April 28, 2025

“The market will always go up in the long run. And if it doesn’t, it means the world has basically collapsed and you’ll have far worse to worry about than your index fund.”

John C. Bogle

Former Vanguard CEO

Here we go again! After a wild ride the past few weeks as the world markets try to outguess the Trump trade policies, things turned decidedly Bullish and out of Bear territory. But first, here are the numbers. The S&P 500 flew back up 5.59%, The Down Jones Industrial Average gained 3.10%, The Nasdaq, not to be outdone roared up 8.29%. Internationally, the FTSE 100 tried to keep pace up 1.69% and the MSCI-EAFE gained 3.7%. The 2-year Treasury paid 3.756% and the 10-year yield was 4.255%.

So, what happened? The S&P 500 started the week on continued pessimism and fear, moving lower on Monday, but reversed course on Tuesday and rallied to a three-week high by the end of the period. The move aligns with the bottom and market reversal that began earlier in the month, suggesting the rally will continue. The risk is that delayed tariffs are still a threat and will create volatility if nothing else, (no kidding!). Worst-case scenarios include a retest of the recent lows and the possibility of setting new lows. This possibility means the fireworks are not over, however strengthening economic numbers will support market optimism.

President Donald Trump seems to keep contradicting himself on his own tariff plans. He says he’s on a path to cut several new trade deals in a few weeks — but has also suggested it’s “physically impossible” to hold all the needed meetings. If you look past the headlines what the President is doing is not shocking, what is shocking to all foreign trading partners, friend and foe, is no one has ever done it this way before and certainly never actually did what he said he would do. This has allowed him to be two steps ahead, but the cost of the apparent instability is market volatility as everyone is trying to figure out if he will succeed. As we cautioned, his concern is changing the course of the Country not the stock market.

As I suggested a few weeks back, Trump has said he will simply set new tariff rates negotiated internally within the U.S. government over the next few weeks — although he already did that on his April 2 “Liberation Day,” which caused the world economy to shudder. The Republican president says he’s actively negotiating with the Chinese government on tariffs — while the Chinese and U.S. Treasury Secretary Scott Bessent have said talks have yet to start. I suspect the current denials from the CCP are a face-saving gambit while talks are progressing behind closed doors and through back channels. Why? Because the Chinese, who export to us 4-5 times as much as we sell to them, cannot sustain a long trade war. I have been asked about Russia and North Korea, why are they seemingly been left out of this. They don’t buy much from the US.

As Market Watch Christine Idzelis reports, “The U.S. stock market closed higher Friday, notching weekly gains as investors hoped for de-escalation with China in the global trade war. U.S. stocks booked weekly gains as investors appeared at times hopeful that the White House was making progress negotiating tariffs with its global trading partners. Big Tech stocks rose last Friday, as investors weighed Google parent Alphabet Inc.’s earnings, and posted a large jump for the week. Good earnings from bell weather companies following good earnings from the banks and the financial sector will help optimism return. The consumer confidence ratings have reversed to a more optimistic future due largely to the appearance of the delay in tariffs and the hope that the early indications on trade negotiations are going well (South Korea, India, and Japan predominately).

Additionally, the message out of the White House took a more conciliatory tone this week. On Tuesday, President Trump said he has “no intention” of firing Jerome Powell, whose term as Fed chair will end in May 2026. His stance on tariffs also seemed to soften, noting that tariffs on Chinese goods “will not be as high as 145%” and that “it’ll come down substantially, but won’t be zero.”

The Wall Street Journal reported last Friday that the Trump administration is working on a new template to streamline tariff negotiations with countries around the globe.

For now, good news on the earnings front might be offsetting tariff fears. In particular, a strong report last Thursday night from Google-parent Alphabet offered hope for tech stocks, as investors brace for a wave of Big Tech results next week, from Amazon.com, Apple, Meta Platforms, and Microsoft.

What’s going on everywhere else? As AP writers Jiang Junzhe and Matt Ott report, “In stock markets abroad, indexes rose modestly across much of Europe following more mixed movements in Asia. Tokyo’s Nikkei 225 jumped 1.9%, but stocks in Shanghai slipped 0.1%. In the bond market, Treasury yields eased some more, and the yield on the 10-year Treasury fell to 4.25% from 4.32% late last Thursday. It’s been generally falling since approaching 4.50% earlier this month in a surprising rise that suggested investors worldwide may have been losing faith in the U.S. bond market’s reputation as a safe place to park cash. Yields have dropped as several reports on the U.S. economy have come in weaker than expected, bolstering expectations that the Federal Reserve may cut interest rates later this year to support growth.

The previously mentioned, sentiment among U.S. consumers sank in April, though not by as much as economists expected. The survey from the University of Michigan said its measure of expectations for coming conditions has dropped 32% since January for the steepest three-month percentage decline seen since the 1990 recession.” (The second of two readings of the consumer sentiment survey improved to 52.2 in late April from 50.8 earlier in the month, after the White House partially paused reciprocal tariffs, the University of Michigan said last Friday.) This is logical due to the media hysteria around the tariffs, my guess is this will likely improve as the effect of Administration works its way through the economy in the coming months.

Some good news, the value of the U.S. dollar meanwhile held steady against the euro and other rival currencies. It’s been recovering some of its sharp, unexpected losses from earlier this month that had rattled investors.

More good news, echoing our sentiment (and at the risk of sounding redundant), Market Watch Jamie Chisholm reports, A cruel summer looms, but here’s why JPMorgan still expects a higher S&P 500 finish this year. The mood will improve later in 2025 as tariff angst eases, and focus turns to tax cuts and deregulation Expect volatile action on Wall Street in coming months, JPMorgan implies.  Investors are feeling a bit more chipper. The S&P 500 has jumped 6.3% over just the last three days and is up 10% from its April 8 closing low. The vibe shift, it seems, is predicated on U.S. President Trump denying he will try to fire Federal Reserve Chair Jerome Powell, and the administration indicating progress on trade deals with South Korea, Japan and India that could serve as templates for other nations. The rhetoric around trade with China, at least from Washington, if not Beijing, has softened a touch, too. All very nice. And its why: “In the very short term, the equity pain trade likely remains to the upside as the market prepositions on tariff de-escalation,” says a team of JPMorgan global equity strategists led by Dubravko Lakos-Bujas. In other words, a sudden improvement in stocks has caught many traders badly positioned.

So, did we hit bottom? “The recovery, which started Tuesday, feels good, but no one is ready to say with confidence that the bottom is in,” wrote Louis Navellier, chief investment officer at Navellier. Hence we will remain cautiously optimistic and keep vigilant watch on trade negotiations.

What about unemployment? Jobless claims remain in stable range, as labor market is seen frozen in place claims edged up 6,000 to 222,000 in the latest week the Labor Department said last Thursday.  Economists polled by The Wall Street Journal had estimated new claims would rise by 5,000 to 220,000.

What’s not to like? Mortgage rates are back up over 7% and housing sales tanked last month, as home buyers are still looking for some longer-term relief which has evaded them. This problem will continue to be addressed going forward but may take more time to occur.

Thank you again for your kind words and wishes regarding my family’s loss, she was a truly saintly and remarkable woman. (Dolores L. Harkins rest in peace)

Mike