Weekly Market Update: April 14, 2025

A global trade war commenced in early April. The first salvo was sent by the Trump Administration when it implemented a universal tariff rate of 10% on goods coming from 185 nations. Subsequent to that action, President Trump signed another executive order that said those nations with the biggest trade advantages over the U.S., generally assumed to mean large surpluses, will see much higher rates. The trade news brought a quick and harsh response from China, which placed additional tariffs on U.S. produced goods. Investors were unnerved by the trade disputes, but the mood improved some after the Trump Administration quickly pivoted. President Trump has since authorized a 90-day pause on the reciprocal tariffs (China not included), while his Administration attempts to negotiate new trade deals with more than 75 nations. 

The March labor market data was encouraging. The nation added an estimated 228,000 jobs last month, far exceeding the consensus forecast of 140,000. The unemployment rate ticked up to 4.2%, but it was accompanied by an increase in the labor force participation rate to 62.5%, which is an indication that the jobs market is solid. Another positive sign was found in average hourly wages, with the 12-month pace of growth slowing to 3.8%, from 4.0% in February. 

The labor market data were a case of “good news is bad news” for the stock market. That is because the employment figures don’t put any additional pressure on the Federal Reserve to cut interest rates, which many market pundits think may be necessary to keep the economy from falling into recession. The fed futures are now suggesting multiple interest-rate cuts this year, but the equity and bond markets may be a bit skeptical the central bank will turn overly dovish on the monetary policy front, especially with inflation still running above its comfort level. 

Conclusion: The major equity averages seesawed in early April, with the whipsaw action prompted by the noted global trade developments. Given this backdrop, we think a portfolio consisting of stocks of high-quality companies that have a history of generating steady earnings and cash flow growth and paying dividends, as well as a good portion of cash equivalent securities, is prudent. 

Source: ValueLine.com