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April 14, 2025

Beacon Weekly Investment Insights 4.14.25

Chief Investment Officer, John Longo, PhD, CFA, provides insights to guide you through changing market conditions. Please read the full text below or download the PDF version.

Historically, the U.S. stock market provides a return of roughly 10% per year. Last Wednesday, the S&P 500 provided a one-day return of 9.5%. In a topsy-turvy week, the S&P 500 increased a substantial 5.7% over the past five trading days but is still down 8.8% year-to-date (YTD). Of course, the tariff war has been at the center of the market volatility.

Last week, President Trump paused tariffs for a 90-day period for all U.S. trading partners, with the exception of China. In fact, the trade war with China escalated from both sides last week with tariffs exceeding 100%. However, over the weekend, President Trump made exceptions for a small number of important industries, such as computers, smartphones, and semiconductors.

One reason for the announced pause was the peculiar behavior of the U.S. Treasury Bond market. Normally, U.S. Treasuries rally, via falling interest rates, during times of market distress. However, U.S. Treasuries fell sharply part of last week, while equities were also falling. This dynamic may have suggested that global investors were losing confidence in U.S. Treasuries and the U.S. Dollar, the backbone of the global financial markets. Clearly, we are not living in normal times for the U.S. financial markets. Financial market historians may eventually label this period of time as the “tariff tantrum,” but uncertainty still remains over the forthcoming 90-day period, as well as the important unresolved trade issues between the two biggest economies in the world, U.S. and China.

Normally, the economic reports released last week on the Consumer Price Index (CPI) and Producer Price Index (PPI) would garner significant economic headlines. However, when surrounded by the tariff, stock market, and bond market volatility, these inflation reports seemed almost like an afterthought. Both the CPI and PPI reports showed declining inflation versus their prior month values. Specifically, the CPI increased at a 2.4% annual rate and the PPI increased at a 2.7% annual rate, and both appear to be trending in the right direction.

The Q1 earnings reporting season kicked off last week with Delta Airlines and several large banks. As expected, most CEOs cited an uncertain outlook given the ongoing tariff negotiations. Delta’s earnings surpassed expectations, and the stock increased nearly 10% last week. JP Morgan reported a strong quarter, with net income rising 9% year-over-year to $14.6 billion. JP Morgan CEO, Jamie Dimon, warned investors about the possibility of substantial economic turbulence in the year ahead due to the unresolved tariff wars. In contrast, Wells Fargo had a mixed report, exceeding earnings estimates, but missing revenue estimates. Total revenue declined 3.4% year-over-year to $20.15 billion, and Net Interest Income fell 6% to $11.5 billion.

The economic calendar is fairly light this week. The Federal Open Market Committee (FOMC) is not meeting this month, but Federal Reserve governors will be on the speaker circuit Monday, Wednesday, and Friday. Investors will be looking for signs regarding when the FOMC will begin to cut interest rates.

The U.S. Retail Sales report will be released on Wednesday. The report will be watched closely, given the low current levels of consumer confidence and the threat of higher tariffs. The Industrial Production report will also be released on Wednesday and provides some insight into the manufacturing sector of the economy, which is in a state of flux due to its overreliance on China. However, it may be buttressed by the promise of new capital investments in the U.S. Lastly, two reports on the housing market will be released this week. The Housing Starts and Builder Reports will both be released on Thursday. Housing accounts for the largest weight in the Consumer Price Index (CPI), so investors will look for continued declines in the rate of price increases.

 

Market Scorecard:	4/11/2025	YTD Price Change
Dow Jones Industrial Average	40,212.71	-5.48%
S&P 500 Index	5,363.36	-8.81%
NASDAQ Composite	16,724.46	-13.39%
Russell 1000 Growth Index	3,529.06	-12.70%
Russell 1000 Value Index	1,734.57	-4.90%
Russell 2000 Small Cap Index	1,860.20	-16.59%
MSCI EAFE Index	2,297.70	1.59%
US 10 Year Treasury Yield	4.493%	-8 basis points
WTI Crude Oil	$61.48	-14.46%
Gold $/Oz.	$3,254.90	23.34%