Wealth Management Services

Making Sense: In Brief

The week ahead for markets and the economy

Monday, April 7, 2025

Phil: Last week, the White House surprised global markets with much steeper tariffs than we and the market consensus expected. A 10% baseline tariff went into effect over the weekend, and additional country-by-country tariffs are scheduled to go into effect this week, some of which are very steep.

All in, the average tariff rate the US charges on imports is poised to rise to its highest level in over 100 years. These new policies pose near-term risks and challenges for global markets and economies. After last week's steep drawdown in risk assets, we received a substantial number of inquiries from clients about the outlook. We want to emphasize three of our strongly held views.

One, it is time in the markets, not timing markets that pays off in the long term. It is all too common for long-term investors to attempt to time markets and miss the early days of the eventual rebound, which can permanently impair long-term portfolios.

Two, drawdowns, including steep drawdowns, do happen in equity markets and are inevitable for long-term investors in risk assets.

Three, we emphasize the importance of balanced portfolios, reflecting our view that fixed-income assets are poised to deliver healthier yield than just a few years ago.

Market drawdowns, especially very steep ones, are painful. Please do not hesitate to reach out to your First Citizens partner.

Now, let's turn to the week ahead. First quarter earnings season kicks off late in the week with bank earnings. We will be listening closely to management commentary on potential disrupted supply chains and higher import prices due to tariffs. How are management teams thinking about the tradeoff between lower margins, higher prices and uncertain demand?

The most closely watched economic release this week will be Thursday's Consumer Price Index release for March. We have seen an uptick in the pace of inflation in recent months, which puts the Federal Reserve in a difficult spot, balancing accelerating inflation with potentially slowing growth. The March inflation data will not include the major step up in tariff rates, but it could give some indication of how firms were positioning there prior to the tariff announcement.

Also on the inflation front, the Producer Price Index for March comes out on Friday. Like the CPI, we will have to wait for future months, but nonetheless, producer prices can give some indication of underlying inflation.

Also on Friday, April's University of Michigan consumer sentiment survey is released. In last month's data, consumer sentiment fell sharply while consumer inflation expectations leapt higher. Do we see a continuation of this trend this week?

So items to watch this week. One, earnings season. Two, CPI and PPI. Three, consumer sentiment.

Authors

Brent Ciliano CFA | SVP, Chief Investment Officer

Capital Management Group | First Citizens Bank

8510 Colonnade Center Drive | Raleigh, NC 27615

Brent.Ciliano@FirstCitizens.com | 919-716-2650

Phillip Neuhart | SVP, Director of Market & Economic Research

Capital Management Group | First Citizens Bank

8510 Colonnade Center Drive | Raleigh, NC 27615

Phillip.Neuhart@FirstCitizens.com | 919-716-2403

Blake Taylor | VP, Market & Economic Research Analyst

Capital Management Group | First Citizens Bank

8510 Colonnade Center Drive | Raleigh, NC 27615

Blake.Taylor@FirstCitizens.com | 919-716-7964

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