The latest on markets, the economy, Fed policy and tariffs.
My name is Michelle Knight, and I am the pathetic owner of an iPhone 11. It has a maximum battery life of only 72% and falling, and its protective case only narrowly hides the damage from the time I dropped the phone on the floor carrying four iced coffees out of Dunkin’ Donuts while trying to multitask.
Buying a new iPhone in 2025 is like buying a car. It requires maximum concentration, as the 20-something salesperson dolefully stares at me, after I once again ask him to please explain the difference between a Plus, a Pro or a Pro Max. I shrink from the thought of the demoralizing questions he will pose, like when was the last time I backed up to the cloud, or if I would like Apple One, and whether I will subscribe to Ultimate Unlimited or Unlimited Plus, and did I want to add 5G Play More?
But as my 13-year-old son Teddy solemnly warned me this week, the time has come to get a replacement while tariffs on electronics, including smartphones and laptops, are paused. Teddy joins the ranks of other consumers who rushed to make purchases in March, particularly large purchases, ahead of tariffs. Domestic retail spending surged in the month by 1.4% after a rocky start to the year, marking the largest monthly increase since January 2023. Year-over-year, retail sales climbed 4.6%, thanks to a huge burst in sales of car and automotive parts, building materials, electronics and sporting goods. It showed consumers were rushing to ramp up spending ahead of the full effect of President Trump’s levies.
While this pull-forward of demand is positive in the short-term, the long-term outlook continues to deteriorate thanks to tariff uncertainty and lack of progress on any other market-boosting initiatives like a tax bill or declining interest rates. Federal Reserve Chair Jay Powell noted in a speech yesterday that data suggests economic growth slowed in the first quarter. He said recent strong imports might mean businesses were trying to get ahead of tariffs and we are likely looking at lower future demand.
“The level of the tariff increases announced so far is significantly larger than anticipated,” Powell said in published remarks of his speech. “The same is likely to be true of the economic effects, which will include higher inflation and slower growth.”
Asked after the speech if there could be a “Fed put” (in essence, will the Fed step in to help the market if stocks continue falling?), Powell replied simply, “No.”
Trump responded with a post on Truth Social this morning calling him “Too Late Powell” and writing, “Powell’s termination cannot come fast enough!” in an apparent reference to the end of Powell’s term in May 2026.
Other economic data this week matched Powell’s dismal outlook, as March industrial production fell 0.3% month-over-month from February and the New York Fed services purchasing managers’ index, a measure of business conditions, slipped. The latest Atlanta Fed GDPNow model for first quarter GDP growth is tracking at -2.2%. Reports on Thursday morning showed that housing starts declined by the most in a year as weak demand from high prices and mortgage rates stymied activity in single-family home construction. Building permits were higher, on strength in the multi-family housing segment. In a piece of encouraging news, weekly jobless claims dipped slightly, showing the labor market remains firm despite the chaos.
Notably, European Central Bank President Christine Lagarde announced their decision to cut interest rates by 25 basis points, with a policy statement that noted the “outlook for growth has deteriorated owing to rising trade tensions.”
Markets lost further ground this week, as technology companies like Nvidia and AMD announced large hits that reflect the Trump administration’s new special licensing requirements for exporting artificial intelligence chips to China. The sector is already struggling with China’s retaliatory tariffs and pressure from the Trump administration to bring some manufacturing home, a costly endeavor.
Skeptical analysts are reducing earnings expectations as they consider the cumulative impact of tariff charges, the cost of repatriation of manufacturing and the reality of lower-than-expected orders. This point was punctuated by chipmaker ASML’s disappointing report showing a miss of $1 billion in net bookings.
At least we have Netflix: The streaming giant is reporting earnings Thursday and is bolstered by subscription-based revenue and a seemingly unstoppable line-up of hits. In contrast, UnitedHealth released a terrible earnings report, resulting from rising care activity in its Medicare Advantage business and from Medicare funding reductions.
As I have connected with many of you in the wake of recent market turmoil, I am grateful for how you’ve shown fortitude in our work combining financial planning and diversified asset allocation, which is designed for moments like these. I am equally grateful for the thought-provoking questions you pose to me. The theme that keeps coming up is, “are we moving into a new world order that is more than just protectionist? Are we weaponizing our interdependence? And as interconnected as we are—and thus vulnerable to each other for crises from pandemics to climate change to financial contagion—what kind of future does that imply?”
In an interview with The Financial Times on Wednesday, JPMorgan CEO Jamie Dimon expressed his fear that America could surrender its economic preeminence on the world stage if Trump persists with his efforts to remold global trade more to his liking. “A lot of this uncertainty is challenging that a little bit,” the banker said of the country’s historic status as “a haven” of democracy, strength and prosperity.
“We should be careful. I don’t think anyone should assume they have a divine right to success and therefore don’t worry about it,” he continued.
With worried but hopeful hearts that we will find a way to navigate this moment, we march on. In my case, that includes a trek to the nearest Apple store with my savvy 13-year-old in tow to help me make an upgrade.
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