Week in Review: April 18, 2025

April 21, 2025

Recap & Commentary

Markets, as measured by the S&P 500, ended the holiday-shortened week lower. Other parts of the market, however, including small caps and international equities, enjoyed positive returns. As has been the case for the past several weeks, trade remained the primary focus for investors.

The week began with confusion as to whether smartphones, laptops, and other electronics from China would be exempt from “reciprocal” tariffs; confusion that was not fully resolved.

Later in the week, Fed Chair Jay Powell offered his thoughts on recent tariff announcements and their potential economic and market impacts. Speaking at the Economic Club of Chicago, Powell said, “The level of the tariff increases announced so far is significantly larger than anticipated. The same is likely to be true of the economic effects, which will include higher inflation and slower growth.” Delving further into the impacts on inflation, Powell stated that “Tariffs are highly likely to generate at least a temporary rise in inflation,” before adding that their “effects could also be more persistent.”

With respect to recent market volatility, Powell said markets were “doing what they’re supposed to do” given recent developments and that markets will likely see continued volatility moving forward. “It is the markets processing historically unique developments and with great uncertainty” Powell noted. Those comments disappointed investors hoping for a “Fed put” wherein the Fed might take actions to stabilize markets.

With respect to monetary policy, Powell acknowledged that the Fed may find itself in a “challenging scenario in which our dual-mandate goals are in tension.” As such, Powell suggested the Fed will likely be cautious moving forward, assessing the impact of tariffs before making any decisions on rates.

Economic Commentary

Recent headlines about souring consumer sentiment seem to have had little impact on consumers’ willingness to spend, as evidenced by March retails sales which rose 1.4% from February, the strongest monthly increase since January 2023. Sales of cars and auto parts were particularly strong, suggesting consumers rushed to make purchases of bigger-ticket items ahead of impending tariffs. Home improvement stores also saw strong sales growth.

Housing starts plunged 11.4% in March, falling to a four-month low, after rising 9.3% in February. The decline was led by a steep slowdown in single family starts which fell 14.2% from February and 9.7% from a year ago. According to the National Association of Homebuilders, the slowdown resulted from elevated mortgage rates and rising construction costs, factors that have weighed on the housing sector for the past several years. Building permits, an indicator of future building activity, rose 1.6%, exceeding economists’ forecast.

Weekly jobless claims fell 9K to 215K, a two-month low. Despite recent headlines about efforts to shrink the federal government, thus far, weekly jobless claims have not experienced any resulting upward pressure.

Of Note

The US Commerce Department announced new export controls on computer chips sold by Nvidia and AMD to China. The controls, in the form of new export licenses, will effectively halt the sale of advanced AI chips to China.

Market Indices   (As of 04/18/2025)

• New Home Sales
• Existing Home Sales
• Consumer Sentiment
• Durable Goods Orders
• Initial Jobless Claims