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April Economic Update

March's Market Summary

As anticipated, March proved to be a volatile month with wide-ranging and sideways markets retesting the recent highs and lows from January and February. As noted in last month’s economic update, these are characteristic movements for the market after sudden moves. In January, we saw a hard move to the upside at a historic rate, followed by February’s hard selloff which retraced the aforementioned gains.

Uncertainty is fueling volatility with relatively large daily moves as the market continues to track in the range from the past two months. The primary contributing factors for these swings are geo-political trade tensions and rising interest rates.

"Trade War" Concerns

Earlier last month, President Trump imposed tariffs on imports of steel and aluminum. In response, the Chinese government announced their plan to impose tariffs on approximately 120 American imports including automobiles, wine and fruit. China also suggested that a 25% excise tax could apply to another set of U.S. imports, including aluminum and pork. (1,2)

China stated that both nations should settle their trade differences “within a stipulated time.” It is clear that President Trump is bidding to follow through on his “America first” campaign promises. Politics aside, many on Wall Street speculate that both sides are drawing hard lines in the sand before negotiating a compromise. The proposed tariffs would be detrimental to both the American and Chinese economies if fully levied.

As controversial as free trade agreements may be, they are at the heart of today’s global economy. We expect the markets to continue on their range-bound movements as this critical political issue continues to unfold.

Market Outlook for April

Wall Street may have something to look forward to in April - a new earnings season begins in the middle of this month. In recent years, April has been a very good month for the market with the S&P 500 advancing in nine of the past ten Aprils and averaging 1.5% gain since 1950. Of course, past performance is no indication of future results, and the market is reacting strongly to the news cycle in recent weeks. In addition, a forecast from FactSet is worth noting: the stock market analytics company projects that S&P 500 firms will report an 18% increase in earnings for fiscal year 2018. If that happens, it would be the strongest annual earnings growth in eight years. (3)