April 6, 2025
Volume 12, Issue 14
Weekly Recap
Domestic stocks got crushed last week in response to the Trump administration’s announcement of a broad range of harsher-than-expected tariffs, which fueled concerns around the potential for slowing economic growth, resurgent inflation, and a possible recession. Some 475 companies in the S&P 500 were lower Friday as the index plunged 6 percent in its worst one-day drop since March 2020. An uptick late on Friday kept the S&P from being down 10 percent for the week, losing 9.1 percent. The index posted its worst weekly performance in over five years.
Small-cap stocks lagged as the Russell 2000 lost 11 percent Thursday and Friday, to end last week down over 30 percent from its all-time high. Small-caps had been considered generally safe from tariffs and thus a good investment bet, but increasing recession fears dashed those hopes.
The tariff announcement led to the largest one-day decline for multiple indexes since 2020 and the global Covid shutdown on Thursday, and stocks continued to slide on Friday. Several countries, including China, began to announce retaliatory tariffs and plans for negotiations with the U.S., adding to trade war fears and broader uncertainty around global trade policy. Expectations for the number of Federal Reserve interest rate cuts in 2025 jumped following the announcement, as traders wagered that negative growth effects from the new policies will force the Fed to ease monetary policy to support the labor market and spur economic growth.
In a speech on Friday, Fed Chair Jerome Powell acknowledged that economic “uncertainty is high and downside risks have risen” and that the “significantly larger than expected” tariff increases are likely to cause “higher inflation and slower growth.” However, Powell also noted that the “size and duration of these effects remains uncertain” and that the “economy is still in a good place,” which leaves the central bank well positioned to wait for greater clarity before adjusting monetary policy.
In other economic news, the Institute for Supply Management released its March manufacturing purchasing managers’ index on Tuesday, which indicated that manufacturing activity returned to contraction territory after two straight months of expansion. New orders contracted for the second month in a row, while the prices index jumped seven percentage points to 69.4 percent, largely due to the impact of tariffs. Index readings above 50 percent indicate expansion, while readings below 50 percent signal contraction.
Meanwhile, ISM’s services PMI signaled that the services sector expanded for the ninth consecutive month with a reading of 50.8 percent, although this was a decline from February’s reading of 53.5 percent and short of estimates for 53 percent. While the prices index decreased from February, it remained firmly in expansion territory at 60.9 percent, and, according to Steve Miller, chair of the ISM Services Business Survey Committee, “there has been a significant increase this month in the number of respondents reporting cost increases due to tariff activity.”
Normally the main event, the Labor Department’s closely watched nonfarm payrolls report supported a more optimistic view of the economy on Friday. The report showed that U.S. employers added 228,000 jobs in March, a sharp increase from February’s downwardly revised reading of 117,000 and well ahead of estimates for 130,000. The unemployment rate ticked up to 4.2 percent.
The stronger-than-expected report indicated that the U.S. labor market has remained resilient amid a volatile few months, wherein uncertainty around trade policy and inflation expectations have weighed on business and consumer outlooks for the economy. Still, the upbeat report did little to improve sentiment as traders remained focused on the potential impacts of new tariff policies moving forward. U.S. Treasury securities generated positive returns during the week, benefiting from the risk-off sentiment surrounding the new tariffs. Yields decreased sharply following the announcement, with the benchmark 10-year U.S. Treasury note yield falling below 4 percent for the first time since October after starting the week at a bit over 4.2 percent. Rates drifted higher late on Friday, pushed 10T yields to 4.01 percent at the close. Traders noted that the disappointing ISM data also helped stoke growth fears and drive negative sentiment during the week, which further benefited the bond market.
Market Monitor
A full listing of market performance data is available here.
DQYDJ.com (“Don’t Quit Your Day Job”) offers helpful investment calculators here, including one that shows total returns for individual stocks. Koyfin.com provides reams of data on individual stocks, including the ability to track total return — and just about anything else — over time.
