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Equity Markets Rally on Trade & Data News
Equity markets rallied last week after the U.S. and China agreed to sharply reduce tariffs for 90 days while trade negotiations continue. Sentiment was further boosted by a positive CPI report, showing continued moderation in inflation. Global equities (represented by the MSCI All Country World Index) finished the week up 4.07%, while domestic stocks (represented by the S&P 500 Index) were up 5.33%. This continues the recent trend of positive weeks in markets, as the S&P 500 crosses back over into positive territory for the year.
Tariff Update
As mentioned previously, returns for the week started out strong after productive trade talks in Switzerland, the U.S., and China announced early last week that they agreed to significantly reduce tariffs for a period of 90 days while the countries work toward a longer-term deal. Tensions between the two had quickly escalated following the U.S. April 2 tariff announcement, which resulted in the U.S. placing a 145% tariff on Chinese imports and China placing a 125% tariff on U.S. imports. During the 90-day period, the U.S. agreed to reduce its tariff on most imports to 30%.
Consumer Price Index (CPI)
Headline consumer price index (CPI), which represents a basket of goods and services bought by consumers, rose by 0.2% in April, with shelter causing the majority of the monthly increase. The 2.3% rise from a year ago is down from the March reading of 2.4% and the smallest increase since February 2021. Core CPI, which removes more volatile food and energy prices, rose by 0.2% in April and 2.8% on a 12-month basis, holding relatively steady from the previous month
Looking Ahead
The week begins with several Federal Reserve officials scheduled to speak, offering potential insight into the outlook for interest rates and inflation. Retail earnings will also be in focus, with Home Depot, Target, and Lowe’s set to report. Results will provide a read on consumer spending and trends in home improvement. Thursday will be the busiest day for economic data, including the Manufacturing PMI and existing home sales.
As Always
I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.
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