The Pulse on the Economy and Capital Markets: April 2025

To Summarize: The “Liberation Day” tariffs announcement has pressured U.S. markets while international markets trend higher. Meanwhile, declining valuations and a slight shift down in earnings expectations are driving market performance. The increased average effective tariff rate of 22% and the drop in GDP are fueling recessions concerns around stagflation. 

The big takeaway – If trade tensions are resolved soon, has the U.S. business leadership been temporarily challenged or has the business environment structurally changed?  

In the Markets: Since “Liberation Day,” the U.S. markets continue to feel the pressure and equities and bonds have sold off pushing them into further losses this year. In contrast, international markets are trending higher year-to-date with almost a 20-percentage point difference between the Nasdaq and Developed International Markets. The current lack of clarity is causing paralyzing decision-making for investors who are left wondering if the trade tensions subside soon, does this become a temporary blip or more of a structural change?

Declining Valuations & Earnings Report: Recent market performance has been driven by declining valuations, not lower earnings. Valuations are getting hit as the Magnificent 7 and Nasdaq have dropped sharply this year. While first quarter earnings are consistent with prior quarters, a slight shift in quiet misses are climbing as analysts are reducing earnings estimates due to recent tariff activity.

Recessions Concerns Around Stagflation: With the new average effective tariff rate of 22%, a potential drop in GDP has fueled concerns around stagflation. However, credit markets are currently at risk as long term averages are signaling a potential mild recession. Despite consumer spending surprisingly increasing, consumer sentiment has plummeted across income levels and CEOs are even losing confidence in the economy.

Top Headlines: We’re reading about how businesses are already trying to pass tariff costs onto customers; mitigating tariffs on using bonded warehouses and foreign trade zones; business conditions at architecture firms remained soft in March pointing towards construction weakness; and how U.S. industrial market absorption and leasing improved in the first quarter despite headwinds.  

Related resources:

• Tariffs: Businesses are already trying to pass tariff costs onto customers, Fed report says
• Tariffs: Migrating tariff impacts with bonded warehouses and foreign trade zones (FTZs)
• Construction: ABI March 2025: Business conditions at architecture firms soften further
• Commercial Real Estate: U.S. Industrial Market Dynamics, Q1 2025

Disclosures 

Investment advisory services are offered by Aprio Wealth Management, LLC, a Securities and Exchange Commission Registered Investment Advisor. Opinions expressed are as of the publication date and subject to change without notice. Aprio Wealth Management, LLC shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, the information, data, analyses or opinions contained herein or their use, which do not constitute investment advice, are provided as of the date written, are provided solely for informational purposes and therefore are not an offer to buy or sell a security. This commentary is for informational purposes only and has not been tailored to suit any individual. References to specific securities or investment options should not be considered an offer to purchase or sell that specific investment.   

This commentary contains certain forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially and/or substantially from any future results, performance or achievements expressed or implied by those projected in the forward-looking statements for any reason. No graph, chart, or formula in this presentation can be used in and of itself to determine which securities to buy or sell, when to buy or sell securities, whether to invest using this investment strategy, or whether to engage Aprio Wealth Management, LLC’s investment advisory services.  

Investments in securities are subject to investment risk, including possible loss of principal. Prices of securities may fluctuate from time to time and may even become valueless. Any securities mentioned in this commentary are not FDIC-insured, may lose value, and are not guaranteed by a bank or other financial institution. Before making any investment decision, investors should read and consider all the relevant investment product information. Investors should seriously consider if the investment is suitable for them by referencing their own financial position, investment objectives, and risk profile before making any investment decision. There can be no assurance that any financial strategy will be successful.  

Certain investor qualifications may apply. Definitions for Qualified Purchaser, Qualified Client and Accredited Investor can be found from multiple sources online or in the SEC’s glossary found here https://www.sec.gov/education/glossary/jargon-z#Q