WEEKLY MARKET SUMMARY

Global Equities: Volatility surged as stocks swung wildly on new trade war developments, culminating in the best weekly performance of the year for US equities. A 9.5% Wednesday return on the S&P 500 tied April 20,1933 for the eighth-largest single-day jump in the index, which closed out the week with a 5.7% gain. The Nasdaq Composite ended the weekly session 7.3% higher while the Dow Jones Industrial Average finished up 5.0%. Small Cap stocks lagged with a 1.8% weekly gain. Developed International stocks gained 5.3%, while Emerging Markets gained 2.9% despite increasing trade hostility between the US and China.

Fixed Income: A surge in Treasury yields to start the week caused major market volatility and may have been the reason President Trump elected to issue a 90-day reprieve on the “reciprocal” tariff rates announced last week. The US 10-Year Treasury yield spiked to nearly 4.6% during the week, while the 30-Year yield briefly eclipsed the 5% mark. There was some speculation that perhaps China has begun to dump some of its $760 billion in US Treasury bonds in retaliation for newly imposed tariffs. Another contributing factor to the bond market volatility was the Treasury basis trade, an arbitrage strategy in which traders exploit tiny differences in the prices of bonds and their associated futures contracts, typically with heavy leverage. High yield bond prices were also volatile during weekly trading but ultimately finished the week flat.

Commodities: Concerns over global growth and highly increased recession odds drove down most commodities other than safe-haven precious metals. US West Texas Intermediate (WTI) Crude prices slipped to around $60 a barrel but rose slightly Friday to end the week at $61.63. Gold prices were big winners for the week, rising 6.5% to $3,248.50/oz.

WEEKLY ECONOMIC SUMMARY

Tariff Pause: Markets were looking extremely ugly until President Trump announced a 90-day pause on his reciprocal tariff plans, instead opting to implement a flat 10% tariff on all countries except for China, which had retaliated to the prior week’s announcement. The pause was announced by Treasury Secretary Scott Bessent, who stated that the decision was not due to market volatility, although President Trump contradicted that narrative moments later, saying he saw markets getting “yippy” and was influenced by concerns vocalized by JP Morgan CEO Jamie Dimon. China and the US then exchanged another round of reciprocal tariffs that effectively freeze nearly all trade between the two nations. President Trump stated that he has at least 75 nations calling him wanting to make deals, so now the waiting game begins to see if he can extract concessions from those trade partners.

Inflation Softens: Inflation data took a back seat to the tariff drama, but the news on both consumer and producer prices was encouraging. The Consumer Price Index (CPI) release showed monthly inflation turned negative in March at -0.1%, bringing headline inflation down to a 2.4% annual rate. Core inflation was up 0.1% for the month to an annualized rate of 2.8% and underlying shelter inflation eased to 4.0% annually. Producer prices also flipped negative, -0.4% for the month thanks to a sharp -4% decline in energy prices.

Earnings Season Underway: Big banks kicked off earnings season with strong results, beating earnings expectations across the board. JPMorgan (JPM), Wells Fargo (WFC), BlackRock (BLK), and Morgan Stanley (MS) all performed well to start 2025, but investors were more interested in their respective CEOs’ takes on the trade war and forecasts for 2025 guidance. JP Morgan’s Jamie Dimon said his firm would maintain excess liquidity amidst the uncertainty, while BlackRock’s Larry Fink compared the current environment to the Global Financial Crisis and Covid pandemic in terms of uncertainty.

CHART OF THE WEEK

The Chart of the Week shows year-to-date path of 10- and 30-Year Treasury Bond yields. Yields had been steadily falling to begin the year as inflation data moderated and investors anticipated eventual rate cuts by the Federal Reserve, a growing economy, and low unemployment. Rates weren’t falling fast enough for President Trump’s liking, as he called on the Fed to cut rates “immediately” on several occasions. When the tariffs were first announced on the April 2nd “Liberation Day”, there was speculation that Trump was intentionally tanking the stock market to trigger a flight to safety and lower interest rates. Trump himself posted a video from a third-party to social media stating this was the plan. If that was the intent of the tariffs, it has backfired in spectacular fashion as bond yields have surged higher, with the 30-Year yield registering the largest 3-day rise since 1982 this week. The 90-day tariff reprieve did little to calm bond markets and yields remained elevated with the US in debt to China to the tune of $760 billion.