April Market Update: Talking global tariffs

"Tariff policy beneficiaries are always visible, but its victims are mostly invisible. Politicians love this. The reason is simple: The beneficiaries know for whom to cast their ballots, and the victims don't know whom to blame for their calamity." ~ Walter E. Williams

 

Last month brought trade tensions and some mixed inflation readings as major U.S. stock indexes declined, making it an opportune time to share an overview of what happened and what could be ahead. Read on for a monthly summary of what's happening now and what you need to know.

 

Major U.S. Stock Indexes

 

Here is how major U.S. stock indexes fared in March:

  • The S&P 500 declined by 5.75%.
  • The Nasdaq Composite fell by 8.20%. 
  • The Dow Jones Industrial Average decreased by 4.20%.

 

April 2nd Tariff Decision

  • On April 2nd, dubbed "Liberation Day" by President Donald Trump, the administration announced a new wave of tariffs. Market watchers were unsure of what would be announced, adding to market uncertainty in the days before the announcement.
  • At 4 p.m. the president announced a minimum of 10% tariffs on all countries, with reciprocal tariffs for countries that the administration categorizes as having an uneven trade relationship.
  • For the reciprocal tariffs, President Trump promised tariffs equivalent to half of what those countries charge the United States. The administration included nonmonetary tariffs (such as currency manipulation) in its calculation of the other countries’ tariffs on the United States. Examples of new tariff rates include 49% on goods from Cambodia, 54% on Chinese goods (including earlier tariffs), and 26% on Indian goods.

 

Trade Tensions

  • Trade and tariff tensions significantly impacted U.S. financial markets last month. The introduction of steep tariffs — 25% on imports from Canada and Mexico, along with an additional 10-20% on goods from China — ignited fears of a global trade war, leading to sharp declines in major stock indices.
  • In response, retaliatory tariffs from trading partners such as the EU and Canada were announced. Those measures, along with a pullback on some of these tariffs and uncertainty regarding the scope and duration of implemented measures, created volatility and challenged investor confidence. Yet, amidst these challenges, sectors like energy displayed remarkable resilience, showcasing an apparent shift from tech to value stocks.
  • Some investors have eyed international diversification in Europe, while others look more closely at defensive plays in dividend-paying stocks.

 

Mixed Inflation Signals

 

Inflation metrics presented a mixed picture in March.

 

Softer CPI & PPI:

  • Recent developments in consumer inflation data provide a glimmer of optimism. The data released in March indicated that headline CPI increased by 2.8% year-over-year, marginally lower than the expected increase of 2.9%.
  • Month-over-month, CPI recorded a 0.2% rise, lower than the 0.3% rise that was forecasted. The S&P 500 closed higher on the day of the data release, but it was not enough to help the index for the month.
  • On the wholesale inflation side, data revealed no change month-over-month versus an expected increase (good, right?). Furthermore, the Core Producer Price Index (PPI) was reported to be two ticks below expectations on a monthly basis. 

Warm Core PCE

  • The month’s last inflation reading (and the Fed's preferred inflation gauge) was running a tick higher than expected in March’s data release, showing a 0.4% increase for February. This was the largest monthly gain since January 2024 and brings the 12-month inflation rate via Core PCE to 2.8%. Economists surveyed by Dow Jones had anticipated a monthly increase of 0.3% and a yearly inflation rate of 2.7%.
  • Core inflation, which excludes the volatile prices of food and energy, is generally considered a more reliable indicator of long-term inflation trends, and the Fed prefers it as a gauge. The data adds a mixed feel to otherwise softer-than-expected inflation data printed in March.

Putting Inflation Together

  • A 2.8% annual run rate for CPI and Core PCE is solid compared to the recent past, as it is below 3% and well below the 9.1% highs we saw in 2022. The market just expects inflation to increase – will tariffs make it happen?

Fed Meeting & Outlook

  • As anticipated, the Federal Reserve kept interest rates unchanged during the March policy meeting. The Federal Reserve projects two rate cuts this year despite facing a more uncertain economic environment than before.
  • Significant developments included a downward revision of the Fed's economic growth rate forecast for 2025, alongside an upward adjustment of its inflation projections. The Federal Reserve adopted a "wait and see" approach in light of existing uncertainties related to tariffs and other factors while indicating that rate cuts may be considered later in the year.
  • As of the last trading day of March, Fed Funds futures markets indicated an 85.5% probability of leaving rates unchanged again at the next meeting (early May). The probabilities shift looking ahead to the June meeting, with futures markets predicting a 64.3% chance of a quarter-point cut in June (data current as of the close of trading on March 31st).

Labor Market

  • Nonfarm Payrolls: The U.S. economy added 151,000 jobs in February 2025 — slightly below the consensus expectation of 170,000 jobs. Job gains were led by sectors like health care (+52,000) and transportation and warehousing (+18,000), though federal government employment dropped by 10,000 amid the early impacts of policy shifts.
  • Unemployment Rate: The unemployment rate rose to 4.1% in February 2025, up from 4.0% in January, indicating a slight softening in the labor market.
  • The data reflects a labor market under pressure from trade tensions and policy uncertainty — yet one that is still growing.

Consumer Health & Mood

 

The U.S. consumer has seen better days.

  • In March 2025, U.S. consumer confidence deteriorated sharply, as the Consumer Confidence Index dropped to 92.9, and the Expectations Index fell to 65.2 — below the recession threshold of 80 — reflecting heightened pessimism. 
  • The University of Michigan Consumer Sentiment Index also fell to 57.0, down 11.9% from February, fueled by inflation fears with 1-year expectations at 5.0%. Consumers are increasingly anxious, burdened by inflation and economic uncertainty, potentially signaling recession risks and reduced spending. 
  • This pensiveness might be overdone, and a catalyst for a shift — such as stabilizing inflation or clearer trade policy — could potentially restore some optimism

 

Remember the Goals

 

Amid tariff uncertainty and market reaction, it’s essential to keep our long-term goals in mind and remember the reasons we started long-term investing in the first place. The objective is to stay invested over time rather than attempting to time the market. Volatility is part of long-term investing.

 

Additionally, markets often anticipate future conditions when setting prices, which is why we hear phrases like “buy the fear” or “buy when there’s blood on the streets.” Are we at that point yet? Nobody knows for sure. But we are watching global markets closely, and we are always looking for new investment opportunities amid the chaos.

 

Contact Us Anytime

 

Tariff uncertainties could persist longer. If it's on your mind, it could be an opportune time to chat about your portfolio and diversification. Let’s remember that markets do not move higher in a straight line (even though we may have gotten accustomed to that in recent years!).