Your Weekly Update for Monday, April 7, 2025.
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Summary
Markets were DOWN last week. The Dow Jones Industrial Average was DOWN 7.86% to 38,314.86 while the S&P500 ended DOWN 9.08% to 5,074.08. The Nasdaq Composite FELL 10.02% to 15,587.79. The annual yield on the 30-year Treasury FELL 14.8 basis point(s) to 4.485%.
Economic data included the announcement of substantial global tariffs by the U.S. administration, which were taken negatively worldwide, but especially in the U.S. Other releases included a weakening of ISM manufacturing and services activity, and JOLTS job openings. The Friday employment situation report came in stronger than expected, with reversals of some earlier seasonal effects.
Equities suffered their worst week since the pandemic, reacting negatively to the U.S. administrationâs tariff news. However, government bonds fared positively, as long-term yields fell sharply. Commodities also lost ground across the board, with the combination of uncertain trade and growth impacts.
Economic Notes
(-) The ISM manufacturing index fell by -1.3 points in March to 49.0, below expectations of 49.5 and back into a slight contraction. The underlying components of new orders, production, and employment also fell back several points further into contraction. However, supplier deliveries stayed in expansion despite falling, while prices paid rose a further seven points to nearly 70âthe highest level in nearly three years. The inventories measure also rose by several points back into expansion, and now exceed new orders by the greatest amount in forty years (aside from the GFC and pandemic), pointing to a shift forward in pre-tariff activity, but time will tell whether this excess will be wound down naturally or create a supply glut. Notably, the press release mentioned the word tariffs nearly 20 times, in that these along with resulting economic uncertainty are âmaking the current business environment challenging,â with concerns by companies around their upcoming gross profits. By contrast, the final S&P Global US manufacturing PMI for March was revised up by 0.4 of a point to 50.2, back into expansion again. Overall, this blend of manufacturing numbers continues to hover around neutral.
(0/-) The ISM services/non-manufacturing index fell by -2.7 points in March to 50.8, below expectations of 52.9. However, it remained (barely) in expansion. Under the hood, conditions were mixed, with business activity up a few points to a solid 56, while new orders fell by -2 points to just over 50, and employment fell sharply back into contraction. Prices paid fell by a few points but remained solidly in expansion at around 60. Unsurprisingly, much of the narrative from survey respondents was also around tariff uncertainty, as they noted buying decisions caused them âto shift spend and in some cases buy in advance of reported tariffsâ and âare expecting price increases in the near future.â The final March S&P Global US services PMI, on the other hand, rose 0.1 to a stronger 54.4 expansionary level.
(+) Construction spending rose 0.7% in February, exceeding the 0.3% median forecast. The report included gains in all areas, the largest of which were in private residential (up 1.3%), with private non-residential and all public spending up a few tenths of a percent. As construction costs rose nearly a percent on a seasonally-adjusted basis, real spending appeared to fall by a few tenths in the month.
(-) Initial jobless claims for the Mar. 29 ending week fell by -6k to 219k, below the unchanged 225k median forecast. Continuing claims for the Mar. 22 week rose by 56k to 1.903 mil., well above the 1.807 mil. expected. The latter implies that some private sector hiring as slowed, with the unemployed staying on the rolls longer. Notably, despite the rise in continuing claims, overall federal worker claims continued to be low and not a meaningful addition to this series at this point.
(0) The JOLTSÂ job openings report for February showed a decline of -194k to 7.568 mil., just above the median forecast of 7.658. Gains were largest in professional/business services (134k), and declined the most in trade/transports/utilities (-163k) and financial activities (-80k). The job openings rate fell by -0.2% to 4.5%, while the hiring rate was unchanged at 3.4%. Departures were unchanged, with the quits rate steady at 2.0% and layoff rate at 1.1%. It appeared that the Federal government hiring rate fell by a tenth of a percent to 1.0%, while the layoff rate spiked by 0.6% to 0.7%, reflecting DOGE activity.
