This Week in Review | Trump's First 100 Days, US & Eurozone GDP, Global Politics (May 5, 2025)

Transcript

Stephanie Kuehne:

Hello, and welcome to This Week in Review. This weekly segment is designed to highlight a few important developments you may have missed this week, what they mean for markets, and most importantly, the potential impact for investors. Now, let's review what happened this week.

First, a look at the Trump administration's second first 100 days.

Now as a reminder, our analysis is always politically agnostic. And we don't believe politics should drive your investment decisions. It's a common belief that certain parties are better for stocks, but history proves stocks have done well, regardless of political leadership. Earlier this week marked 100 days since the start of the second Trump administration. While this is an arbitrary milestone, it's a good moment to reflect on US political developments we've seen so far this year. So far, we classified this administration as nothing short of unusual compared to other administrations in modern American history, and it has riled up investors on both sides, along with independents.

Whether this is tariffs and the ensuing market volatility, DOGE layoffs or cuts, negotiations with Ukraine and Russia, disparaging the Fed chair or otherwise, the administration has been unconventional and certainly stirred controversy. Regardless of how you feel about President Trump, his administration's policies generate a lot of headlines and emotions. But we think it is crucial for investors to approach political developments with cool headed analysis, setting aside ideology when viewing the relationship between politics and markets.

To us, the most important thing to focus on is scaling the administration's actions and assessing each move purely from an economic and market viewpoint. If you're tempted to make investing decisions based on political instinct, ask yourself, what do I know about President Trump or his administration that others don't? The administration is so widely watched and discussed from all angles that almost any theory has been chewed over, limiting their potential surprise power. It's important to closely monitor ongoing developments. And while it can be understandably difficult, we encourage long-term investors to stick to their long-term plan even in the face of ongoing political developments or short-term market volatility.

Next, US and eurozone Q1 2025 GDP.

The initial estimates for Q1 2025 showed us GDP shrank by 0.3% on an annualized basis, while the eurozone grew by 1.6%. The US reading was lower than forecast, but the eurozone beat expectations, illustrating Europe's stronger positive surprise potential for this year. A key element of our outlook for the market, which we published earlier this year. For some, the US contraction might spark recession fears, but it's important to keep a few things here in mind. First, the US decline was mostly due to a surge in imports, which doesn't necessarily point to broader economic weakness ahead. Second, a single quarter of GDP contraction isn't enough to declare we're in a recession or that one is even forthcoming. Third, these numbers are just an initial estimate and are revised several times before becoming final. Notably, other parts of the US economy like private business investment and consumption, remain positive for Q1.

For stocks, the key question is how does reality compare to expectations? Right now, sentiment is gloomy, but even slightly better news than expected could give markets a boost.

Finally, global politics.

On Monday, Canada held its federal election. After trailing by over 20 points in the polls earlier this year, Prime Minister Mark Carney's Liberal Party won the most seats, pulling off one of the biggest political turnarounds in recent memory. That said, they didn't win the majority, so it's likely the political status quo from 2019 will continue. Meanwhile, Australia is gearing up for its federal election on May 3rd. Political uncertainty is high at the moment, but it will likely start falling after the vote and the results come into focus. The conclusion of that vote will mark the end of major elections in developed economies for the rest of 2025, and in our view, that relative calm should provide a tailwind to stocks.

And that's it for this week. Thanks for tuning in to This Week in Review. If you're looking for more insights, then don't miss our other series, 3 Things You Need to Know This Week, released every Monday. You can also visit FisherInvestments.com anytime for our latest thoughts on markets. Thanks again for joining us, and don't forget to hit "like" and "subscribe!"