By Jack Kraft, CFA, Vice President, Investment Strategist
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Last week provided a historic trading week with stocks whipsawing multiple percentage points like a nervy Sunday at Augusta as traders looked to price in every breaking development. Evolving rhetoric throughout the week on trade policy caused sharp swings with the S&P 500 recording a 9.5% gain mid-week on record daily volume of 30 billion shares. Ultimately, stocks ended higher across the leaderboard following a 90-day pause on some of the Trump administration’s “reciprocal” tariffs. For the week, the S&P 500 added 5.7%, while the Nasdaq grabbed the green jacket with a 7.3% return. Meanwhile, the Dow jumped nearly 5.0% on the week.
Investors have been assessing very little development on the trade front, causing sharp moves in equity markets amid light positioning and low liquidity as measured by bid-ask spreads. This has led to heightened volatility, with the S&P 500 recently experiencing one of its single best days (+10%) and one of its single worst days (-6%) in the past two decades.
The worst and best days in the market often cluster together, which is why it’s so important to stay the course during volatile periods. Selling during the worst days can have lasting consequences on long-term returns. According to JPMorgan, missing just the 10 best days in the market over the past 20 years would have cut your portfolio’s return nearly in half. Timing the market takes a real stroke of genius—two perfect swings: knowing when to sell, and when to buy. Most often, it’s a shank into the woods, because the market tends to bottom during peak pessimism.
Meanwhile, trade tensions continued to evolve rapidly, adding further fuel to the market’s instability. President Trump issued a three-month pause on the majority of reciprocal tariffs, while keeping in place a 10% baseline tariff across the board. The spotlight has moved to U.S.-China trade policy, which has been escalating as the duty rate jumped well above 100% for both countries last week. Over the weekend, the Trump administration provided some relief on Chinese tariffs for technology companies, exempting smartphones, computers and other electronic devices such as semiconductors, solar cells and flat-screen TV displays. As these recent events have been viewed as positive, much uncertainty remains around where permanent U.S. trade policy will land. We are still in the early innings of this change in policy, and continued large swings in equity markets will likely persist.
Coming into the year, markets were priced to near perfection with high valuations on “U.S. exceptionalism.” The thesis of this investment theme was that U.S. stocks warranted a premium to the rest of the world due to better productivity, earnings and economic growth. The rapid flip-flop in U.S. trade policy has derailed that investment theme as expectations for economic and earnings growth have slowed quickly. As the outlook has dimmed, so has the premium valuation for U.S. stocks, prompting investors to adjust course.
In just three months, the narrative has shifted from above-average earnings growth to rising odds of a self-inflected or event-driven recession. An event-driven recession can be thought of as a one-off shock causing economic instability (e.g. Covid, commodity shocks, geopolitical conflict). These tend to be shorter in nature with higher odds of a more rapid recovery; however, risks of it morphing into a prolonged downturn remain. The duration of the trade war will be a key factor in determining if the United States is 1) pushed into a recession and 2) how deep that cut will be. Last week showed just how quickly the market can snap back, with a single social media post or headline—positive or negative—triggering massive moves in the stock market.
First-quarter earnings season got off to a birdie start with big banks issuing profit results on Friday. JPMorgan, Wells Fargo and Morgan Stanley all topped analysts’ expectations, indicating the recent market volatility is yet to show up in corporate profits. One thing to watch this earnings season is which companies are reaffirming or revising 2025 guidance (issued just three months ago) versus who is pulling guidance all together. Consensus on Wall Street is that the uncertain macroeconomic backdrop will likely result in lower growth and higher unemployment than previously thought.
Economic data has been split—some reports looked above par, while others landed squarely in the bunker. The Consumer Price Index rose 2.4% in March below expectations of a 2.6% rise. Meanwhile, the Producer Price Index (PPI) dropped -0.4% amid declines in gas, food and services. The PPI will be a key indicator in the coming months, with it being a leading indicator of pipeline inflation and will be where price increases from tariffs show up first. Conversely, tariff news is weighing on future expectations of consumer sentiment and inflation. Updates from the University of Michigan showed consumer sentiment sinking to its lowest level in three years, while inflation expectations also rose.
Looking ahead to this week, investors will have a jam-packed earnings calendar and will be looking for additional updates on trade policy. Financials will continue to report with Goldman Sachs, Citi Bank, Bank of America, regional banks and insurance companies. Other notable companies releasing first-quarter results include Johnson and Johnson, Albertsons, J.B. Hunt, semiconductors ASML Holding and Taiwan Semiconductor Manufacturing Company Limited, and Netflix. Economic data will be relatively light with retail sales headlining the calendar on Wednesday. The real estate market will be in focus with the release of the home builder confidence index, housing starts and building permits. Central bank news will also garner attention with several U.S. Federal Reserve presidents speaking throughout the week.
| Time (ET) | Report | Period | Median Forecast | Previous |
| MONDAY, APRIL 14 | ||||
| 6:00 PM | Philadelphia Fed President Patrick Harker speaks | |||
| 7:40 PM | Atlanta Fed President Bostic speaks | |||
| TUESDAY, APRIL 15 | ||||
| 8:30 AM | Import price index | March | 0.10% | 0.40% |
| 8:30 AM | Import price index minus fuel | March | — | 0.30% |
| 8:30 AM | Empire State manufacturing survey | April | -10 | -20 |
| WEDNESDAY, APRIL 16 | ||||
| 8:30 AM | U.S. retail sales | March | 1.20% | 0.20% |
| 8:30 AM | Retail sales minus autos | March | 0.40% | 0.30% |
| 9:15 AM | Industrial production | March | -0.20% | 0.70% |
| 9:15 AM | Capacity utilization | March | 77.90% | 78.20% |
| 10:00 AM | Business inventories | Feb. | 0.30% | 0.30% |
| 10:00 AM | Home builder confidence index | April | 38 | 39 |
| 12:00 PM | Cleveland Fed President Hammack speaks | |||
| THURSDAY, APRIL 17 | ||||
| 8:30 AM | Initial jobless claims | 12-Apr | — | 223,000 |
| 8:30 AM | Housing starts | March | 1.41 million | 1.5 million |
| 8:30 AM | Building permits | March | 1.46 million | 1.46 million |
| 8:30 AM | Philadelphia Fed manufacturing survey | April | 3.7 | 12.5 |
| FRIDAY, APRIL 18 | ||||
| 8:00 AM | San Francisco Fed President Mary Daly speaks |
Links to previously published commentaries can be found at benjaminfedwards.com/Latest Investment Insights/Market Commentary/Market