Market Update – April 14th, 2025

Financial Markets

Markets experienced heightened volatility last week, driven by President Trump’s unexpected rollback of most newly enacted tariffs and cooling inflation data that calmed investors. Equities rallied sharply, with the Nasdaq Composite climbing 7.3%, the S&P 500 up 5.7%, and the Dow Jones Industrial Average advancing 5% for the week ending Friday, April 11th. Bonds moved in the opposite direction as long-term yields jumped last week, with the Bloomberg U.S. Aggregate Bond Index dropping -2.4%.

Source: Zacks

Market News

Tariffs. Markets surged mid-week after President Trump announced an unexpected reduction in reciprocal tariffs, with the S&P 500 posting its best single-day gain since 2008, rising 9.5% on Wednesday. The decision to lower most tariffs to a more manageable 10% helped ease investor concerns around prolonged trade tensions and their potential drag on global growth.

On the other hand, negotiations with China—one of the U.S.’s largest trade partners, remain in limbo, as both countries imposed new reciprocal tariffs on each other last week, keeping uncertainty between the two countries elevated despite the broader de-escalation.

Source: Zacks

March CPI

March’s Consumer Price Index report came in cooler than expected, demonstrating that tariffs have not pushed inflation meaningfully higher yet. Headline inflation rose 2.4% year over year, while core inflation, which excludes food and energy, slipped to 2.8%, the lowest level since 2021. On a monthly basis, overall prices fell by 0.1%, with core prices rising a minimal 0.1%.

Source: FRED

The primary driver of the inflation slowdown was falling energy costs, which dropped 2.4% in March and are now 3.3% lower than a year ago. This contributed to a 1.3% monthly decline in transportation services, which were still up 3.1% year over year.

Grocery prices increased 0.5% in the month, rising 2.4% year over year, and restaurant prices climbed 3.8% annually. Shelter inflation remained sticky but continued to moderate, with a 4% annual increase, indicating further cooling in housing-related costs.

Source: Bureau of Labor Statistics

March PPI

March’s Producer Price Index also came in cooler than expected, adding to investor optimism following the soft CPI report. Annual wholesale inflation dropped to 2.7%, down from 3.2% in February, while core PPI improved to 3.4% year over year. On a monthly basis, headline producer prices fell 0.4%, and core prices rose just 0.1%.

Energy prices were a major driver of the lighter inflation, falling 4% in the month, also leading transportation and warehousing costs 0.6% lower, while food prices dropped 2.1%, led by a steep 36.2% decline in egg prices. Both goods and services saw price declines, with goods down 0.9% and services down 0.2% month over month.

Altogether, March’s CPI and PPI inflation data eased near term fears of tariff-induced price pressures and may open the door for the Federal Reserve to begin cutting rates this summer.

Source: Bureau of Labor Statistics

Consumer Sentiment

The University of Michigan’s Consumer Sentiment index continued its slide in April, falling for the fourth consecutive month and coming in below expectations. Sentiment plunged 11% from March, with the decline broad-based across all demographics, including age, income, education level, region, and political affiliation. Since a recent peak in December 2024, sentiment has fallen more than 30% amid rising concerns over trade tensions and their potential economic impacts.

Source: The University of Michigan

Within the survey, labor market concerns skyrocketed, with the share of consumers expecting unemployment to rise has doubled since November 2024 and is at its highest level since 2009. It is important to note that survey data was collected between March 25 and April 8, just before President Trump’s partial tariff rollback on April 9, which will likely influence next month’s reading.

Source: The University of Michigan

Summary

Markets rebounded sharply last week as President Trump’s surprise rollback of most new tariffs and cooler-than-expected inflation data helped ease investor concerns. Equities surged across major indexes, while bond prices fell as long-term yields climbed. Despite the rally, consumer sentiment continued to decline and trade tensions with China remain unresolved, keeping some economic uncertainty in play.

Joseph M. Maas,
CFA, CFP®, ChFC, CLU®, MSFS, CCIM, CVA, ABAR, CM&AA

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