Location Strategy Chartbook 04.05.25

The S&P’s 9% loss since last Friday makes this stocks’ worst week since March 2020 and the fifth-worst week of the last 20 years, trailing only losses sustained in October 2008 and early 2020.

The selloff wiped out more than $4.9 trillion of market capitalization among stocks listed on the S&P, according to FactSet data, led by Apple, Nvidia and Tesla’s more than $1 trillion combined loss.

Fear drove S&P selling higher at the close

The US and/or the global economy is now more likely than not headed toward a recession, according to updated JPMorgan Chase calculations in the wake of Trump’s reciprocal tariffs. The bank lifted its risk assessment for that outcome to 60% from 40% previously.

“These policies, if sustained, would likely push the US and possibly global economy into recession this year,” JPMorgan economists led by Bruce Kasman wrote in a note Thursday. That doesn’t mean a slump is a “foregone conclusion,” they added. “The current positioning of the US and global expansion points to limited vulnerability that might suggest a relatively mild downturn. But recessions are inherently unpredictable.”

“At a basic level a tariff is a tax increase” on household and business purchases of imported goods, the team wrote, and the measures that have been unveiled so far would be “on par” with the biggest postwar tax hike — signed in 1968 to help cool an overheated Vietnam war-era economy. In this case, “the implied tax hike from tariffs is set to be disproportionately felt by middle- and lower-income households,” which, while they spend disproportionately less, “are still a big share and are more reactive to income shocks,” the JPMorgan team wrote.

In interviews and published markets commentaries, many investors and analysts pointed to the Trump administration for the anomaly.

Its protectionist policies, upending of the global economic order in place since World War II, and a growing U.S. debt pile have been chipping away at the dollar's appeal, they say. Left unchecked, a crisis of confidence in the dollar could also undermine its position as the world's reserve currency, they added.

"What we're seeing today is a further indication that the structure and nature of the U.S. dollar’s relationship to global markets has changed," said Thierry Wizman, global foreign exchange and rates strategist at Macquarie in New York.

The recent depreciation in the dollar showed that concerns about the currency's status had "left footprints in financial markets already," Sweden's central bank deputy governor Per Jansson said at an event in London on Tuesday. "If (the dollar's status) would change, that would be a big change for the world economy ... and would basically create a mess," he told Reuters afterwards. "I really do not hope the U.S. goes there."

"The blowback of US tariffs onto the US domestic economy leaves the dollar naked," writes ING's global head of markets Chris Turner in a note.

Alan Cole, a senior economist with the Tax Foundation's Center for Federal Tax Policy, tells Axios "If people think the U.S. isn't a good place to invest in, they might say, 'I don't trust this whole tariff regime,' or 'I don't trust the U.S. economy.'"

In a live earnings call Wednesday, the CEO of furniture retailer RH, formerly Restoration Hardware, uttered an expletive when he saw how his chain's stock tumbled after Trump's announcement. RH's shares were down about 40% end-of-day Thursday, the top loser among U.S. stocks. Also among the day's worst performing stocks were VF Corp., the footwear maker behind such brands as Vans and Timberland, as well as home furnishings retailer Wayfair and apparel firm Gap.

The National Retail Federation and the U.S. Fashion Industry Association immediately voiced their opposition to the new round of tariffs. In fact, the NRF announced Wednesday it expects the growth of U.S. retail sales to slow down this year, to 2.7% and 3.7% over 2024 to between $5.42 trillion and $5.48 trillion, because of inflation and consumers’ anxiety over tariffs. The NRF added that tariffs will disproportionately impact small retailers.

The U.S. Fashion Industry Association represents textile and apparel brands, retailers, importers and wholesalers based in the United States that do business globally. The new tariffs will disproportionately impact the textile and apparel industries, which have "been paying higher tariffs for decades with little impact on reshoring manufacturing," the trade organization said in a statement.

"International trade is critically important to our business and industry," Corie Barry, Best Buy’s CEO, said during a March earnings call.

She added that "the consumer electronics supply chain is highly global, technical and complex. China and Mexico remain the No. 1 and No. 2 sources for products we sell respectively. While Best Buy only directly imports 2% to 3% of our overall assortment, we expect our vendors across our entire assortment will pass along some level of tariff costs to retailers, making price increases for American consumers highly likely."

