Knowledge Center
Market Currents – 5/9/25
- Tariffs and Fed Sparked April Volatility. April packed in enough headlines to rival a full year’s news cycle. Markets kicked off the month on edge after President Trump’s “Liberation Day” declaration on April 2, which unveiled aggressive new tariffs on virtually all major trading partners. A week later, the administration reversed course somewhat with a 90-day pause on reciprocal tariffs, helping calm markets – at least temporarily. Volatility flared again mid-month when the president criticized Federal Reserve Chair Jerome Powell for holding off on rate cuts, including suggestions that his role could be in jeopardy – raising fresh concerns about central bank independence. After all the news and volatility, markets ultimately ended the month roughly unchanged.
- Tariff Pause Offers Breathing Room – For Now. The 90-day pause on reciprocal tariffs has provided a welcome window for diplomacy, allowing negotiations to progress with key trade partners. A newly announced agreement between the U.S. and U.K. marked an early sign of constructive engagement and an encouraging step toward easing tensions with allies. While the pause has helped relieve immediate pressure on markets, the direction of trade policy remains a major variable. The outcome of these talks could have far-reaching implications for inflation, global trade flows, and economic momentum heading into the second half of the year.
- Q1 GDP Dips on Import Surge Ahead of Tariffs. The first estimate of Q1 GDP showed a -0.3% contraction, the weakest quarterly performance since early 2022. While GDP figures are inherently backward-looking, the report offered insight into how businesses are navigating the shifting trade environment. A sharp rise in imports – the largest in nearly five years – as firms rushed to front-load purchases ahead of tariffs, weighed heavily on the numbers. At the same time, core components like consumer spending and corporate investment remained solid. The labor market also continues to hold up, though signs of cooling are beginning to emerge.
- Solid Earnings Season, with Caveats. Corporate earnings have been a relative bright spot this quarter, with most companies beating expectations on the bottom line. In response to growing tariff pressures, many are taking action – cutting costs, reworking supply chains, and seeking ways to protect margins. A number of companies have reaffirmed forward guidance, a positive signal given the uncertainty, but many have also noted that their projections do not yet reflect the potential impact of further trade disruptions.
- Market Outlook: From the numbers alone, April may have seemed like a relatively uneventful month for markets. In reality, it was anything but. Shifting trade policy and concerns around central bank independence drove sharp swings in sentiment. Despite the heightened uncertainty, much of the “hard” macroeconomic data – such as employment, spending, and business investment – has held up well, though surveys point to growing caution among households and businesses. Looking ahead, the trajectory for both the economy and corporate earnings will depend largely on how the tariff landscape evolves. While the tone from policymakers has moved toward engagement, lasting confidence will depend on measurable progress. We have acted with intention and discipline throughout this period of volatility – both before and during the downturn – and will continue to respond with the same focus and speed as conditions evolve.