Daily market snapshot

Published April 4, 2025
 Woman on couch looking at laptop

Friday, 04/4/2025 a.m.

  • Equities slide further as China retaliates with 34% tariffs – Equity markets are set to open sharply lower as China announced 34% tariffs on U.S. goods, starting April 10. The levies are in response to President Trump's hike of U.S. tariffs on products from China to 54%. In international markets, Asia declined, led by Japan's Nikkei, which fell 2.75%, as the country will face higher-than-expected 24% duties on its exports to the U.S. Europe is lower as well, led by banks to the downside, as investors price in slower growth and lower interest rates*. The U.S. dollar is extending its decline against major international currencies, having fallen about 6% year-to-date. In commodity markets, WTI oil is down to its lowest price in four years on demand concerns and OPEC+'s production hikes*.
     
  • Job growth higher than expected in March – Total nonfarm payrolls grew by 228,000 in March, well above estimates calling for 130,000*. Figures for January and February were revised lower by 48,000. Despite, the stronger-than-expected job gains, the unemployment rate rose to 4.2%, as expected. Hourly earnings were up 3.8% annualized, below forecasts calling for a 4.0% rise*. The upshot is that the labor market remained healthy going into the current trade tensions, providing growing employment and wage gains on average that are comfortably above inflation.
     
  • Bond yields drop further - Bond yields are down, with the 10-year Treasury yield at 3.89%, its lowest in six months. Bond markets are reflecting expectations for the Fed to cut interest rates aggressively, pricing in five cuts to the fed funds rate this year, well above the Fed's own "dot plot" forecast, which reflects just two cuts**. These expectations are likely based on the view that the Fed will need to cut rates in order to support the labor market as the economy slows due to escalation in trade tensions.
     
  • Portfolio diversification remains critical - The potential risks to economic growth and corporate profits suggest that after falling into correction (10% decline from highs), the recovery in stocks will take a while to materialize. Patience and investment discipline will be key for investors to navigate the trade headlines, which no doubt will continue to dominate the market narrative. 
     

    Despite the headwinds, the fundamental drivers of market performance remain more supportive than harmful: 1) unemployment is low; 2) the Fed remains in a rate-cutting cycle; 3) corporate profits are still likely to rise this year, though potentially less than the 10% expected before tariffs; and 4) the policy agenda may soon shift to pro-growth measures, such as tax cuts and deregulation.
     

    The good news for investors with balanced and diversified portfolios is that those portfolios have weathered the pullback better than those with concentrated positions in U.S. large-cap stocks. International stocks are up for the year, U.S. mid-cap stocks have outperformed, and bond prices have rallied, helping smooth out the equity-market volatility. At a sector level, industrials, technology and consumer discretionary could be more exposed to tariffs based on their heavier reliance on imports, while financials, utilities and real estate are more insulated from a trade war. 
     

    While the immediate drawdown in stock markets may be jarring, we recommend that investors stay with their long-term investment strategy, emphasizing diversification and high-quality investments. Avoid making emotionally charged investment decisions, and remember that time in the market has proven to be a better strategy over time than trying to time yourself in and out of the market. (Our Don't Fear the Bear report is a great reminder of this.) 
     

Brian Therien, CFA
Investment Strategy

Source: *FactSet **CME FedWatch for market expectations

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