May 9, 2025

U.S. stocks took a “Tariff Tumble” in early April as President Trump laid down a set of steep and extensive global tariffs in an opening bid to correct “decades of unfair trading”. Several “walk-backs” and tariff revisions by President Trump and Treasury Secretary Bessent allowed equity investors to gather their wits and share prices ended the month with a much better tenor than in the beginning of April. The broad market, as measured by the S&P 500 Index, finished April with a decline of 0.7% after being down some 14% at the trough on April 7th. Energy (-13.7%) was by far the worst performing S&P 500 sector as worries about economic softness and related energy demand weighed on energy prices and the sector. Technology (+1.6%) and staples (+1.2%) were the best performing sectors. Small-cap stocks continued to struggle in April and mid-cap stocks also declined more than large-cap stocks during the month.

Recent macro data indicate some softening, but these indicators are still mostly “soft” data.  “Soft” survey data – Conference Board, the Purchasing Managers’ Index, CEO surveys – continue to show eroding confidence in the economic outlook by consumers and businesses, which will likely impact spending and hiring plans eventually. Key “hard data” (jobs/spending) remain resilient, likely supported near term by pull-forward activity preparing for the possibility of prolonged tariff/trade war related import issues. It is a foregone conclusion that there will be no rate cut in May by the Fed; the key will be whether Powell tips his hand for June; a resilient job market gives Fed more runway to “wait and see.”  The stock market seems to be climbing the proverbial “wall of worry” on hopes stirred by Trump tariff roll backs/promise of trade deals plus the resilience of economic data so far. Q1 Earnings are coming in better than expected; however, estimates for rest of year are coming down on weaker (or no) guidance with “Big Tech” leading the way.