In the News
President Trump on Wednesday unveiled sweeping tariffs on countries and territories worldwide, including several top U.S. trading partners. “We will supercharge our domestic industrial base, we will pry open foreign markets and break down foreign trade barriers,” Trump said in a speech announcing the “Liberation Day” tariffs, which saw the most brutal selloff since the Covid lockdowns started in March 2020.tariffs, which are poised to hit both U.S. allies and competitors. The plan began at a 10 percent baseline duty for all imports but also outlined higher reciprocal tariffs on a case-by-case basis, including a 20 percent tax on all imports from the European Union and a 34 percent levy on all Chinese goods (and China retaliated in kind). The latter, together with two earlier rounds of 10 percent duties, means Beijing could now face a combined tariff rate of 54 percent. On Thursday, stocks suffered their worst one-day loss since Covid (the S&P 500 lost 4.8 percent; the Dow Jones Industrial Average fell 3.98 percent; and the Nasdaq Composite plummeted 5.97 percent). The benchmark 10-year U.S. Treasury note hit a six-month low in yield (3.976 percent). The VIX spiked nearly 40 percent higher and closed above 30 for the first time since last August. The tariff list had several notable exceptions: Russia; North Korea; Cuba; and Belarus. Press Secretary Karoline Leavitt said that these countries were left off because U.S. sanctions already “preclude any meaningful trade.” However, the U.S. still trades more with Russia than with countries like Mauritius or Brunei that did make the list. Wall Street trading desksand hedge funds are mystified. Oh, and prediction markets raised the odds of recession to over 50 percent(Goldman Sachs, too).Employers added jobs in March at a much stronger pace than expected, a sign that the labor market remained strong despite economic uncertainty and market turbulence. The U.S. added 228,000 jobs in March, the Labor Department reported Friday, well above the gain of 140,000 jobs economists polled by The Wall Street Journal had expected to see. That was more than the 117,000 jobs
added in February. The unemployment rate, which is based on a separate survey from the jobs figures, ticked up to 4.2 percent.
Inside the office fridge, maybe behind a “Don’t Touch!” Post-it Note, is a telling economic indicator: More employees are eating lunches brought from home than they have in years.
Will the President’s tariffs drive Europe into China’s arms … or into a fight? Data Dump: Jobs; Jobless Claims; ISM Services; Trade Deficit; ADP Private Employment; Mortgage Applications; Construction Spending; ISM Manufacturing; Job Openings.
Charts of the Week
I found the following articles to be of note. Some may be of interest only to advisors while others are aimed more broadly. You may hit paywalls below; many can be overcome here.
Finding Certainty in a Sea of Uncertainty (Cullen Roche)
Presidential Partisan Portfolios (Ben Carlson)
The Two Most Dangerous Words in Investing (Joe Wiggins)
A Brief Note on Market Uncertainty (Todd Wenning)
Living Past 90 (Roger Wohlner)
This is the best thing I’ve read recently. The saddest. The stupidest. The wildest. Best pasta. Surviving a plane crash. Spring cannot be canceled. Just joking. When Newshour asked Alton Brown what special technique home cooks need to know for their kitchen he replied, “Read the recipe.” Rich list. The Degenerate Economy Index. Rejection goals. RIP, Val Kilmer (“God wants us to walk, but the devil sends a limo.”).
College basketball is getting older, comically so in some cases. In 2019, the average age of a Sweet 16 starter in the men’s tournament was 20.8, a figure that rose to 21.2 by 2021, and is now at 21.6 years of age. Look at Auburn, a No. 1 seed, where the starting five averaged 23.2 years old. That is older than the starting lineups of 5 whole NBA teams last week and 2 years older than the starting lineup of the Washington Wizards last Wednesday, which came in at 21.2 years old. While the extra year of COVID availability is certainly one element, the transfers are really to blame — one-time transfers getting to play without sitting out a year in 2021 and multi-time transfers getting immediate eligibility in 2024 have upended the game. The exception, however, is Duke, where the starters are 19.4 years of age.
“Advice is seldom welcome; and those who want it the most always like it the least.” ~ George Chapman
Securities and advisory services are offered through Madison Avenue Securities, LLC, a member of FINRA and SIPC, a registered investment advisor. This report provides general information only and is based upon current public information we consider reliable. Neither the information nor any opinion expressed constitutes an offer or an invitation to make an offer, to buy or sell any securities or other investment or any options, futures, or derivatives related to such securities or investments. It is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities, other investment, or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities or other investments, if any, may fluctuate and that price or value of such securities and investments may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Diversification does not guaranty against loss in declining markets. Madison Avenue Securities, LLC | 13500 Evening Creek Drive N, Suite 555 | San Diego, CA 92128 US
