Inflation surprised to the downside in March, with Consumer and Producer Price indices showing a contraction of prices. Equities rallied sharply on Wednesday following news of a 90-day pause on tariffs for most countries. The move in the intermediate to long end of the yield curve is worth watching.
How Did Markets React to the Tariff Delay and Cooling Inflation?
U.S. equities rebounded sharply last week, with most of the recovery occurring on Wednesday after the U.S. announced a 90-day postponement of tariffs for countries that did not issue retaliatory measures. The S&P 500 jumped more than 9% on the day. However, emerging markets lagged—China, which remains in a trade standoff with the U.S., continues to weigh on the MSCI Emerging Markets Index.
Fixed Income Reaction
The shift in tariff policy sparked a move out of bonds and into equities. Still, a steepening yield curve emerged by week's end, particularly on the long end. This is worth monitoring, as it can influence sectors like housing.
What Key Economic Data Was Released Last Week?
NFIB Small Business Optimism Index
Small business sentiment declined more than expected. Business owners pointed to policy uncertainty, taxes, and labor quality as key concerns.
- Expected: 98.4
- Prior Month: 100.7
- Actual: 97.8
Consumer Price Index – CPI
Headline and core inflation came in below expectations. Notably, headline prices fell for the month.
- Prior Monthly CPI/Core CPI: +0.2%/+0.2%
- Expected: +0.1%/+0.3%
- Actual: –0.1%/+0.1%
- Prior Year-over-Year CPI/Core CPI: +2.8%/+3.1%
- Expected: +2.5%/+3.0%
- Actual: +2.4%/+2.8%
Producer Price Index – PPI
Producer prices also declined, with both headline and core readings missing forecasts.
- Prior Monthly PPI/Core PPI: +0.0%/–0.1%
- Expected: +0.2%/+0.3%
- Actual: –0.4%/–0.1%
- Prior Year-over-Year PPI/Core PPI: +3.2%/+3.4%
- Expected: +3.3%/+3.6%
- Actual: +2.7%/+3.3%
University of Michigan Consumer Sentiment
Consumer sentiment dropped to 50.8, reflecting ongoing concerns about economic conditions.
- Expected: 53.8
- Prior: 57.0
- Actual: 50.8
What Does This Mean for Investors?
Inflation came in cooler than expected last week—an encouraging sign for markets and the Federal Reserve. At the same time, business and consumer sentiment continued to deteriorate. This combination creates a push and pull between lower pricing pressure and a cautious outlook.
The 90-day pause on tariffs was a welcome surprise and helped drive a significant mid-week rally. But with China excluded from the exemption and still engaged in tit-for-tat measures, global tensions remain a risk.
On the fixed income side, the steepening yield curve—particularly in the intermediate to long end—is worth watching. This could impact long-term borrowing, especially in interest-rate-sensitive sectors like real estate.
What to Watch This Week
This will be a shortened trading week due to the Good Friday market closure.
- Tuesday, April 15: Import Price Index for March — This data excludes tariffs but may offer insight into how exporters are adjusting pricing.
- Wednesday, April 16: March Retail Sales and April NAHB Housing Market Index — Retail sales may get a lift from auto purchases. Builder sentiment is expected to decline.
- Thursday, April 17: Housing Starts and Building Permits for March — Both are projected to decline.
Tom Hine is a CERTIFIED FINANCIAL PLANNER® professional and owner of Capital Wealth Management. With over 30 years of experience, Tom works with individuals and families on financial planning, retirement strategies, and investment management. He has a particular passion for special needs financial planning, shaped by his personal experience helping raise his sister Amy, who was born with a severe chromosomal condition. Tom understands the emotional and financial challenges that come with caring for a loved one with disabilities and helps clients navigate complex issues like preserving government benefit eligibility, coordinating Special Needs Trusts and ABLE accounts, and long-term care planning. With offices in Glastonbury and Wilton, CT, Tom serves clients across Connecticut and throughout the U.S. Schedule a complimentary introductory meeting with Tom.
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