Recent developments in global trade policy, particularly between the U.S. and China, have created an environment of heightened uncertainty—something we have experienced and navigated in the past. While this environment can naturally raise concerns, we want to assure you that we are closely monitoring the situation and proactively managing our response.
In times like these, clear and timely communication can become even more valuable. Over the past few weeks, we have increased the frequency of our updates and will continue to do so for the time being to provide up-to-date clarity and offer our perspective. We hope this helps you better understand what is happening.
What Happened This Week?
Tensions around tariffs remain in focus, especially between the U.S. and China, and the news flow has been steady. Below is a summary of this week’s key developments:
- Friday, April 11: The U.S. announced exemptions for electronics and computer equipment from both the new 10% blanket tariff and the 125% tariff on China. The White House subsequently clarified that these exemptions would be temporary and may expire in “a month or two.”
- Monday, April 14: It was reported that the U.S. is exploring tariff relief for imported vehicles and parts to support domestic carmakers. At the same time, new national security probes were launched into imports of pharmaceuticals and semiconductors, paving the way for new sector-specific tariffs.
- Tuesday, April 15: Additional restrictions were placed on exports of high-performance AI-related chips, including a ban on Nvidia exporting AI-enabling chips to China.
- Wednesday, April 16: Reports emerged that China had canceled orders for Boeing jets and further restricted exports of rare earth minerals. However, Chinese leaders signaled they are “open to trade talks.” The White House responded by stating that China now faces tariffs of up to 245%.
Market and Portfolio Impact
Financial markets remained relatively stable this week, despite the occurrence of major announcements and reports nearly daily. Encouragingly, several positive developments helped offset the geopolitical noise:
- Earnings Season: Early corporate results surprised to the upside, with constructive updates from Walmart, United Airlines, and big banks, including J.P. Morgan and Goldman Sachs.
- Interest Rates: During a speech in Chicago, Fed Chair Powell emphasized the need to monitor the effects of tariffs and ensure that related price increases do not create ongoing inflationary pressures, thereby conveying a wait-and-see approach before adjusting rates. Despite this statement, investors maintain confidence that rate cuts may be a tool used later this year, despite potential inflationary pressures from tariffs.
- Bond Markets: U.S. and Global taxable bonds returned 0.9% and 1.0% this week, respectively. While municipal bonds have lagged year-to-date (-1.8%), largely due to technical factors related to seasonality, taxable fixed-rate bonds have delivered positive returns overall this year.
- Infrastructure: These investments, which can help hedge against inflation, gained 3.5% this week and have contributed meaningfully to portfolio performance, returning 8.1% year-to-date.
- Equity Markets: After a rally in the week prior, this most recent week saw mixed, albeit steadier, returns than we have been experiencing recently:
- U.S. large-cap stocks fell 1.0% this week and remain down 10.0% year-to-date. AI-linked chip export restrictions negatively impacted Nvidia, a mega-cap technology company. At the same time, a handful of large companies, including United Airlines and several major banks, reported positive earnings.
- U.S. small-cap stocks rose 1.0% this week, as technology-focused trade restrictions have less impact on smaller listed companies, although they remain down 15.3% year-to-date.
- International stocks returned 4.0% for U.S. investors as the dollar continued to weaken against many major currencies. Foreign markets are up approximately 4.8% year-to-date.
Closing Thoughts
We appreciate that market volatility, concern about an economic slowdown, and portfolio performance can be unsettling and disappointing. Unfortunately, market downturns do happen frequently over time. For example, on average, 10% of corrections in U.S. stocks have occurred every two years over the last half-century. Following these corrections, 75% of the subsequent 12-month periods were positive, with an average return of 11% (source: FactSet, since 1975).
We have intentionally built our client portfolios to weather periods like this. They are diversified, aligned with each client’s financial plan, and grounded in their specific goals, time horizon, and risk tolerance.
Previous Posts
- Our Perspective: Tariff Developments Continue
- Our Perspective: The Recent Tariff Announcements
- Sage Insights: The First Quarter Comes to an End
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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.
