April 2025

The Slice

A Monthly Market Update & Investment News Roundup

Cutting through the noise...so you don't have to.

Good morning,
 

Here’s the interesting thing about the stock market. It cannot be indicted, arrested or deported; it cannot be intimidated, threatened or bullied; it has no gender, ethnicity or religion; it cannot be fired, furloughed or defunded; it cannot be primaried before the next midterm elections; and it cannot be seized, nationalized or invaded. It’s the ultimate voting machine, reflecting prospects for earnings growth, stability, liquidity, inflation, taxation and predictable rule of law.  - Michael Cembalest, JPMorgan

We've reached a fork in the road. After last month's 10% market correction - the first since 2023 - we're now weighing two very different outcomes for this year.

The first is what 3Fourteen Research's Warren Pies defines as a "non-recessionary correction," which occurs when the market goes down 10%, but we avoid an economic recession. In these scenarios, the market drops an additional 5-7%, but then recovers, and the correction ends up being a buying opportunity.

The second outcome is more serious. In a "recessionary correction," a recession does occur within 12 months, and the market goes on to lose an additional 15-17% --after the first 10% drop. In these cases, the correction is just the beginning of much bigger drawdown.  

Pies points out that it's a close call, but the evidence suggests a non-recessionary correction is more likely at this point:

• Interest rates on high yield bonds, a proxy for investors' risk appetite, haven't risen nearly as much as they typically do in advance of a recession,
• Payrolls in residential construction remain stable, and
• There is ample credit available (from the private sector) to keep us afloat as government spending pulls back.

Great. So, does that mean it's time to jump back in?

I can't think of a dumber day to buy. 

Jim Cramer, CNBC
March 31, 2025

In a word, "no." 

Until the market recovers 50% of its losses, you don't have great odds that the correction has ended according to Pies. From yesterday's close, the market would need to go up another 4% to get to the 50% level (SP500=5835). Even then, there's still a 20% chance that the correction gets worse.

And there are fundamental reasons to be patient too. April is a seasonally weak period for markets following years with strong returns like 2024. Why? Investors often sell stock to pay their taxes (see this month's PieChart), which results in a headwind for the market.

Policy uncertainty is also weighing on investor sentiment as the White House announced tariffs on autos made overseas last week and prepares to release its reciprocal tariff plan on April 2nd. 

Lastly, first quarter earnings reports are set to begin on Friday April 11th. Frontrunning earnings less than two weeks away seems foolhardy. A sustained reduction in earnings estimates for the S&P 500 over the next 12 months would make the current path look more like a recessionary correction and change the narrative...for the worse.

Here's what you need to know.

Markets

News & Notes

• Flagging Consumer Sentiment: The University of Michigan index of consumer sentiment, which measures how consumers feel about the economy, fell this month to a three year low. In a separate survey, consumer confidence about future expectations fell to a 12 year low. (WSJ)
   
• Gold Hits Record: The yellow metal is surging and just turned in its best quarter since 1986. (Reuters)
  
  Note: Gold was added to client portfolios at the beginning of March. See notes from our most recent rebalance below. 
   
• Future of Asset Allocation: BlackRock Chairman Larry Fink says the standard portfolio of the future is going to look more like a 50/30/20 containing stocks, bonds and private capital, instead of a 60/40 stock/bond allocation. (BlackRock)
   
• Landman Dallas Cowboys owner Jerry Jones makes an Emmy-winning cameo performance on Paramount series Landman giving life advice on wealth, legacy, and family -- even some Eagles fans approved. (Paramount)
   
• Boeing: The aerospace and defense company was chosen to build the Next Generation Air Dominance fighter jet, the "F-47." The news comes as a federal judge set June 23rd as the start of a criminal trial for the company in the wake of two deadly crashes involving its 737 MAX jet. (NYT)
   
• How to Avoid an IRS Audit: Want to avoid a tax audit? Make sure you aren't doing these 3 things. (Barron's)
   
• The Rise of Single Seniors: The number of seniors living alone is on the rise. Here's how to prepare. (Barron's)
   
• Southwest Abandons Fuel Hedging: After changes to its checked baggage fees and open seating, the airline is also discontinuing its fuel hedging policy that once set it apart from peers. (WSJ)
   
• Social Security: How federal layoffs could affect the Social Security Agency's ability to serve its 73 million (current) beneficiaries. (NYT)
   
• Travel & Spend:
  36 Hours: Budapest (NYT)
  36 Hours: Hilo, Hawaii (NYT)
  36 Hours: Valencia, Spain (NYT)
  
  Skiing next season? Book now. (NYT)

(Pie)Chart of the Month

In years following strong market returns like 2024, April and May are often a weak period for the market because investors sell their investments to pay tax bills from the previous year. Known as a liquidity drain, this seasonal phenomenon can act as a headwind to equity markets. 

Source: 3Fourteen Research.

Firm News

March Rebalance

Last month, all PieCapital managed portfolios were rebalanced and traded to remain in line with risk/return objectives. PieCapital leverages BlackRock as an outsourced chief investment officer for the core portion of our portfolios, and complements those holdings with private capital, hedged equity, and dividend-focused equities to help retirees and near retirees maximize their income in retirement. 

Diversified Balanced portfolio shown. The allocation of asset classes in the charts above do not reflect actual allocations, for illustration purposes only.  Not intended as investment advice.

Growth Mode

PieCapital continues to grow! Travel this month included stops in Charleston and Washington DC. We also secured commitments from clients #18 and #19, leaving 31 openings until we reach our ultimate goal of 50 families served.

Hoops For NC Heroes: 2025 Bracket Challenge

The NC Heroes Fund's first ever bracket challenge was a huge success. We ended up raising $9,472 -- enough to provide grants to 4xNC servicemember/veteran families!

Shoutout to Slice subscribers David Hayden, Tracie Rodriguez, Lyndsay Hanna, Nathan Hanna, Jen Pcholinsky, Rob Ragsdale, Mitchell Smith, Khaner Walker, Ellis Boyle, Cliff Minsley, Jen Friberg, Jim Chappell, Cait Smith, Marlie Andersch, Chris Hume and more for supporting!

March Madness

Speaking of basketball, I got to watch the 2nd round of the NCAA tournament with friends Judy Burkholder and Alissa Murphy (Slice subscribers 🥧 and Duke fans 😐) in Raleigh last weekend. Duke beat Baylor and is set to play Houston next weekend in the Final Four.

Pi(e) Day Celebrations

3.14.25

Contest Winners

Slice subscribers Nancy Fitch (L) of St. Michaels, MD and Micky Zickefoose (R) of Westport, MA were our Pi(e) Day contest winners. Nancy chose a Coconut Custard Pie from Achatz Handmade Pie Company, and Micky went with a strawberry rhubarb from Blue Owl Bakery in Kimmswick, MO. Congratulations!

Pie Parties

After celebrating Pi(e) Day at the office, we attended a friend's birthday party who was born on, well, you know. 

Go RedBulls!

I don't know how to put this, but we're kind of a big deal. The Raleigh Red Bulls are coming off of a 6-1 win against the Raleigh Rampage on Saturday, and are currently 3-1-1 heading into the 2nd half of the season.

Huzzah!

Christy ran the Richmond Half Marathon this month and then we made our annual trek to Williamsburg, VA. 4/5 of us had a great time.

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