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US large cap stocks traded lower to start the week, then trended upward as positive trade news broke around a trade deal with the UK and developing talks with China. Despite the late week rally, US large caps posted modest losses for the week. US mid- and small caps as well as international stocks posted modest gains. Unsurprisingly, the Federal Reserve left the fed funds rate unchanged, highlighting risks of higher inflation and unemployment. Chair Powell maintained his message of waiting for more data to be available on the impacts of tariffs and other metrics before taking further action. Key economic readings related to the services sector were mixed but remained in expansion territory. The start of positive trade developments is reassuring. The US still has a healthy labor market. Despite slowing, corporate earnings are still projected to grow. Increased trade uncertainty is likely to lead to increased volatility and potentially slower economic growth in the short-term. Potential tax reform or deregulation efforts following these trade negotiations could provide stimulus to the markets.

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Last week, markets experienced a mix of positive and negative developments. U.S. equities rebounded nicely. The S&P 500 is up about 8% over the last two weeks, driven by solid first-quarter economic and earnings data. Corporate earnings growth for Q1 has been positive. About 76% of S&P 500 companies reported positive earnings surprises. However, guidance for Q2 has weakened due to uncertainty around consumer spending and trade tariffs. U.S. GDP growth turned negative in Q1, largely due to a surge in imports ahead of higher tariff rates. Despite this, the labor market appears resilient, with the unemployment rate steady at 4.2% and a positive surprise in job gains. Overall, uncertainty is still high around trade and tariff policies. As the administration softened its positions, markets have since recovered much of the ground given during early April’s selloff and volatility episode. We expect volatility to be present until more certainty around global trade policies occurs. This should provide opportunities to strategically rebalance portfolios and diversify across markets segments and asset classes.

Last week, equity and bond markets experienced a relief rally as the U.S. administration softened its stance on trade and concerns over the Fed's independence eased. This change of position from the Trump administration appears to have helped alleviate trade uncertainty and market volatility with both measures dropping sharply off their recent highs. While this is a positive shift, equity markets are still below their recent highs and likely require more concrete agreements with major countries to return to those levels. As first quarter earnings season continues corporate profits are in focus. Based on releases thus far, it appears mid-single-digit earnings growth could be achievable if the economic slowdown doesn't worsen. While the US equity market continues recovering from their recent drawdown episodes, US fixed income and international equities continue to deliver positive returns on a year-to-date basis. This highlights the importance of maintaining diversification across markets segments and asset classes when constructing and rebalancing portfolios.

Last week, stock markets couldn’t keep the positive momentum and experienced a modest decline, with the S&P 500 down 1.5% and the Nasdaq dropping around 2.6%. This was driven by uncertainty surrounding tariffs, particularly new export restrictions on semiconductors to China, which affected major U.S. semiconductor companies like NVIDIA. On the positive side, the bond market functioned more orderly, with government bond yields moving lower and the U.S. Aggregate bond index climbing about 1% for the week. The broader markets continue to be influenced by the tariff narrative. Given the increased uncertainty still present in the market, it is important to maintain discipline, ensure portfolio allocations are rebalanced to appropriate ranges and well-diversified. When possible, establish and maintain an emergency cash reserve to help weather any future volatility.

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