The week of April 7 through 11 delivered historic market volatility, as a sudden tariff reversal triggered a rollercoaster ride across US and global markets—from stocks and bonds to commodities and currencies¹. The S&P 500 started the week on shaky ground, slipping closer to bear market territory before plunging 1.6% on Tuesday in a panic-driven selloff marked by record trading volume. Then came a stunning turnaround Wednesday, with the S&P 500 soaring 9.5%—its biggest one-day jump since the financial crisis—after President Trump announced a 90-day pause on the 10% reciprocal tariffs. But the celebration didn’t last: Thursday brought another sharp drop, this time 3.5%. By Friday, markets ended on a more optimistic note, with the S&P bouncing nearly 2% to notch its best weekly gain in over a year. Behind the scenes, Treasury yields swung wildly, the dollar tumbled, and assets like oil, gold, and Bitcoin reacted to the chaos. All in all, it was a historic week of whiplash across financial markets.

Beneath the market’s turbulence, one bright spot emerged: a long-awaited dip in inflation. In March, the Consumer Price Index (CPI) fell 0.1%—its first monthly decline since 2020². Gasoline prices dropped 6.3% in March, contributing significantly to the overall CPI decline¹. However, grocery prices rose 0.5% from February, with notable increases in eggs (+5.9% month-over-month)¹. Annual inflation slowed to 2.4%, down from 2.8% in February¹. Still, experts caution that newly announced tariffs could push prices higher in the months ahead.

Against this backdrop of inflation anxiety, consumer sentiment took a sharp hit in April. The University of Michigan’s consumer sentiment index dropped to 50.8—down from 57.0 in March and the lowest reading since mid-2022². The decline was broad-based, with all demographics reporting weaker views on business conditions, personal finances, income prospects, and the job market³. Short-term inflation expectations jumped to 6.7%, the highest since 1981, while five-year expectations climbed to 4.4%². Concern about rising unemployment also grew, reaching levels not seen since 2009²—fueling fears that cracks are forming in the labor market and recession risks are mounting.

The bottom line: Amid growing economic uncertainty, the US is experiencing heightened market volatility, investor unease, and growing concerns about a potential recession. While the 90-day tariff pause may offer temporary relief, market volatility is far from over. The US tariff rate remains historically elevated at 26.25%, and higher consumer prices stemming from tariffs might not fully appear until the May CPI report. With trade tensions intensifying, market instability is likely to persist, leaving investors cautious. Moreover, uncertainty surrounding future inflation and labor market conditions could reshape expectations for the Federal Reserve, potentially altering the anticipated two rate cuts this year.

Sources:

1. https://www.wsj.com/market-data/quotes/index/SPX/historical-prices
2. Bureau of Labor Statistics, https://www.bls.gov/news.release/cpi.nr0.htm
3. University of Michigan Surveys of Consumers, http://www.sca.isr.umich.edu

CRN202804-8594490