Rapidly evolving tariff developments were a significant source of volatility in financial markets again this past week. Both enacted tariff rates and shifting perceptions of the United States’ trade policy goals contributed to sharp market swings up and down.
Here is a summary of last week’s key developments:
- Saturday, April 5: A universal tariff of 10% on most goods imported into the U.S. went into effect.
- Wednesday, April 9: The U.S. imposed additional, larger “reciprocal tariffs” on major trading partners, including China, the European Union, Japan, and others.
- Same-Day Reversal: The U.S. paused country-specific tariffs, with the exception of China, for 90 days, though the universal 10% tariffs remained in place.
- Continued Escalation with China: China was excluded from the pause, and tensions escalated between the two countries throughout the week. As of this email, the U.S. and China have imposed tariffs of 145% and 125% on each other’s goods, respectively.
- Exemptions: Goods from Canada and Mexico covered under the USMCA trade agreement (products wholly grown or originated in Mexico/Canada, such as avocado or lumber) remain exempt. We still anticipate sector-specific tariffs for pharmaceutical products, oil, and semiconductors.
Market Impact
In a climate of heightened uncertainty, diversification remains a core component of our investment strategy. After equities struggled last week, this week saw mixed performance across asset classes:
- Interest rates rose, likely due to foreign investors selling U.S. Treasuries, asset managers’ risk-hedging, and hedge funds’ de-leveraging. This hurt fixed-income returns as bond prices declined.
- The Bloomberg Global Aggregate Bond Index, which includes U.S. and international bonds, fell 0.9% this week but has returned more than 3.3% year-to-date.
- Infrastructure investments, which can serve as a hedge against inflation, gained 1.1% this week. They have contributed meaningfully to portfolio performance, returning 5.5% year-to-date.
- U.S. large-cap stocks rose 5.5% this past week but remain down 8.6% year-to-date.
- U.S. small-cap stocks gained 1.8% this week and remain more sensitive to the economic cycle, with a year-to-date return of -16.0%.
- International stocks returned 1.2%, even as global economic interdependence raised concerns about spillover effects from the U.S.-China tensions. Year-to-date, international markets are up 2.5%.
Looking Ahead
As we wrote last week, we expect the new tariffs to slow U.S. economic growth modestly and temporarily raise prices on some consumer goods. However, it is important to keep several factors in mind based on what we know now:
- These tariffs are one-time price shocks, and we do not expect them to be an ongoing source of inflation.
- The global economy entered 2025 on solid footing, with healthy corporate balance sheets, manageable household debt levels, and a robust labor market.
- Bilateral negotiations may ease trade tensions in the coming months. Shifting the sourcing of goods from high-tariff to low-tariff countries could also reduce long-term inflationary pressure.
- If growth slows, fiscal stimulus and additional Fed rate cuts are likely to be considered—potentially offsetting some of the economic drag from tariffs.
Closing Thoughts
This level of market volatility and concern about an economic slowdown can be unsettling. Staying the course with patience and discipline continues to be one of the most important aspects of being a successful investor. Our clients’ portfolios have been carefully constructed with their unique goals, time horizons, and risk tolerances in mind, and they are well-diversified to weather a range of outcomes.
Previous Posts
- Our Perspective: The Recent Tariff Announcements
- Sage Insights: The First Quarter Comes to an End
- Sage Insights: Market Observations for February
Learn More About Sage
Disclosures
The information and statistics contained in this report have been obtained from sources we believe to be reliable but cannot be guaranteed. Any projections, market outlooks, or estimates in this letter are forward-looking statements and are based upon certain assumptions. Other events that were not taken into account may occur and may significantly affect the returns or performance of these investments. Any projections, outlooks, or assumptions should not be construed to be indicative of the actual events that will occur. These projections, market outlooks, or estimates are subject to change without notice. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, product, or any non-investment-related content referred to directly or indirectly in this newsletter will be profitable, equal to any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer reflect current opinions or positions. All indexes are unmanaged, and you cannot invest directly in an index. Index returns do not include fees or expenses. Actual client portfolio returns may vary due to the timing of portfolio inception and/or client-imposed restrictions or guidelines. Actual client portfolio returns would be reduced by any applicable investment advisory fees and other expenses incurred in managing an advisory account. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Sage Financial Group. To the extent that a reader has any questions regarding the applicability above to his/her situation or any specific issue discussed, he/she is encouraged to consult with the professional advisor of his/her choosing. Sage Financial Group is neither a law firm nor a certified public accounting firm, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of Sage Financial Group’s written disclosure statement discussing our advisory services and fees is available for review upon request.
