Tariff Announcement Sends Equity Markets Lower for the Week

Tariff Announcement Sends Equity Markets Lower for the Week

Equity markets declined this week after the U.S. announced a broad range of tariffs leading trading partners to issue reciprocal tariffs. This triggered heavy sell-offs on Thursday and Friday as the market digested this new information and concerns over slowing growth increased. Overall, for the week global equities (represented by the MSCI All Country World Index) finished down at 7.86% while domestic stocks (represented by the S&P 500 Index) were down slightly over 9.00%.

U.S. Treasurys

U.S. Treasurys generated positive returns for the week as the market took a risk-off approach following the tariff announcement. This caused yields on the 10-year Treasury to fall below 4% for the first time since October. When looking at the bond market as a whole (as measured by the Barclays U.S. Aggregate Bond Index), we see a positive return of 3.69% on a year-to-date basis.

March Manufacturing Purchasing Managers’ Index (PMI)

The ISM released its March manufacturing purchasing managers’ index (PMI) on Tuesday, which indicated that manufacturing activity entered contraction territory after two straight months of expansion. However, on the services side, the reading of 50.8% indicates expansion marking its ninth consecutive month of growth.

March Jobs Report

The March jobs report came in strong with a reported gain of 228,000 jobs for the month. This number was above most economists’ expectations and the previous month’s adjusted figure of 117,000. The latest figure was also above the average monthly figure for the past 12 months of 158,000.

Volatility in the Market

As we continue to see a rise in volatility and headline noise in the market, it is important to remember that this is normal and healthy for the market regardless of how uncomfortable it may feel for investors. We would remind you that as investors we are investing for the long term, and this volatility often creates opportunity and leads to strong market returns in the following years. Below are periods since the financial crisis where U.S. Stocks have bottomed after declining 10% or more and what the returns were in years to follow.

Looking Forward

For the week ahead, we have several things to look out for. Starting on Wednesday we have the release of the minutes from the Federal Reserve’s March meeting. Thursday and Friday we will have another round of CPI and PPI data along with the University of Michigan Consumer Sentiment survey.  

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.