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In this Month’s Quick Recap: Trade uncertainty, long-term discipline.

Presented by The PensionmarkMeridien Team, April 2025

Last month brought trade tensions and some mixed inflation readings as major U.S. stock indexes declined, making it an opportune time to share an overview of what happened and what could be ahead. Here is a monthly summary of things to know.

MAJOR U.S. STOCK INDEXES
Here is how major U.S. stock indexes fared in March:

• The S&P 500 declined by 5.75%¹.
• The NASDAQ Composite fell by 8.20%².
• The Dow Jones Industrial Average decreased by 4.20%³.

TRADE TENSIONS
Trade and tariff tensions had a profound effect on U.S. financial markets last month, as the imposition of steep tariffs—25% on imports from Canada and Mexico, and an additional 10-20% on goods from China—sparked fears of a global trade war. This uncertainty triggered sharp declines in major stock indices, with retaliatory tariffs from trading partners like the EU and Canada further exacerbating market volatility and undermining investor confidence.

Despite these challenges, certain sectors, particularly energy, demonstrated resilience, reflecting a notable shift in investor preference from high-growth technology stocks to value-oriented investments. Meanwhile, some investors sought diversification by exploring opportunities in European equities or focusing on defensive strategies such as dividend-paying stocks. These dynamics underscore the complexity of navigating financial markets amid escalating trade conflicts and shifting economic conditions.

MIXED INFLATION SIGNALS
Inflation metrics in March painted a complex and somewhat contradictory picture, reflecting both progress and lingering challenges in the broader economic landscape.

Consumer Price Index (CPI):
Recent consumer inflation data offered a glimmer of optimism. In March, the headline Consumer Price Index (CPI) rose by 2.8%⁴ year-over-year, slightly below the forecasted 2.9% increase. Month-over-month, CPI recorded a modest 0.2% rise, which was also lower than the expected 0.3%. Despite this encouraging trend, the S&P 500 closed higher on the day the data was released but failed to recover its losses for the month. These developments suggest a gradual easing in inflationary pressures, potentially signaling progress toward economic stability.

Producer Price Index (PPI):
On the wholesale inflation side the Producer Price Index (PPI) showed no change month-over-month, defying expectations of an increase. Additionally, the Core PPI, which excludes volatile food and energy prices, came in slightly below forecasts on a monthly basis.

Core Personal Consumption Expenditures Index (PCE)
The Federal Reserve’s preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index, showed a 0.4%⁵ increase in February, marking the largest monthly gain since January 2024. This brought the year-over-year core inflation rate to 2.8%, slightly above economists’ expectations of 0.3% monthly growth and a 2.7% annual rate. Core PCE, which excludes the volatile prices of food and energy, is considered a more reliable measure of long-term inflation trends and remains above the Fed’s 2% target. The data adds complexity to an otherwise softer inflation narrative from March, highlighting persistent inflationary pressures despite broader economic efforts to stabilize prices.

Putting Inflation Together
A 2.8% annual run rate for CPI and Core PCE is solid compared to the recent past, as it is below 3% and well below the 9.1% highs we saw in 2022. The market just expects inflation to increase – will tariffs make it happen?

FED MEETING & OUTLOOK
As expected, the Federal Reserve maintained interest rates at their current range of 4.25%-4.5% during the March 2025 policy meeting, signaling a cautious approach amid heightened economic uncertainty. The Fed projected two rate cuts later in the year, reflecting its ongoing focus on balancing inflation and growth concerns.

Notable adjustments included a downward revision to the economic growth forecast for 2025 and an upward revision to inflation projections, underscoring the challenges posed by persistent inflationary pressures. Adopting a “wait and see” stance, the Fed acknowledged uncertainties related to tariffs and other factors while leaving open the possibility of rate cuts in the coming months.

Market expectations mirrored this cautious outlook. As of March 31, Fed Funds futures indicated an 85.5% probability of rates remaining unchanged at the next meeting in early May. However, looking ahead to June, futures markets suggested a 64.3% likelihood⁶ of a quarter-point rate cut, reflecting growing anticipation of monetary easing later in the year.

LABOR MARKET
Non-farm Payrolls: The U.S. economy added 151,000 jobs in February 2025 — slightly below⁷ the consensus expectation of 170,000 jobs. Job gains were led by sectors like health care (+52,000) and transportation and warehousing (+18,000), though federal government employment dropped by 10,000 amid the early impacts of policy shifts.

Unemployment Rate: The unemployment rate rose to 4.1%⁸ in February 2025, up from 4.0% in January, indicating a slight softening in the labor market. The data reflects a labor market under pressure from trade tensions and policy uncertainty — yet one that is still growing.

CONSUMER HEALTH & MOOD
The U.S. consumer has seen better days. In March 2025, consumer confidence deteriorated sharply, with the Consumer Confidence Index falling to 92.9⁹ and the Expectations Index dropping to 65.2—well below the recession threshold of 80—indicating heightened pessimism.

Similarly, the University of Michigan Consumer Sentiment Index declined to 57.0, down 11.9%¹⁰ from February, largely driven by inflation concerns, as one-year inflation expectations rose to 5.0%. Consumers are increasingly anxious, weighed down by inflation and broader economic uncertainty, which may signal potential recession risks and a pullback in spending. However, this pensiveness may be overdone. A meaningful catalyst—such as stabilizing inflation or clearer trade policy—could help restore some optimism and confidence in the economy.

APRIL 2ND TARIFF DECISION
On April 2nd, a date President Donald Trump dubbed “Liberation Day,” the administration announced a new wave of tariffs. Leading up to the announcement, market viewers were uncertain about what would be unveiled, which added to the overall market volatility and unease.

At 4 p.m., President Trump revealed that the United States would impose a minimum 10% tariff on goods from all countries. In addition, the administration introduced reciprocal tariffs for nations it identified as maintaining an uneven trade relationship with the U.S. Under this policy, the U.S. would impose tariffs equal to half the rate those countries charge American goods, factoring in not just monetary tariffs but also non-monetary practices such as currency manipulation. As a result, new tariff rates included 49% on goods from Cambodia, 54% on Chinese goods (inclusive of previous tariffs), and 26% on goods from India.

To read what we had to say on the April 2^nd Tariff Announcements <click here>

REMEMBER THE GOALS WAIVER
Amid tariff uncertainty and market reaction, it’s essential to keep our long-term goals in mind and remember the reasons we started long-term investing in the first place. The objective is to stay invested overtime rather than attempting to time the market. Volatility is part of long-term investing.

Additionally, markets often anticipate future conditions when setting prices, which is why we hear phrases like “buy the fear” or “buy when there’s blood on the streets.” Are we at that point yet? Nobody knows for sure.

CONTACT US ANYTIME
Tariff uncertainties could persist longer. If it’s on your mind, it could be an opportune time to chat about your portfolio and diversification. Let’s remember that markets do not move higher in a straight line (even though we may have gotten accustomed to that in recent years!).

If you would like to discuss the current market outlook and explore investment strategies based on your objectives or recent market developments, please feel free to contact us.

We are  always here when you need us!