Weekend Update #226
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Stocks ended the week higher as earnings season gets into full swing, driven by gains in large-cap tech stocks, despite mixed signals on trade negotiations and concerns over President Trump's tariff policies. The S&P 500 crossed 5,500, led by gains in Tesla and Alphabet. However, President Trump's comments downplaying the possibility of delaying tariffs on China caused brief market volatility.
President Trump stated that tariffs on China would remain unless there were substantial concessions from Beijing, and that further delays to tariff increases were unlikely. Uncertainty remains high as investors receive mixed messages about whether or not trade talks with China have begun. President Trump indicated that there has been some contact with China, while China has refuted these reports and outlined conditions for resuming trade talks, including demands for respect, consistent US positions, and addressing Chinese concerns on sanctions and Taiwan. In regards to other trade talks, the White House says it expects announcements on many deals to be coming “over the next three to four weeks.”
US Consumer sentiment dropped to near-record lows, while long-term inflation expectations surged to their highest point since 1991 due to concerns about the economic impact of tariffs. The University of Michigan's final April sentiment index fell to 52.2, the fourth-lowest since the late 1970s. Consumers expect inflation to rise 4.4% over the next 5-10 years and 6.5% over the next year, the highest year-ahead expectation since 1981. The university's expectations index also dropped to its lowest point since 2022, with 60% of respondents expressing concerns about the negative effects of tariffs.
The impacts of tariffs are starting to materialize in hard data as well, with recent trucking and import figures plummeting to levels unseen since the COVID-19 pandemic, coupled with dwindling inventory levels. This could trigger supply chain disruptions and reignite inflation. The timing is particularly concerning as retailers typically place holiday season orders now, raising the specter of empty shelves if trade deals aren't reached soon.
The US economy is set to expand 1.4% in 2025 and 1.5% in 2026, according to the latest Bloomberg survey of economists, compared with 2% and 1.9% in last month’s poll. The median respondent now sees a 45% chance of a downturn in the next 12 months, up from 30% in March.
Friday’s Close (Weekly Performance)
S&P 500 5,525.21 (+4.59%)
Nasdaq 17,382.94 (+6.73%)
Dow Jones 40,113.50 (+2.48%)
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