Weekly Market Update for March 21, 2025
by Jared Plotz, Director of Research
Investors don’t feel as comfortable as they felt last year, but equity markets held steady this week as participants considered whether the recent pullback was “enough.” Reflecting on the proposition of continued – albeit slower – economic and earnings growth, we view the recent pullback as a symptom of heightened uncertainty, not necessarily the underpinnings of an end to the bull market (when stocks decline 20% from their recent high). Periods of uncertainty are common features of equity markets, and 10% market corrections have happened in more than half of years, historically.
The S&P 500 climbed +0.5% this week, while the Nasdaq rose +0.2%. Meanwhile, the 10-Year Treasury yield, an interest rate indicator, closed at 4.25%, up +3 bps from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, ended down -5 bps at 4.22%.
Retail sales rose less than forecast in February (+0.2% m/m); however, the subset that feeds into U.S. GDP did much better than expected (+1.0% m/m). Regional manufacturing reports from New York and Philadelphia showed conflicting directions of activity. While February existing home sales and housing starts both saw marked improvement, homebuilder Lennar outlined a more cautious outlook for housing activity. They noted that high mortgage rates and challenges around down payments were more of a headwind than lumber inflation pushing up prices.
On Wednesday, the Federal Reserve kept their benchmark rate unchanged. Their economic forecasts were revised unfavorably (lower growth with less of a reduction in the rate of inflation). Committee members noted that uncertainty has picked up due to unknown trade impacts, which could cause further unfavorable revisions. The Fed suggested the economy remains in a good place based on “hard data,” and that they could afford being patient until greater clarity comes. They still are aiming for two rate cuts this year, two more next year, and a final cut in 2027. This algins with our view calling for a Fed Fund Rate of 3.50% in the next 24-36 months. Fixed income securities would welcome such moves.
Next week brings flash (preliminary) readings of economic activity (PMI) for March on Monday. Some additional housing data hits mid-week, along with the revised (second) estimate of Q4 GDP. Then the index for personal spending/income (PCE) will come out Friday, as will a revised measure of consumer sentiment. All these metrics feed into views of how consumer and business activity may be evolving during this time of policy uncertainty.
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