Weekly Market Update: April 21, 2025

The world is in the midst of a global trade war. This commenced with the Trump Administration implementing across-the-board 10% tariffs on 185 nations. President Trump also announced a series of reciprocal tariffs against those nations with the biggest trade advantages over the U.S., generally assumed to mean large surpluses. The implementation of the reciprocal levies—with the one exception being China—was sub- sequently delayed for 90 days, as the parties attempt to renegotiate trade deals. Still, the intensified trade dispute between the world’s two largest economies has the global equity and bond markets on edge. 

Meantime, the inflation situation improved in March. Specifically, the Consumer Price Index (CPI) fell 0.1% on a month-to-month basis, while the core CPI, which excludes the food and energy components, rose just 0.1%. On a 12-month basis, the CPI and core CPI increased 2.4% and 2.8%, respectively, with both readings also coming in below forecasts. Likewise, the Producer Price Index (PPI) declined 0.4%, while the core PPI rose just 0.1%. From a one-year perspective, the respective PPI and core PPI rose 2.7% and 3.4%, with the rate of both advances easing from the February tallies. The more-benign inflation readings give the Federal Reserve some wiggle room to cut rates if the U.S. economy were to fall into recession. 

First-quarter earnings season is underway. The results from the big multi-sector banks, including JPMorgan Chase and Goldman Sachs, surpassed prognostications. That said, the pace of earnings growth at the S&P 500 companies likely slowed considerably from the rate of 18.2% witnessed in the final quarter of 2024. Wall Street also will be watching what Corporate America is saying about the potential impact of the global trade war on U.S. industries. Our sense is that overall profit growth guidance will have a more-negative tone than seen in recent quarters, and sometimes may not be provided at all, owing to the uncertainty created by President Trump’s trade negotiations. 

Conclusion: Volatility on Wall Street remains elevated, as investors are worried about issues including global trade disputes, uncertain fiscal and monetary policies, weakening profit growth expectations, and rising Treasury yields. Given this unsettling backdrop, we recommend a diversified portfolio consisting mostly of the stocks of high-quality companies with reliable cash flows, and cash-equivalent securities. 

Source: ValueLine.com