(+) The employment situation report came in far better than expected for March, although it was unfortunately overshadowed by the tariff news. Nonfarm payrolls rose by 228k, exceeding the median forecast of 140k, although it contained revisions downward for the prior two months of -48k. It appeared that weather-sensitive areas accounted for roughly half of job gains, after contributing to weaker readings in the prior two months, so some of this activity was offsetting. By segment, gains were strongest in healthcare/social assistance (78k), leisure/hospitality (43k), and retail (24k), while weaker results originated from durable goods manufacturing (-3k), mining/logging (-2k), and wholesale trade (-2k). Federal government fell by -4k, while state/local government jobs rose by 23kâagain demonstrating the different relative directions in staffing of the two segments. The unemployment rate ticked up by only a hundredth of a percent to 4.15%, which was rounded up to the nearest tenth at 4.2%, exceeding expectations of no change. The U-6 underemployment rate fell by a rounded tenth to 7.9%. Average hourly earnings rose by 0.25%, just short of the 0.3% expected. The year-over-year rate of change fell slightly to 3.8%. The average workweek length was unchanged at 34.2 hours.
Question of the Week: Now that tariffs have been announced, what is the expected impact looking ahead?
Much of this remains in flux, and there are a lot of moving parts. No doubt there could be changes in coming days and weeks, with financial markets likely to react accordingly. Some of these points are hypothetical, may not occur in this particular order, or may not occur at all. But this provides some things to consider as a roadmap unfolds.
- Current state of affairs. The announced tariff rates shocked global financial markets, being several percentage points higher than earlier weighted average expectations (from an assumed flat rate averaging around 15% to around 23%). The quoted rates announced on Wednesdayâs display board in the White House rose garden were clarified as the maximum possible rates, so generally a worst case scenario of sorts. Interestingly, there has been criticism of the tariff formulas as overly simplistic, not grounded in academic rigor, and not representative of âwinnersâ and âlosersâ from trade, nor reflecting complicated supply chain or geopolitical relationships. There were a variety of exclusions, such as Canada and Mexico, which had been hit hard earlier with their own high rates and different criteria for exit. Essentially, itâs that the worst case announced was even more severe than most guesses. Itâs assumed things can only get better from here, as foreign boycotts and talk of non-U.S. trade alliances have already surfaced. The primary concerns so far are about how far/fast tariffs slow the economy, raise the chances of recession, and increase inflation.
- Pros and cons. Optimists tout a new global order where the U.S. reinvents itself as a manufacturing superpower, boosting employment, and reducing reliance on other countries, which would minimize risks like supply chain disruptions. This is more in line with how the U.S. looked a century ago. Pessimists note that making such radical changes in such a short period of time, after nearly a century in the making, are unrealistic, in many cases arenât even desirable, and pile the brunt of the damage on U.S. consumers due to higher costs.
- Reciprocal tariffs. These were likely, and have already started, with China having applied a 34% rate. The reality with some of the China data is that, for example, while exports make up 20% of Chinaâs GDP, only 15% of those exports are to the U.S., a proportion that has been shrinking over time. On the other hand, Canadian and Mexican exports to the U.S. represent more like 80% of their respective export totals. These differences complicate the net result further, as administrationâs trade formula focuses on trade deficit alone, regardless of underlying country-specific qualitative or quantitative dynamics.
- Based on past behavior, this is a likely next step, but the timeline is uncertain. Several tariffs are slated to begin in the coming week, with the White House expecting a flurry of incoming phone calls from foreign diplomats and trade representatives. Essentially, the longer these discussions take, the longer the U.S. is saddled with the maximum rates, and the more damage to the economy thatâs possible during that time. On the other hand, if deals are made, some tariffs could substantially shrink from the maximum.
- Again, based on past precedents from the administration, successful negotiations could be announced as substantial victories. This could be the case even if the wins are small and/or if little has changed on net from earlier policy. In fact, it could be hard to tell about some trade outcomes without looking deeper into the documentation, but rest assured there will be plenty of analysis in the media. Financial markets could also be quick to react (positively or negatively) to headline announcements, and the general trend of how negotiations are going.
- Sentiment of businesses and households. According to reports, the White House keeps especially close watch on sentiment and favorability ratings. If tariff negotiations carry on too long with little progress, higher prices and supply chain reconfigurations could weigh on consumers, further souring the mood. Pushback has already begun, with nationwide protests along with general frustration to rising prices, as seen in business and consumer surveys for months. Last weekâs stock market performance and implications for retirement accounts is also not helping ease these frustrations. Up through last week, the uncertainty about what tariff policy might look like already began to weigh on spending in Q1, and businesses holding back on capex plans and hiring. Now that the worst case scenario has come out, some macro uncertainty has been replaced by micro uncertainty.
