The Week That Was - April 18th, 2025

Introduction

After last week's rollercoaster ride in the markets, this week seemed strangely tranquil. During a shortened week on Wall Street due to Good Friday, we saw much less intraday volatility in what can only be described as the dust settling from the tariff tantrums from the prior two weeks.

Let's get into it.

Stock Market Update

Despite the relative peace, we still saw markets down in the shortened trading week. The main culprit was Fed Chair Jerome Powell's speech on Wednesday when he mentioned the potential impact of tariffs could be the dreaded combination of higher prices and higher unemployment. Also known as "stagflation," persistent inflation coupled with a contracting economy is the Federal Reserve's worst nightmare.

Translation: don't expect the Fed to cut rates to save the market and/or economy if inflation is lurking around the corner.

The Dow Jones Industrial Average reminded everyone of its unique way of weighting the underlying companies on Thursday when it dropped by over 1%, while other indexes were flat or positive on the day. The thirty stocks in the Dow are weighted according to share price (instead of size), which meant that UnitedHealth Group's -22% one-day decline had an outsized influence on the index.

One of the week’s most striking stories: fixed-income funds saw their largest outflows since the pandemic panic in March 2020. Investors pulled a staggering $18 billion from bond ETFs and mutual funds over just five days. Remember stagflation from earlier? That environment would not be good for bonds with a longer time to maturity and/or those issued by companies with lower credit quality.

In potentially a sign of things to come, Nvidia announced a $5.5 billion charge tied to new export restrictions on its AI chips to China. That rattled tech investors and cast a shadow over the sector's growth story.

The Economy at a Glance

Good news: Retail sales surged 1.4% in March, which was the strongest monthly jump in over two years.

Bad news: In what can be referred to as "front-running," a big chunk of that strength came from consumers buying cars and other goods ahead of expected tariff-driven price hikes.

The job market remains stable. Initial jobless claims ticked down again last week, and continuing claims remain well within their normal range. So, no flashing red lights on the employment front yet.

Across the pond, U.K. inflation was lower for a second month, opening the door for interest rate cuts, though the Bank of England hasn't committed to anything.

Conclusion

We’re seeing a market that’s unsure whether to focus on strong consumer numbers or the growing list of economic wildcards, from rising mortgage rates (back above 7%) to the dollar losing some of its traditional “safe haven” status.

As always, the key is to stay grounded. The noise will come and go, but a well-diversified, long-term plan tends to outlast the headlines. If you’re wondering how this week’s shifts might affect your income or portfolio, let’s chat.