Global Leading Indicators, April 2025 - Hanging on
The April 2025 edition of the global LEI chartbook can be found here. Additional details on the methodology are available here.
Global leading indicators were hanging on for dear life in April strained by the shock of President Trump’s tariff measures. A rebound from current levels that keeps the cyclical upturn alive is not without precedent, but it is rare—and historically, such rebounds have offered little comfort to investors. Portfolios with high sensitivity to the global macro cycle are likely to face continued weakness.
Sustained resilience in the global macro environment now depends heavily on a swift and decisive retreat by the White House from its poorly executed tariff agenda. While President Trump appears to be attempting a climb-down from some of the more extreme tariff proposals, it’s increasingly clear that tariff levels will stabilize at a relatively elevated baseline. This shift is unlikely to be fully reflected in investment themes most exposed to global growth and trade. Markets that are highly responsive to the global cycle tend to be most vulnerable when leading indicators are rolling over from a peak, which now seems to be the case. I remain skeptical of a near-term reversal; at this stage, it seems likely that the downturn in global LEIs still has further to run.
As of April, 8 out of the 16 leading indicators in the sample were trending upward—suggesting a still-positive but weakening global upturn from a momentum peak last October. This mirrors the revised March figures. However, risks are tilted toward downward revisions of the April data. While a rebound from these levels is possible, it is uncommon. For historical context, global leading indicators also rolled over from a high in early 2006, rebounding into 2007 before beginning the prolonged downturn that culminated in the global financial crisis. A similar, though less potent, rebound occurred in late 2010 into 2011; by then, global growth had already slowed meaningfully from a post-GFC peak and would continue to deteriorate amid the European sovereign debt crisis. Meanwhile, the coincident indicator declined modestly midway through Q1, though it currently offers little actionable signal. Given present trends, the emerging weakness in leading indicators is unlikely to weigh on coincident activity before late Q2 at the earliest.
The rolling 3-year Z-score of the global LEI—typically a few months ahead of the headline index—rose again in April but at a significantly slower pace than in prior months. Based on this indicator alone, portfolios with high exposure to global macro data can remain cautiously constructive. However, renewed weakness in the Z-score would send a negative signal, reinforcing the directional message from the decelerating second derivative in the headline diffusion index.
Despite some recovery from the initial panic, the sharp equity selloff still suggests downside risk for global leading indicators. Forecasting models that incorporate market-based inputs have been flashing red over the past month, even as volatility has subsided.
The first principal component (PC1) of the global LEIs was still trending downward as of April. This component reflects the common cyclical signal across the countries sampled and typically peaks during synchronized global downturns—highlighting the "everything is correlated in a crisis" effect. The fact that this index remains negative indicates a divergence in the sample's leading indicators, which, for now, suggests a degree of underlying resilience.
Country-level analysis shows little change in the breadth of the downturn between March and April. LEIs in Mexico and Japan remained entrenched in broad-based declines—both below average and falling on a six month basis—while those in the UK, Brazil, and Indonesia were rolling over from elevated levels. Notably, the Indian LEI showed improvement from March, likely due in part to revisions, while Italy’s index weakened enough to potentially join the ranks of Mexico and Japan. Closer examination of individual charts reveals that leading indicators in Spain, the U.S., and the G7 fell in April, potentially marking the onset of more pronounced weakness. In contrast, the Mexican LEI rose, possibly signaling the early stages of a contrarian upturn from a low base.