- While tariffs historically havenât generated ongoing inflation (as official inflation percentages are based on the rate of change from time A to time B), they have created one-time price level bumps. The assumed additional increase of year-over-year inflation is roughly 0.5-1.0%, with Fed Chair Powell noting that, âWhile tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent.â This is not only from the obvious tariffs being applied to imports, but the sneakier technique of U.S. companies raising their own prices to match foreign sticker prices (since they can). As we experienced during the pandemic, businesses and consumers donât really differentiate between an ongoing slow grind of inflation rates of change and a one-time adjustmentâitâs just that prices are higherâand thatâs interpreted as âinflation.â Rightly or wrongly, politicians are the first to get the blame.
- Economic growth. Uncertainty creates a hesitancy to act, and as economic growth is dependent on activity, less movement means less growth. The longer that is in flux, the greater the impact. If maximum tariffs stay in place, some estimates have pegged the potential loss of U.S. GDP at upwards of at perhaps a full percent or more per year looking ahead. Some effects were modeled based on the slowdown during the 2018-19 first term tariff period. Since U.S. trend growth is pegged to around 2% per year, that would obviously be significant. While the economy was already starting to slow naturally, recession odds as published by a variety of firms have already significantly risen. However, as other economic indicators through March have remained positive, and there hasnât been a build-up of excesses, such as speculative investment and debt, all signs point to a shallow to moderate recession at worst at this point. That said, a recession is not yet a foregone conclusion.
- Central bank policy. Based on CME Fed funds futures markets, the number of Federal Reserve interest rate cuts priced in for this year has risen from just one a few weeks ago to now four, but still just 1-2 more in 2026. Comments from the ECB point to concerns about further cuts due to higher inflation and possible disruptions to funding and currency markets. These estimation markets can be fast-changing, but still donât point to more extreme distress, as one would expect a flurry of rate cuts if a recession were imminent. At the same time, higher inflation from tariffs offsets that a bit, putting the Fed and other central banks in a difficult position of balancing different objectives. That said, should conditions deteriorate, particularly in the labor market (officially their other key mandate), they would be expected to proceed with multiple cuts, which should provide stimulus to the economy, per the normal monetary procedure.
- Stock earnings. S&P 500 earnings have been quite solid, with 18% growth in Q4 and 11% for the full year of 2024 (per FactSet). However, Q1-2025 expectations have fallen from 12% in January to around 7% currently, but a still-decent 9% for Q2. Itâs been assumed that the maximum tariff rates, should they stand, could carve off up to -5% or so of the pace of earnings growth. Again, damaging, and stock markets have been responding accordingly.
- Stocks can react in the short term to a variety of news, which can offset and mean revert, but longer-term results have been driven by company earnings. So, an expected reduction in stock earnings growth has been a key driver of current movements. Stocks are known to overreact to the new and/or the unknown. As well-known academic and author Dr. Jeremy Siegel likes to remind us, in a discounted cash flow model, only around 10% of a stockâs fair value calculation is attributable to the next two yearsâthe rest is all based on longer-term assumptions. Obviously, stock market reactions reflect that fact being often forgotten, as the baby is often thrown out with the bathwater. Stock drawdowns often share this tendency, and can provide attractive buying opportunities, assuming oneâs time horizon is sufficiently long.
- Fixed income. The 10-year U.S. treasury note yield has already fallen from a peak of 4.8% in mid-January when risks were focused on too-rapid growth, to now just under 4.0%. This has helped boost government bond returns in a period where diversifiers have been in short supply. Higher rates generally have come along with higher rate volatility, which is tied to central bank policy, growth, and inflationâtheyâre all interconnected. Investors who have been persistently favoring cash, at current high yields, also often forget the usefulness of bonds not only as a yield producer, but as a portfolio diversifier when rates fall (e.g., 5-year duration x -1% yield decline = +5% capital gain, in addition to the yield earned).
- Mid-term elections. Gong back to political sentiment, the length of inflation and economic damage from tariffs could have a significant impact on the 2026 mid-term elections. Traditionally, voters have been motivated most by the state of the economy and inflation. Now that primaries are only a year away, campaigns will be ramping up in the coming months. In recent years, in a variety of regions, Republicans deemed âtoo moderateâ were âprimariedâ out by more conservative candidates more aligned with the Presidentâs policies. Though, as history has shown us, Presidents experiencing an unpopular or difficult first few years have been subject to sharp rebukes in the mid-term terms. Should that occur in 2026, a risk is that the already-tight House Republican majority moves even tighter or even flips to the Democrats, creating a stalemate and effectively closing down the Presidentâs agenda for the final two years. (Note: financial markets have tended to like this scenario, as nothing important or controversial tends to get done, being the ultimate removal of some âunknownsâ for sure.)
