On the other hand, the hard data, which reflects actual activity, has been strong. Retail sales hit a record high in March, and weekly card spending data — which you can see below in TKer’s weekly review of macro crosscurrents — suggest that strength has continued into April. Durable goods orders and shipments continue at elevated levels. Meanwhile, key labor market metrics including job creation, unemployment, and claims for unemployment insurance continue to trend at levels associated with economic expansion.
This narrative of contradictions is illustrated nicely in this chart from Goldman Sachs, which shows how soft data has been surprising to the downside while hard data has been surprising to the upside. In other words, sentiment has been weaker than expected while realized activity has been stronger than expected.
The hard data has been surprisingly good despite the soft data being surprisingly bad. (Source: Goldman Sachs)
Renaissance Macro’s Neil Dutta wrote about these “data discontinuities” in his April 21 note.
“It’s probable that much of the recent upside surprises in hard data reflect pulling forward activity in the anticipation of tariffs,” Dutta wrote. “Consumers pulled forward auto sales and consumption on other household durables, as an example. Firms likely pulled forward some orders too. That likely gives the veneer of strength in the recent high-frequency dataflow.”
During much of the economic expansion that began in 2020, it’s paid off to focus on what consumers and businesses did (i.e., the hard data) over what they said (i.e., the soft data). The Federal Reserve just published research explaining this phenomenon.
“[R]ecent hard data in the U.S., mostly for March, are overstating activity and it’s worth noting that conditions were not especially strong to begin with,” Dutta added. “The collapse across a range of survey-based measures of activity suggest that actual activity will continue to slowdown, in a potentially abrupt manner. Recession may already be here.”
We’ll only know with the benefit of hindsight whether or not we’re in a recession or going into a recession.
Importantly, as long term investors, we should understand that recessions and market downturns will happen as you build wealth with stocks.
The economy has been in expansion about 80% of the time. Similarly, stocks have been in a bull market about 80% of the time. Maybe we’re currently going through an unpleasant period that has historically occurred about 20% of the time.
There were several notable data points and macroeconomic developments since our last review:
🏭 Business investment activity rises. Orders for nondefense capital goods excluding aircraft — a.k.a. core capex or business investment — rose 0.1% to a record $75.1 billion in March.
Core capex orders are a leading indicator, meaning they foretell economic activity down the road. The growth rate had leveled off a bit, but they’ve perked up in recent months.
💳 Card spending data is holding up. From JPMorgan: “As of 18 Apr 2025, our Chase Consumer Card spending data (unadjusted) was 3.3% above the same day last year. Based on the Chase Consumer Card data through 18 Apr 2025, our estimate of the US Census April control measure of retail sales m/m is 0.51%.”
(Source: JPMorgan)
From BofA: “So far, Bank of America card data through April 19 suggests that consumers are continuing to spend at a healthy rate, with spending up YoY throughout most of the month. In the week ending April 19, total card spending per household was up 3.1% YoY, with the YoY partly being boosted by the later timing of Easter this year. “
💼 Unemployment claims tick higher. Initial claims for unemployment benefits rose to 222,000 during the week ending April 19, up from 216,000 the week prior. This metric continues to be at levels historically associated with economic growth.
💳 Bank accounts remain in pretty good shape. From BofA: “While household median deposit levels have declined since 2021, they increased across the income spectrum last month and remain at least 40% higher than 2019 levels on a nominal basis and 15% above inflation adjusted levels, according to Bank of America checking and savings account data. … Additionally, the rate of decline in deposits is significantly slower compared to two years ago, reflecting easing inflation over the same period. This is especially true for lower-income households. While median deposits fell around 3% YoY in March, that’s a noteworthy improvement from the 15% YoY decline that occurred three years ago.”
👎 Pay expectations are deteriorating. From the New York Fed: “The average reservation wage — the lowest wage respondents would be willing to accept for a new job — sharply retreated to $74,236 from a series high of $82,135 in November. This decrease was most pronounced for men and respondents over age 45.”
👎 Consumer sentiment is tumbling. From the University of Michigan’s April Surveys of Consumers: “While this month’s deterioration was particularly strong for middle-income families, expectations worsened for vast swaths of the population across age, education, income, and political affiliation. Consumers perceived risks to multiple aspects of the economy, in large part due to ongoing uncertainty around trade policy and the potential for a resurgence of inflation looming ahead. Labor market expectations remained bleak. Even more concerning for the path of the economy, consumers anticipated weaker income growth for themselves in the year ahead.”
🏚 Home sales fall. Sales of previously owned homes fell by 5.9% in March to an annualized rate of 4.02 million units. From NAR chief economist Lawrence Yun: “Home buying and selling remained sluggish in March due to the affordability challenges associated with high mortgage rates. Residential housing mobility, currently at historical lows, signals the troublesome possibility of less economic mobility for society.”
💸 Home prices rise. Prices for previously owned homes increased from last month’s levels and year ago levels. From the NAR: “The median existing-home sales price for all housing types in March was $403,700, up 2.7% from one year ago ($392,900). All four U.S. regions registered price increases.”
🏘️ New home sales rise. Sales of newly built homes rose 7.4% in March to an annualized rate of 724,000 units.
🏠 Mortgage rates tick lower. According to Freddie Mac, the average 30-year fixed-rate mortgage declined to 6.81% from 6.83% last week. From Freddie Mac: “The average mortgage rate decreased slightly this week. Over the last couple of months, the 30-year fixed-rate mortgage has fluctuated less than 20 basis points, and this stability continues to bode well for buyers and sellers alike.”
⛽️ Gas prices tick higher. From AAA: “The national average for a gallon of regular is slightly higher than a week ago and 5 cents higher than a month ago. An increase in demand – as the weather gets nicer and more people get out and about – is pushing prices up slightly. But at $3.17, the national average remains well below what drivers were paying this time last year. That’s because the price of crude oil is on the lower side at $62 a barrel compared to $82 a barrel one year ago.”
🏢 Offices remain relatively empty. From Kastle Systems: “Peak day office occupancy was 63% on Tuesday last week, down six tenths of a point from the previous week. Washington, D.C. experienced the biggest single-day drop, falling more than eight points on Wednesday as local government offices were closed to observe Emancipation Day. New York’s high was 62.9% on Tuesday, down nearly six points from the previous week. The average low was on Friday at 35.2%, down 1.1 points from the previous week.”
👎 Activity surveys look bad. From S&P Global’s April U.S. PMI: “The early flash PMI data for April point to a marked slowing of business activity growth at the start of the second quarter, accompanied by a slump in optimism about the outlook. At the same time, price pressures intensified, creating a headache for a central bank which is coming under increasing pressure to shore up a weakening economy just as inflation looks set to rise.”
🇺🇸 Most U.S. states are still growing. From the Philly Fed’s March State Coincident Indexes report: “Over the past three months, the indexes increased in 43 states, decreased in four states, and remained stable in three, for a three-month diffusion index of 78. Additionally, in the past month, the indexes increased in 39 states, decreased in seven states, and remained stable in four, for a one-month diffusion index of 64.”
Actions speak louder than words: We are in an odd period given that the hard economic data has decoupled from the soft sentiment-oriented data. Consumer and business sentiment has been relatively poor, even as tangible consumer and business activity continue to grow and trend at record levels. From an investor’s perspective, what matters is that the hard economic data continues to hold up.
Think long term: For now, there’s no reason to believe there’ll be a challenge that the economy and the markets won’t be able to overcome over time. The long game remains undefeated, and it’s a streak long-term investors can expect to continue.
