- Markets Soar Despite Volatility: U.S. equities logged one of their best weeks in recent years, even as Treasury yields surged to multi-decade highs, reflecting inflation concerns and market fragility.
- Tariffs Fuel Market Turbulence: Rapid shifts in trade policy—including exemptions for key electronics and a temporary pause in tariffs—kept volatility elevated and the economic outlook uncertain.
- Mixed Signals on Inflation and Sentiment: Inflation reports showed cooling price pressures, but inflation expectations and economic pessimism surged, highlighting a complex and shifting macro backdrop.
Last Week in Review: A Week for the History Books
Last week brought a flurry of headline-grabbing events that could one day earn a place in financial history books. It was also one of the strongest weeks for the U.S. stock market in recent years. While the market sprinted ahead, it continues to navigate uneven terrain, with an environment still filled with market-moving developments. The weekend announcement exempting Chinese imports of phones, computers, and chips from tariffs helped set a constructive tone heading into the new week.
Trade policy remained front and center. Tariffs continue to be a primary source of market volatility, which is currently at its highest in years. Notable developments included Wednesday’s 90-day pause in reciprocal tariffs and Thursday’s retaliatory measures from China. These were followed by the latest exemption on electronics—underscoring just how fast the landscape is shifting.
Despite this uncertainty, U.S. equity markets posted one of their strongest weeks in years. Some benchmarks logged daily gains not seen in over two decades. However, many investors may not have felt that strength—perhaps due to a historic sell-off in Treasury bonds. The 10-year yield surged to 4.5%, marking at one point its worst weekly move since 2001, while 30-year yields approached 5%, echoing moves not seen since 1987. Typically, yields often rise on optimism about economic growth, but last week’s spike reflected deepening concerns over inflation and economic fragility.
Adding to the mix was a surprisingly encouraging inflation report. Both CPI and PPI came in below expectations, with Core CPI hitting a four-year low. Inflation has cooled—like a fever breaking—but we are not out of bed yet as this progress was not enough to shift market expectations for Federal Reserve policy. Why? Because tariffs have yet to fully work their way into prices, and inflation expectations—according to the University of Michigan—have jumped to their highest levels since 1981, now nearing a 7% one-year inflation expectation. Economic sentiment also weakened significantly, with job insecurity surpassing even pandemic-era levels. The consumer sentiment index dropped to its second lowest reading since records began in 1952.
Meanwhile, the U.S. dollar declined sharply, despite rising interest rates—a rare divergence. Tariff-related uncertainty and potential inflationary effects weighed heavily, pushing the greenback to a fresh three-year low.
Looking Ahead: Tariffs, Earnings, and Retail Sales
This week, tariffs and geopolitics will likely continue to dominate the headlines and drive market action. At the same time, the first quarter earnings season kicks into high gear. So far, results have been mixed, though financials surprised to the upside late last week. Still, a growing number of companies are suspending forward guidance due to elevated uncertainty.
One of the most anticipated economic data releases is March retail sales. Given the recent plunge in consumer sentiment—now pointing toward a potentially sharp economic contraction—investors will be watching closely. However, we may not see a significant impact yet. Many consumers likely pulled forward purchases ahead of anticipated tariff-related price increases. Expect a good report this week, but like last week’s inflation numbers, this may be reversed in the months ahead.
Closing Thoughts: Steady Hands in Unsteady Times
Looking ahead, we expect the market to remain sensitive to tariff headlines and macro signals. Earnings season could add another layer of clarity—or confusion. For long-term investors, this remains a time to focus on fundamentals rather than fear.
Investors should expect continued choppiness—but opportunities are forming for the patient investor. However, for long-term investors whose goals, risk tolerance, and personal circumstances remain unchanged, now is a time to recommit to timeless investment principles: stay invested, stay diversified, and stay disciplined. As always, easier said than done—but these times demand our best.
In times like these, this classic reminder remains as relevant as ever: “This too shall pass.” And indeed, it will.
if you have any questions, please don’t hesitate to reach out to us at strategists@brinkercapital.com or at rusty@orion.com. Thank you for your time and trust.