- Congressional authority and trade policy. Going further back, to the President McKinley days of the 1890s and recently-top-of-mind Smoot-Hawley tariffs of the 1930s, through the present, official tariffs require Congressional action to implement. However, since the 1970s, a variety of bills have allowed for targeted or âemergencyâ trade actions by the President, such as the International Emergency Economic Powers Act (IEEPA) in this case. Generally, the executive branch has been given increasing leeway on crafting trade policy; in fact, some scholars argue too much authority. A possibility, if the current tariff agenda inflicts enough economic damage, is a dilution of that executive authority with more onus shifted back to Congress. (A bill was already floated in the Senate to revoke tariffs on Canada. Other discussions involve having the courts decide on potential limits to IEEPA authority.) These things take time, and might not occur at all, but is a road likely to be discussed. In fact, it could even happen sooner than later, but would require Congressional action, then overcoming a certain Presidential veto, and passed again through a tougher threshold (so less likely with todayâs legislative composition). Of course, looking further out when a new President is elected in 2028, current executive actions could be removed as easily as they were imposed.
- The long story short is, markets often act as if new conditions are in place forever. But in reality, there are a variety of potential paths. Markets have progressed through world wars, depressions, terrorist attacks, and pandemicsâthrough to the other side. This is due to the global economyâs tendency not to shrink, but to progress and grow over time. Although we havenât yet reached the -20% bear market point for the S&P, forward returns from such points have been historically positive in most cases. While this is no guarantee of future results, of course, since World War II, the average return for the periods after a bear market is reached are 9% for the next six months, 12% for the following 12 months, and a cumulative 24% for the following 24 months, with the median returns slightly better than that. Companies that produce goods and services have significant underlying value, and continue to function, often in a variety of global markets, generate earnings, often pay dividends, and pay their debts despite challenges in the geopolitical landscape. That part is easy to forget during times of market distress.
Market Notes
| Period ending 4/4/2025 | 1 Week % | YTD % |
| DJIA | -7.82 | -9.53 |
| S&P 500 | -9.05 | -13.42 |
| NASDAQ | -10.00 | -19.13 |
| Russell 2000 | -9.64 | -17.79 |
| MSCI-EAFE | -6.90 | 1.58 |
| MSCI-EM | -2.90 | 1.69 |
| Bloomberg U.S. Aggregate | 1.12 | 3.69 |
| U.S. Treasury Yields | 3 Mo. | 2 Yr. | 5 Yr. | 10 Yr. | 30 Yr. |
| 12/31/2024 | 4.37 | 4.25 | 4.38 | 4.58 | 4.78 |
| 3/28/2025 | 4.33 | 3.89 | 3.98 | 4.27 | 4.64 |
| 4/4/2025 | 4.28 | 3.68 | 3.72 | 4.01 | 4.41 |
U.S. stocks began the week on another negative note, as comments from the administration over the prior weekend were taken negatively by markets (notably, those noting a disregard for auto manufacturer pain and possibilities of a recession, brought on by policies). Wednesdayâs âLiberation Dayâ announcement was done after the market close, but stock futures fell immediately afterward and carried over to a decline of nearly -5% on Thursday, one of the worst single days since the pandemic in 2020. The damage continued Friday, with markets down beyond -5%, as markets reacted to Chinaâs retaliatory tariff of 34%. From the peak on Feb. 19, the S&P has fallen over -17% (up to nearly -20% if this morningâs futures are included). As noted separately, the market was prepared for tariffs to some extent, but these came out definitely stronger than expected.
Every domestic sector saw declines last week, led by energy, technology, and financials, which fell beyond -10%. As expected, defensives like consumer staples and utilities held up best, but still lost a few percent each. Real estate declined -6% in line with expected economic weakness, even though yields fell sharply.
Foreign stocks also fared negatively last week across the board, but fared a bit better than U.S. equities. Interestingly, international fared a few percent better during the initial Thur. drawdown but generally caught up by Fri. when investors attempted to absorb the ultimate global economic impact of maximum tariffs. Emerging markets fared best for the week, with lower starting valuations, and seemingly earlier recognition of negative tariff impacts already baked into assumptions.