Manufacturing ISM Survey: WHAT RESPONDENTS ARE SAYING

• "Complex markets saw a surge in volume buying in anticipation of 2025 being slightly better than 2024. In March, however, all markets saw a slowdown, with fear and inventory stocking to hold through a potential crisis." [Chemical Products]

• "Acute shortages continue to impact supply chain continuity. Chinese restrictions on critical minerals such as germanium have caused major shortages, resulting in all supply needed in 2025 already assumed — and, not surprisingly, significant price increases as a result. Tariffs are causing minor ripples at the moment in securing supply, with purchase order terms narrowing due to uncertainties. A&D (aerospace and defense), which has been very resilient, is starting to see questionable medium- to long-term demand due to governmental policy, including retaliatory actions taken by foreign countries with foreign military sales." [Transportation Equipment]

• "Customers are pulling in orders due to anxiety about continued tariffs and pricing pressures." [Computer & Electronic Products]

• "Starting to see slower-than-normal sales in Canada, and concerns of Canadians boycotting U.S. products could become a reality." [Food, Beverage & Tobacco Products]

• "Business condition is deteriorating at a fast pace. Tariffs and economic uncertainty are making the current business environment challenging." [Machinery]

• "New order levels have increased and are better than expected. We suspect that our customers are trying to build inventory at current prices to get ahead of expected tariff and related cost increases. We expect this surge in demand to be short-lived." [Fabricated Metal Products]

• "Demand has been stable, consistent with last year. No evidence of growing demand. Tariff impacts and mitigation strategies are a daily conversation." [Electrical Equipment, Appliances & Components]

• "Newly implemented tariffs are significantly impacting gross profits. Canada's new tariffs on U.S. goods are significantly impacting orders from that country. Quotes and sales are lower from Europe due to the threat of retaliatory tariffs." [Miscellaneous Manufacturing]

• "Worldwide economic instability has really begun to impact our oil and gas business. Aside from the change in the U.S. administration, the economies of China, India and Europe are drivers in what we believe is the next cyclical trough." [Petroleum & Coal Products]

• "Bearish market sentiment and tariff applications and costs have dominated discussions over the past month and should continue to dominate markets until a clear path forward is determined. Overall concern is whether or not demand destruction will occur with higher pricing." [Primary Metals]

After several decades of offshoring, leaving a handful of large — but vital — operations behind, North Texas seems to be grabbing the attention of manufacturers once again — and for good reason.

Dallas-Fort Worth has been at the top of the development cycle for several years — often seeing more industrial space brought to market than any other part of the country, big or small. A great deal of this is in speculative space, primed and ready to go for a would-be tenant in either the logistics or manufacturing industry.

Another primary driver, and perhaps the most critical, is the region’s robust labor market, which in recent years has shown promising signs.

Another factor that draws many newer arrivals to this market includes the availability of pre-built space. Although there is a substantial range in terms of the overall scope of these projects, many of the headline-making relocations or expansions will usually require bulk industrial space — something which Dallas-Fort Worth has in abundance.

On the smaller end, you have companies like Flex, which penned a lease in the East Dallas Commerce Center to set up its manufacturing facility to produce electronics for data centers. This new 373,000-square-foot facility is among many throughout the company’s expansive global network.

Meanwhile, close to the middle are companies like Bell Textron, which is taking over a space previously used as a distribution center for Stanley Black & Decker, to build its next-generation advanced fighter aircraft. During the site selection process, Bell Textron committed over $429 million in capital investment over the lifetime of the project, attracting fierce competition among at least two other states over who would land the new facility. Naturally, this competition often plays out in the realm of economic incentives, of which the company was approved for $47 million through Texas' Jobs, Energy, Technology, and Innovation Act program, in addition to several local grants and tax abatements.

Average LTV for all outstanding mortgages is only 46.9%

Only 0.3% of borrowers are underwater

Total borrowers in delinquency is creeping higher but still very very low.

These 42 housing markets are seeing falling home prices.

• National home prices rose +2.1% year-over-year from February 2024 to February 2025, according to the Zillow Home Value Index. That’s a deceleration from the +4.6% year-over-year rate last spring

• However, not every housing market is seeing rising home prices. Among the 300 largest metro area housing markets, 42 markets are seeing falling home prices on a year-over-year basis. That’s up from last month when just 31 of the nation’s 300 largest metro area housing markets had falling year-over-year home prices

• While home prices continue to rise in regions with tight inventory—such as much of the Northeast and Midwest—some housing markets in states like Texas, Florida, and Louisiana, where inventory has now surpassed pre-pandemic 2019 levels, are experiencing modest price corrections

• These year-over-year declines are evident in major metros such as Austin (-3.8%); Tampa (-3.6%); San Antonio (-2.0%); New Orleans (-1.7%); Phoenix (-1.6%); Jacksonville, Florida (-1.5%); Dallas (-1.4%); and Orlando (-1.4%).