This Week in Review | Tariff Update, National Debt Concerns, April Jobs Data

Transcript

Paige Tyson:

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 may mean for markets, and most importantly, the potential impact for investors. To stay up to date with our latest market insights, subscribe to our YouTube channel or visit FisherInvestments.com. Now, let's review what happened this week.

First, an update on tariffs.

On Thursday, the US Court of International Trade ruled against President Trump's attempt to impose a new 10% blanket tariff by invoking authority under Section 122 of the Trade Act of 1974. Recall back in February, the US Supreme Court blocked President Trump from imposing broad tariffs under the International Emergency Economic Powers Act of 1977. The president then responded to the Supreme Court ruling by issuing new tariffs, citing Section 122. It's that second attempt at broad tariffs that was struck down this week. Importantly for investors, while last year's blanket tariff announcements helped fuel a large correction, markets reacted with more normal volatility in reaction to the Supreme Court ruling in February. We expect this time to be similar as markets appear to have moved on from tariff fears, and this makes sense. Global trade has been shifting away from US dominance for some time, with non-US trade partnerships steadily growing. While tariffs may reduce US participation in global trade, they are unlikely to cause a decline in global trade overall. And looking ahead, regardless of how tariff policy evolves from here, we believe the economic impact will likely be less than some fear. Markets have already priced-in much of the tariff risk, limiting its potential to disrupt stocks in the long term. As always, we'll continue monitoring the situation for any emerging risks.

Next, renewed US national debt concerns.

Recently, US publicly held debt surpassed 100% of GDP, sparking comparisons to post-World War II borrowing and fears about America's fiscal future. However, before reacting, it's worth questioning whether debt-to-GDP is even the right metric to assess the nation's financial health. The key issue is that Uncle Sam doesn't pay its bills using GDP. Debt-to-GDP ratios don't reflect the serviceability of debt. A more practical measure, used by bond investors, is whether incoming cash flow in the form of tax revenue can cover interest payments. Viewed this way, the situation looks less alarming. Only around 18% of federal tax revenue goes towards servicing the debt, a level similar to the late 80s and early 90s, a period where stocks performed just fine. The bond market seems to agree. Today, 10-Year Treasury yields hover around 4.4%, well below their historic average of 5.8%. If US debt was a real problem, we'd likely see a sharp spike in yields as investors demand higher returns for increased risk. Headlines about arbitrary debt thresholds may grab attention, but they rarely lead to the market turmoil many fear.

Finally, April employment data.

Today, we got a fresh look at the state of the US labor market. April's data saw nonfarm payrolls increased by 115,000 jobs, well beyond expectations. Unemployment remains steady at 4.3%. Readings have fluctuated between positive and negative over the last year, with March and April being the first two consecutive positive readings since May 2025. Continuing a trend seen in recent years, the latest figure showed solid employment gains in healthcare, while employment in government, financial and tech jobs declined. We believe this explains the disconnect many may be feeling as solid jobs readings conflict with headlines announcing corporate layoffs tied to AI. Each layoff represents a person or family navigating a difficult transition, and we don't take that lightly. However, for investors assessing the broader economic picture, context is key. While layoff figures may seem alarming in isolation, they're relatively small in the context of the US labor market. First quarter layoffs totaled over 217,000, and while that's a large figure, it actually represents a 56% drop from the same period last year when the Trump administration made significant cuts to the federal workforce. For investors, it's important to remember that layoff announcements are backward looking, reflecting corporate decision based on past conditions. Stocks, on the other hand, are forward looking, pricing and expectations for corporate earnings, productivity and economic activity over the next 3 to 30 months. History also shows that technological shifts, like AI, often displace some jobs while creating others in areas no one predicted. While this doesn't lessen the immediate impact on those affected, it underscores that reacting to layoff headlines by changing your long-term strategy is rarely wise.

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 Three 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."