April 14, 2025

QuickTakes

Stocks Rise On Latest Trump Pivot

Any day with a Trump Pivot is a good day for the stock market. Shares of automakers closed higher today after President Donald Trump said he is looking to "help some of the car companies" with his 25% auto tariff (chart). The automakers "need a little bit of time" to move their production to the US, Trump said.

Tech stocks rose too after guidance on Friday from US Customs and Border Protection revealed exemptions from "reciprocal" tariffs for electronic products such as smartphones, computers, and semiconductors. The stocks were up even though President Trump and Commerce Secretary Howard Lutnick on Sunday suggested these exemptions might be only temporary (chart).

The President was asked about those temporary exemptions today. He responded, "I'm a very flexible person. I don't change my mind, but I'm flexible, and you have to be. You just can't have a wall, and you'll only go, you know, sometimes you have to go around it under it or above it."

The tech sector was also boosted by Nvidia's announcement that the company will spend up to $500 billion to build AI supercomputers in Texas. "The engines of the world's AI infrastructure are being built in the United States for the first time," Nvidia CEO Jensen Huang said in a press release. 

There wasn't much economic news today. The Federal Reserve Bank of New York reported that consumers' inflationary expectations rose to 3.6% in March, well below the 5.0% rate reported by the Consumer Sentiment Index (CSI) survey, which rose to 6.7% in April (chart).

The CSI survey seems off to us. In the past, the CSI measure of expected inflation was highly correlated with the gasoline pump price, which has been subdued lately (chart). The recent divergence clearly reflects consumers’ fears that tariffs will boost inflation. But the CSI survey seems too panicky.

Even odder is that the widely followed proxy for inflation in the 10-year TIPS market remains highly correlated with the price of a barrel of Brent crude oil, and both have been falling lately (chart). Go figure. We are thinking that inflation might not rise as much as feared in coming months.

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