Below are the economic and market highlights for the week:
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Consumer prices fell for the first time since 2020. However, the inflation relief could be short-lived as tariffs threaten to reignite inflation. The Consumer Price Index (CPI) index fell -0.10% in March, helped by falling oil prices and lower airfares. That helped bring down the 12-month increase in consumer prices to 2.40% from 2.80%, matching a post pandemic low. Core CPI which excludes volatile food and energy was also muted in March, rising 0.10% for its smallest increase in nine months. On a twelve months basis, the core rate decelerated to 2.80% from 3.10%. That was its lowest level in four years and continues to inch closer to the Fed’s 2.00% target level. Normally, the report would have sparked a large rally on hopes the Fed could be more accommodative, but with tariffs having been enacted, the outlook for GDP and inflation remains cloudy. Friday’s consumer sentiment report plunged to 50.8 from 57 just last month–its largest monthly decline since 2009 and lowest overall level since 2022. Within the report, consumer’s expectation for inflation in the year ahead spiked to 6.7%, which is the highest reading since 1981. Forward expectations are considered the feedstock for actual inflation, which is something the Fed is acutely sensitive towards.
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The Fed’s March FOMC meeting minutes noted a number of risks ahead for the U.S. economy. Central bank officials highlighted signs of stagflation, characterized by rising inflation and slowing growth. They also noted higher-than-expected inflation data early in the year, with reports of cost increases, possibly linked to the anticipation of tariffs. Household spending was also flagged as a concern as consumer spending showed signs of slowing amid weakening consumer sentiment and increased financial challenges. The Fed staff lowered their first-quarter growth forecast and adjusted their inflation projection upward for the year from 2.50% to 2.80%. These discussions occurred before the announcement of reciprocal tariffs by the Trump administration. As of April 9th, the real GDP growth rate for Q1 25 is expected to be -2.4%.
De-escalation Give Equities a Lift
It was another wild week on Wall Street as markets convulsed in anticipation of Trump’s reciprocal tariffs going into effect on Wednesday. Intraday trading throughout the week was unpredictable. False rumors of a tariff pause on Tuesday led to an explosive but short-lived rally. Wednesday started negative only to reverse course, with the Nasdaq posting its strongest daily performance since 2001 on news that Trump had agreed to a 90-day pause on most “reciprocal” tariffs. The Dow Jones surged nearly 3,000 points in response – its largest daily point gain in history. Thursday saw reality set back in, chipping away at some of the previous day’s gains, but investors managed to close out the trading week in the black on positive trade talk indicators and decent earnings news. While sentiment felt overwhelmingly negative throughout the week’s sessions, the Dow, S&P 500, and Nasdaq managed to have impressive showings, returning 4.95%, 5.7% and 7.43% respectively. The normally quite Treasury market was not without its own excitement with the 10-year treasury climbing from 4% to 4.5% in just a week as recession bets turned to stagflation concerns as tit-for-tat tariff responses between the U.S. and China spiraled higher. While markets were solidly positive for the week, it was anything but pretty and even with the full impact from Trump’s tariff package having been temporarily suspended, those that remain will still weigh heavily on the economy. This week’s de-escalation may have removed some of the immediacy and helped sentiment, but we don’t expect volatility to ease until meaningful trade deals begin to get struck. The average U.S. tariff rate now stands at 14.50%, up from 2.50% last year. To put this in some context, the average manufacturer in the U.S. has a cost of goods sold that is in the neighborhood of 55% of sales and a net profit margin of 8%. All other items held steady, the tariffs at the levels we’re now experiencing would either be expected to reduce the average manufacturer’s profit margin to 1.4%, be offset by a price increase to the consumer to preserve their margin, or some combination thereof. Breadth and time now become the critical metrics in determining the extent of the damage, and while the 90-day pause may have corralled emotions, we’d still expect markets to trade widely within a range until a series of meaningful announcements get made.
The Week Ahead
To traders’ relief, it will be a holiday shortened trading week for the Good Friday market holiday. Our next edition arrives on April 25th with the latest global PMIs, new home sales, and consumer sentiment readings.
The Olympics of Piano Comes to Texas
Every four years, some of the best young pianists from around the world participate in a months-long competition in the United States. This prestigious event is called The Van Cliburn International Piano Competition or simply The Cliburn, and it’s held in Texas. Named after the renowned pianist Harvey Lavan “Van” Cliburn, Jr., the competition was established in 1962 to honor Cliburn’s historic and “against all odds” win at the inaugural International Tchaikovsky Competition in Moscow in 1958 during the Cold War. Few, if any, expected a foreigner to claim the top prize, and it was certainly more farfetched that the winner was a young pianist from East Texas. Cliburn, who was just 23 years old at the time, delivered a stunning performance of music by beloved Russian masters, including Rachmaninoff, Tchaikovsky, and Borodin, with both technical brilliance and profound emotional depth. His performance is described as breathtaking and transformative, captivating audiences and judges alike. Cliburn impressed the Russians not only with his mastery of their renowned composers but also with his youthful charm, humility, and six-foot-four frame. After receiving an eight-minute standing ovation, he further endeared himself to the audience by playing a piano arrangement of Moscow Nights, one of Russia’s most cherished songs. This gesture, along with his heartfelt speech in Russian, demonstrated his respect and admiration for Russian culture. The event made Cliburn a world-famous cultural icon overnight and a symbol of artistic diplomacy. Cliburn landed on the cover of Time magazine and became the only classical musician to receive a ticker-tape parade in New York City. He was the first classical musician to sell a million albums. Cliburn’s performance can be viewed here.
Today, The Cliburn is considered one of the most esteemed classical music competitions in the world and the “barometer of worldwide pianistic talent.” Earlier this year, 77 pianists were selected from a pool of 340 international applicants to participate in live screening auditions at Texas Christian University (TCU) that took place last month with each pianist performing a 25-minute piece. The 30 finalists who will move forward to the official competition in May were named this week. The advancing pianists range in age from 18 to 30 and span 17 countries. The first two rounds of the 2025 competition will be held at TCU before concluding at Bass Performance Hall in Fort Worth. It seems like an endurance event for musicians with multiple rounds: a mix of solo recitals and concertos with an orchestra from May 21 to June 7. In the preliminary round, 30 competitors will perform 40-minute recitals. The quarterfinal consists of 18 competitors, also performing for 40 minutes each. The 12 semifinalists will compete in two phases: a 60-minute recital and a Mozart concerto with the Fort Worth Symphony Orchestra. The six finalists perform two concertos with the Fort Worth Symphony Orchestra.
Three winners will have their careers expertly guided, managed, and supported for three years through The Cliburn, giving emerging pianists a worldwide platform to launch their professional careers and share their artistry with audiences across the globe. Additionally, a total of $265,000 in cash will be awarded, including $100,000 for gold, $50,000 for silver, and $25,000 for the bronze medalist. The entire 2025 Cliburn Competition (May 21–June 7) will be broadcast live and available for on-demand viewing on multiple channels. Details are available at Cliburn.org.