Tariffs, Tech, and Tumbling GDP: Navigating April's Market Crosscurrents

Ann Miller |

This week, U.S. equity markets showed unexpected resilience despite increasing signs of economic stress. The S&P 500 and Dow Jones Industrial Average extended their winning streaks to five consecutive sessions, buoyed by strong performances in industrials and consumer staples.

Late-day buying and sector-specific optimism helped offset mounting concerns around trade and macroeconomic data.

However, deeper fundamentals suggest caution. The U.S. economy contracted by 0.3% in Q1 2025, its first negative quarter in over two years. This contraction was largely driven by businesses rushing to import goods ahead of President Trump's renewed tariffs, primarily targeting imports from China, Mexico, and Canada. This pre-emptive surge in inventory distorted the balance of trade and dampened domestic demand.

  • GDP contraction driven by inventory buildup and weaker consumer spending
  • New tariffs escalating trade tensions with major partners
  • U.S. manufacturers facing rising input costs and export headwinds

Corporate earnings season reflected these uncertainties. While many technology and healthcare firms reported stronger-than-expected results, a growing number of multinationals have slashed guidance. Auto manufacturers such as General Motors, Mercedes-Benz, and Stellantis, with heavy North American cross-border supply chains, cited significant tariff-related cost increases.

  • UPS, Procter & Gamble, and PepsiCo each reported higher operational costs and trimmed forward-looking earnings projections
  • Sectors under pressure: automotive, logistics, and consumer discretionary
  • Sectors showing strength: defense, industrials, and selected large-cap tech

Abroad, China’s factory activity contracted at its fastest pace in 16 months, signaling global economic ripples from protectionist U.S. policy. Weak manufacturing demand, coupled with diminished export activity, has added to global market jitters.

  • China’s PMI fell below 48, well into contraction territory
  • Eurozone growth stagnated, particularly in Germany and Italy, reinforcing fears of broader slowdown

Looking forward, volatility is expected to continue as markets react to geopolitical developments and central bank decisions. The Federal Reserve remains in a delicate position—balancing inflation control with economic support. Though a rate cut isn’t imminent, language from recent Fed meetings suggests increased flexibility should growth continue to soften.

  • Watchlist items for investors:
    • Upcoming Fed rate decision and employment data
    • Corporate earnings revisions in Q2
    • U.S.–China and U.S.–Mexico trade negotiations

In light of these developments, we continue to recommend a thoughtful, diversified approach to portfolio management. Now more than ever, it is important to maintain appropriate liquidity, assess any concentrated exposure to sectors sensitive to global trade dynamics, and prioritize quality. Companies with strong balance sheets, consistent cash flows, and resilient business models are well-positioned to weather market volatility and deliver long-term value. For many clients, this may also be a prudent time to review allocations and rebalance where necessary to stay aligned with your goals.

As always, we’re here to help you navigate uncertainty with confidence. If you have questions about how current market conditions may affect your financial plan, we encourage you to reach out. At the heart of everything we do is our commitment to "Wealth Management for Life"—providing enduring guidance to support the long-term success and security of you and your family.