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

May 1, 2025

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.

Signals from the Fed: Inflation, Growth, and What Comes Next

August 22, 2025
It was a Fed-heavy week, with three major developments that matter for markets and the economy. FOMC minutes (July 29–30) — released Wednesday (Aug. 20). The minutes reinforced a data-dependent stance : participants saw continued progress on inflation but noted that risks aren’t one-way, citing pockets of labor-market cooling and the growth impact of tighter financial conditions. Policymakers emphasized flexibility and the need to see inflation moving durably toward 2% before declaring victory. For investors, the takeaway is that the bar for rapid policy shifts remains high, but the Committee is clearly keeping both sides of the mandate in view. Weekly balance sheet (H.4.1) — released Thursday (Aug. 21). The Fed’s weekly statement showed the usual moving pieces: securities holdings, reserve balances, and program usage. While week-to-week changes can be noisy, the release remains a useful pulse on system liquidity and the runoff of the Fed’s portfolio under quantitative tightening . Markets watch aggregate reserves and Treasury General Account flows because they can nudge front-end rates and funding conditions at the margin. Jackson Hole — Chair Powell’s Friday address. At the Kansas City Fed’s annual symposium, Chair Powell underscored that policy decisions will continue to be guided by incoming data . He highlighted the balance between sustaining expansion and finishing the job on inflation , noting tariff-related price pressures and supply-chain considerations among factors being monitored. The message: no preset path, but openness to adjust as evidence accumulates. Historically, Jackson Hole is more about long-term framework and risk management than near-term moves, and that tone held this year. What it means for the days ahead Near-term market drivers will be how inflation and labor data align with the Fed’s “proceed carefully” posture. • If inflation continues to edge lower while growth holds steady, the door stays open to gradual policy easing later this year. • If price pressures re-accelerate—or if hiring slows more sharply than expected—the Fed may extend its wait-and-see approach. Liquidity dynamics from the Fed’s balance sheet runoff will remain a background factor , but the central story is still inflation’s glide path and the durability of demand . Investors should expect choppy trading around key data releases , with markets pricing probabilities rather than certainties. As always, we welcome your questions and are here to support you . At the heart of everything we do is our commitment to “ Wealth Management for Life ”—providing enduring guidance for you and your family’s financial success.

Fed Moves and Market Trends | Affinity Capital

August 6, 2025
Markets entered the week with a boost of optimism, fueled by softer labor data and growing chatter that the Federal Reserve might be leaning toward a rate cut this fall. But that optimism didn’t last long . As the week unfolded, economic uncertainty returned to center stage: fresh concerns about tariffs, underwhelming corporate earnings in some sectors, and signs of consumer fatigue in key parts of the economy tempered the early enthusiasm.

Weekly Market Update: Stability Amid Data and Tariff Jitters | Affinity Capital

July 17, 2025
This week’s stock markets were marked by tight trading ranges, record-setting highs in tech, and a backdrop of macro uncertainty. The S&P 500 (through SPY), Nasdaq (QQQ), and Dow (DIA) eked out modest gains, shrugging off headline volatility tied to Fed independence concerns and escalating tariff threats.