Bonds were mixed, with U.S. Treasuries gaining over a percent, along with their tradition portfolio save haven status. Investment-grade corporates rose by a fraction of a percent, hampered by widening spreads, which took high yield and floating rate into the negative for the week. Foreign bonds were mixed, with a far weaker dollar boosting foreign developed market government bonds while emerging market debt fared less well with negative returns, along with general risk avoidance.
Commodities generally fared poorly, with expected negative tariff and global economic growth impacts which overwhelmed all else. As expected in that scenario, energy and industrial metals fared the worst, each down almost -10%, with crude oil prices down -11% to $62/barrel. As a safe haven, precious metals also fared negatively, with bonds proving to be a better diversifier last week.
Mortgage Rates
âOver the last month, the 30-year fixed-rate has settled in, making only slight moves in either direction. This stability is reassuring, and borrowers have responded with purchase application demand rising to the highest growth rate since late last year,â said Sam Khater, Freddie Macâs Chief Economist.
The 30-year FRM averaged 6.64% as of April 3, 2025, down slightly from last week when it averaged 6.65%. A year ago at this time, the 30-year FRM averaged 6.82%.
The 15-year FRM averaged 5.82%, down from last week when it averaged 5.89%. A year ago at this time, the 15-year FRM averaged 6.06%.
Freddie Macâs Primary Mortgage Market SurveyÂŽ is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Borrowers may still pay closing costs which are not included in the survey.
Through our relationship with Mortgage Window, Inc. (NMLS#2485156) in Vancouver, Washington we originate residential and reverse mortgages.
Selected Cryptocurrencies
| Symbol | Name | Price | 24h % | 7d % | Market Cap | Volume(24h) |
| BTC | Bitcoin | $77,039.99 | -6.76% | -6.21% | $1,529,083,114,066 | $72,221,276,969 |
| ETH | Ethereum | $1,508.81 | -15.35% | -16.88% | $182,074,695,373 | $42,972,743,744 |
| XRP | XRP | $1.78 | -13.87% | -14.42% | $104,014,326,653 | $11,712,770,143 |
| BNB | BNB | $545.81 | -7.07% | -8.54% | $77,762,643,167 | $2,600,135,427 |
| SOL | Solana | $101.56 | -13.47% | -18.13% | $52,354,184,716 | $7,105,663,544 |
| TRX | TRON | $0.23 | -5.36% | -3.25% | $21,476,204,527 | $874,077,086 |
| DOGE | Dogecoin | $0.14 | -14.13% | -14.30% | $20,848,174,965 | $2,664,486,861 |
| ADA | Cardano | $0.55 | -13.52% | -14.88% | $19,346,838,001 | $1,668,198,258 |
| LEO | UNUS SED LEO | $8.89 | -1.34% | -2.19% | $8,215,036,610 | $6,898,803 |
| TON | Toncoin | $3.06 | -6.80% | -21.88% | $7,568,581,204 | $375,343,256 |
| LINK | Chainlink | $10.92 | -12.82% | -17.43% | $7,175,590,075 | $798,158,616 |
| XLM | Stellar | $0.22 | -10.80% | -16.63% | $6,817,004,100 | $374,423,943 |
| AVAX | Avalanche | $15.72 | -7.92% | -15.91% | $6,530,925,734 | $561,901,957 |
| SHIB | Shiba Inu | $0.00 | -8.35% | -9.58% | $6,478,980,295 | $432,821,712 |
| SUI | Sui | $1.85 | -13.21% | -16.46% | $6,021,914,389 | $1,566,905,577 |
| OM | MANTRA | $6.14 | -1.44% | -2.46% | $5,939,710,124 | $176,498,766 |
| HBAR | Hedera | $0.14 | -11.01% | -13.84% | $5,846,261,233 | $423,990,023 |
| DOT | Polkadot | $3.44 | -12.18% | -14.01% | $5,388,742,196 | $364,093,965 |
Information current as of 5:40 AM PDT, Monday, April 7, 2025. Source: https://coinmarketcap.com
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Sources: Ryan Long, CFA, FocusPoint Solutions, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Citigroup, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management,
MarketfieldAsset Management, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, PIMCO, Standard & Poorâs, StockCharts.com, The Conference Board, Thomson Reuters, T. Rowe Price, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wall Street Journal, The Washington Post. Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends. Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product. FocusPoint Solutions, Inc. is a registered investment advisor.
Notes key: (+) positive/encouraging development, (0) neutral/inconclusive/no net effect, (-) negative/discouraging development.