, which retreated from recent highs as the prospect of lower economic growth could weigh on demand. U.S. prices for copper have risen as traders have tried to front-run potential tariffs.^[2]