It was a brutal start to the year for the markets, with the tech-heavy Nasdaq Composite (^IXIC) ending the first quarter 10% lower. Yahoo Finance Markets Reporter Josh Schafer shares three of his takeaways from Q1.
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Well, US stocks claw back earlier losses as markets cap their worst quarter since 2022. Here with the trading day takeaways, Yahoo Finance's Josh Schafer, Josh.
Josh, it is the end of the quarter. We only get to do it four times a year, so let's zoom out. All right, I got Q1 market takeaways for us sort of a look at where we're at three months into the year. This first one obviously stands out. It's something we've been talking about a lot, right? So, the Mag 7 officially wrapped up their worst quarter against the S&P 500 since 2022. Remember 2022 was obviously a bad year for a lot of big tech stocks, right? So, it's sort of had that vibe to it a little bit to start the year. It just has not been strong for the Mag 7. I'll take a look at that board quick too, and we can just see, I think what's interesting within this too is sort of how far off a lot of these stocks are from their 52-week high, right? We look at this Mag 7 cohort about 20% or more from recent all-time highs. That we've seen these stocks have taken a pretty big haircut to start the year when we think about how big these stocks are. It's part of why the index is down to start 2025, too.
And different puts and takes, right? I mean, like deep sea, I got growth worries, right? So, now I guess if you're, if you're a big tech investor, now you've got earnings season, which will be here before you know it.
Yeah, yeah, earnings season comes up in a month. But what sort of stuck out to me last week? Vi Nu Christian at Barclays, he downgraded the S&P 500 target of 5900. He said, you know, I still like Big Tech. He takes Tesla out, but he said I like the rest of Big Tech, but I don't see a near-term catalyst. He said I think these are great companies. You know, he's not saying don't own Apple for the next five years, but he's saying if you're, you know, looking just out into the next quarter, he's not really sure what we're going to hear in earning season that turns this story around in the near term. So, I think that's sort of an interesting thing. A lot of times when you talk tech, usually there's some events you can circle on the calendar, maybe there's something expected at earnings that can drive it forward. Right now, it feels like the catalyst just isn't really there. So, maybe something can come a little bit out of nowhere and help out the, help out the second half of the year.
It wasn't all tech which like Chinese tech, Kweb up to 8%.
Yeah, Alibaba had a good quarter, right? There was plenty of like outside of US tech. US large cap tech not doing great. All right, economic data souring, Josh. So, really this was kind of the story of the first quarter to me is you take a look at this inflation chart. Look at how we started 2025. Your three-month annualized, so that's really just kind of only taking the first quarter. It's taking January, February, December right now. We don't have March yet. Inflation's ticking higher, right? And so you have sort of this inflation still sticky above that 2% target, growth is slowing. People are talking about that term stagflation where growth slows and inflation remains sticky. Not usually a good environment for stocks. But I think just sort of the economic data coming in below expectations for the large part of the quarter seems to be what drove a lot of the macro action from where we're at at this point.
And now, and now speaking of economics, the big jobs report on Friday. How important is that for them?
Yeah, so, so when you think about that story I just laid out, right? Of bad economic data hasn't been a great quarter. Well, the jobs market's actually been okay, right? And so I think the large question right now would be all right, if we're a little bit worried about economic growth, does the jobs market stay strong? So, when you go into Friday, looking for a 4.1% unemployment rate staying flat. If that unemployment rate starts to tick up higher, then I think your recession calls and things like that might start to get a little bit louder. And that's where we're going to go. Josh, take three forecast falling. This one's actually on the rise. I shouldn't have wrote falling. This is Goldman's recession probability, and this is a big takeaway too. You look at where they entered the year, 15, 20%, that's pretty standard, right? And normally you would get 15% recession odds at any given moment. That's kind of the historical average. They're now up to 35%. So, Goldman's saying in a note over the weekend, you know, we consider tariffs, we consider this higher inflation data as it is, this already slowing story, add in what tariffs could do to the economy, they're not feeling that great necessarily about how that's sort of going to play out. And then flip to what that means for stocks. Goldman's now one of your lowest forecast at S&P 500 calls, 5700. And you just look at this wide diversion of where people feel like the market could end sort of stands out to me.
And what explains the difference between these two?
Yeah, so when you take a look at sort of the bottom part here, this has become your stagflation camp, right? So, Stifel was out early to start the year saying this, but Barry Bannister said, you know, I don't think the second half of the year's going to be great for really 2025 in general will be great for stocks. He thinks it's going to be higher inflation than people thought, lower growth, you have a Fed that probably can't cut because you're in that lower growth environment, but you're also at high inflation, so they're not going to want to cut interest rates. Versus this part here that's still bullish is essentially saying, all right, tariff uncertainty is driving the narrative right now, making everyone very uneasy, it's driving sort of the data narrative, companies are getting worried, but maybe once we get to the second half of the year, we start talking about some of Trump's policies that maybe are more beneficial. We're talking about tax cuts, maybe tax extensions, maybe further tax cuts. Maybe that takes hold in the second part of the year and the story gets a little bit more positive. But again, I think what the real takeaway here is you look at this wide range of numbers. I don't really know if anyone has a lot of conviction right now, Josh. It feels like a little bit of wait and see has been the first.
Another problem, two very smart guys, that's the real problem here.
Two very smart guys saying that they don't love stocks very much.
Thank you, Josh. Appreciate it.
