The Global Trade Risk Index has risen again, yet global stock markets, including the S&P 500, reached historic highs last week. Have the threats posed by tariffs truly dissipated, or is this an overly optimistic signal for the market? The answers to these questions are already hidden in the economic data. This week's WEFC will guide you through these topics.
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Global Stock Indices Surge Amid Ongoing Tariffs
Despite ongoing tariff uncertainties, global stock indices have surged to multi-year highs, driven by optimism surrounding the US-China trade truce and increasing loose monetary expectations. However, the persistent rise in tariffs adds complexity to business strategies and market outlooks.
Retail Sales Strong, But Inflation-Adjusted Data Shows Weakness
Inflation remains controlled, with CPI showing moderate increases, while core inflation has been driven up by services prices. Additionally, PPI hit a three-year high, indicating that businesses are facing significant cost pressures from tariffs, which have shown early signs of being passed on to consumers. Retail sales have proven resilient, with stronger-than-expected growth. However, excluding inflation, real data reveals a cooling trend, with the real retail sales index remaining flat for years and a key consumption measure turning negative for the first time since 2008 and 2020.
US-China Truce & Strategic Decoupling
While the US and China maintain a temporary trade truce for another 90 days, both nations are advancing their strategic decoupling. China is reducing its dependence on US exports and expanding its domestic tech capabilities, especially in AI, while the US is focusing on domestic economic measures, signaling long-term competition between the two nations.
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