Market Viewpoints
Spring 2025
By Keith Bonjour, CFP®
Senior Vice President, Portfolio Manager
After a positive start to the year for the stock market, equity markets have sold off heavily over the last few weeks. Uncertainty surrounding tariffs and the potential negative implications for global growth, consumer spending, company earnings, and the possibility for higher inflation soured global stock markets and caused a rapid sell-off in stocks.
However, as of April 9th, President Trump has paused all reciprocal tariffs, apart from those imposed on China, for ninety days to allow for further negotiations to take place. Tariffs on China have been increased to one hundred and twenty-five percent, after China retaliated to the initial tariffs levied by the US. With the pause in tariffs, US stocks saw a tremendous relief rally which helped reduce some losses for the year, however markets are still well in the red for the year.
Tariffs were imposed by the US on foreign countries this year in an attempt to reduce many of the long-standing trade deficits that the US has with other countries. This was also an attempt to negotiate with other countries to invest more in U.S. manufacturing and motivate more domestic companies to move their manufacturing back to the U.S. market.
The Trump administrations goals with tariffs are to generate additional revenue to fund administration priorities and tax cuts along with negotiating better deals on global trade for the US and rebalancing these global trade deficits to increase US domestic production. None of these goals will be achieved overnight, and we expect negotiations to continue for some time which will continue to add uncertainty and volatility to markets as new developments are digested.
The Federal Reserve has indicated that they will remain patient before reducing the Federal Funds rate considering recent tariff volatility and the potential impacts to both economic growth and inflation this year. Probabilities have increased that the Fed will reduce rates for the first time this year during their June meeting with a few more cuts expected prior to year-end.
However, this will be very dependent on future trade negotiations, along with impacts to the labor market, economic growth projections, and the potential for inflation to increase. We expect the Fed to indicate that they will continue to be data-dependent and make decisions on a meeting-by-meeting basis.
On a brighter note, the consumer price index dropped by a seasonally adjusted 0.1% in March which reduced the 12-month inflation rate to 2.4%, which was a nice downward move from February’s number of 2.8% for the prior 12-month period. Core inflation, which excludes food and energy, increased by a lower than expected 0.1% for March and fell to a 2.8% annual rate over the last year.
Both numbers are still above the Federal Reserve’s 2% target, but it does help ease worries that inflation was starting to move in the wrong direction. However, these numbers are for March and do not reflect many of the new global tariffs that have been announced so we will continue to monitor the tariff impact on inflation over the coming months.
We continue to be mindful of the risks the market faces this year from additional tariff fallout risk leading to slower global economic growth, increasing inflation, a timid consumer, weaker company earnings, and a softer labor market. We recommend staying the course with your investment objectives with the understanding that markets go through cycles and both the stock and bond market show positive returns at higher percentage rates the longer the time-period measured.
Please communicate with us if any short-term cash needs arise so we can look for opportunities to be pro-active when raising cash for any necessary distributions, which helps to protect against possible short-term negative moves in the market. We appreciate the trust you have placed in us and will continue to make prudent investment decisions as we navigate the markets going forward.