Markets April trading kicked off on a strong note, bolstered by the U.S. and Iran agreeing to a two-week ceasefire, pushing major indices up 3.00%+ month-to-date and driving oil prices lower. Wall Street welcomed the relief rally with hopes the conflict will soon come to an end and its back to business as usual. Main Street, however, remains cautious over higher energy prices and the ripple effects from the war despite improving investor sentiment.
Economic Highlights:
- Inflation moved higher in March, up 0.90% as supply disruptions from the Iran war pushed gasoline prices up 21.20%. The monthly rise pushed the CPI Index up 3.30% from the year ago period. Core prices, which exclude volatile food and energy, rose 0.20% for the month and were up 2.60% year-over-year (YOY). The rise in energy prices weighed heavily on topline inflation, accounting for nearly three-quarters of the headline price increase. The report did reveal that there were surprising pockets of outright price declines in medical care, personal care, and used cars and trucks during the month.
- Consumer confidence plunged to a record low in April as fears mounted over rising energy prices and the broader impact of the Iran war. The University of Michigan Consumer Sentiment survey tumbled to 47.6, down 10.70% from March. The current conditions and expectations components of the index also posted double-digit monthly declines.
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Despite the Middle East conflict, the U.S. service industry – while softening somewhat – continued to expand in March. The ISM Services Index hit 54 in March, down from the previous month’s 56.1 reading. Numbers above 50 indicate expansion while those below signal contraction. The cooler headline reading was due to slower exports and production which offset faster new order growth.
Geopolitical De-Escalation Sparks Relief Rally
The major indices are off to a strong April start as investors cheered the U.S. and Iran agreeing to a two-week ceasefire on Tuesday, optimistic the pause will open an off ramp to the Middle East conflict. The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite surged on the de-escalation news on Wednesday and again Thursday, sending them all up more than 3.00% month-to-date. As stocks rallied, WTI fell from its peak of $113 a barrel last week to under $100 a barrel at Friday’s close as investors remain hopeful the re-opening of the Strait of Hormuz will soon alleviate supply chain disruptions which have sent oil prices spiking. Traffic thus far remains at just a trickle through the waterway, however, as the U.S. and Iran still have major sticking points to address including who will control the Strait of Hormuz, the future of Iran’s nuclear enrichment capabilities, and an end to Israeli strikes on Lebanon. Delegates from the U.S. and Iran are scheduled to meet in Pakistan this weekend to hash out these differences and hopefully strike a long-lasting truce and relieve inflationary pressures in the global supply chain. This week we saw higher energy prices spill into the CPI index which hit its highest annual rate since April 2024. Higher prices at the pump and potential broader effects have consumers worried, sending the University of Michigan’s Consumer Sentiment survey to its lowest on record. However, it was not all doom and gloom for the U.S. economy in this week’s batch of economic data. Consumers saw price declines in several categories while the services economy–which accounts for over three-quarters of the U.S. economy–remained in expansion mode.
The U.S.-Iran ceasefire was the dominant headline this week. It was much welcomed as consumers and investors have been left battered by higher prices at the pump, for goods and services, and higher market volatility. De-escalation efforts have investors optimistic the conflict will soon finally be behind us and its back to business with few lingering effects. Next week brings our first read on the impact of the Middle East conflict on businesses and consumers as the Q1 earnings season kicks off with big banks and consumer giants reporting results. Better than expected results and strong guidance could keep this relief rally going while lower prices at the pump could revive consumer sentiment and spending and return the U.S. economy to firmer footing.
The Week Ahead
Key reports include wholesale prices and existing home sales.
Probity welcomes new hire: Cole Rea, CFP®
We are pleased to welcome a new member to our team, Cole Rea. Cole is a Certified Public Accountant (CPA) who brings strong accounting and tax expertise to Probity, further strengthening our ability to deliver comprehensive service and thoughtful guidance to our clients.
Cole joins us from Guidestone Financial Resources, a financial services provider, where he supported investment management and operations across a suite of mutual funds. Prior to that, Cole spent time at KPMG where he was involved in auditing engagements, assisting with the evaluation of financial statements, assessing internal controls, and helping ensure compliance with accounting standards and regulatory requirements.
Cole is a Dallas native who attended Trinity Christian Academy. He is a graduate of Texas A&M University where he earned both a BBA in accounting and a master’s in financial management. Cole is preparing to sit for the Investment Adviser Representative license (Series 65) and is working towards earning his Tax Certified Planning Professional® (TPCP®) designation. The TPCP® is a specialized license for professionals with expertise in both financial planning and tax planning.
Cole was thrilled with the opportunity to join Probity, having known the Ozanne family his entire life. He looks forward to helping clients navigate the financial decisions that matter most to them, providing clear, thoughtful guidance to support their progress toward achieving their financial goals. He is particularly excited to contribute his expertise in aligning investment and financial planning decisions with tax efficiency and long-term planning strategies. He looks forward to building meaningful relationships, growing professionally, and contributing to the firm’s success.
Outside of work, Cole enjoys spending time with friends and family, especially his parents who live just five minutes away, and he enjoys playing basketball and tennis and watching sports. Cole and his wife Olivia are expecting their first child, a boy, who is due in May, and he and Olivia are so excited to become first-time parents. While Cole is the lone Aggie in our office, he reluctantly agrees to tolerate the many SMU graduates at Probity when they cheer for their beloved Mustangs.
We are excited to have Cole on our team and look forward to the impact he will make. We hope you will join us in welcoming Cole and enjoy getting to know him over the coming weeks, months, and years as he serves the mission of Probity Advisors, Inc. to help our clients create and conserve wealth.