Weekly Market Report: March 14th, 2025
Last week’s economic calendar centered around inflation, labor market, and sentiment but it was policy chaos and uncertainty that has the market’s attention. Despite a nice bounce on Friday, the S&P 500 logged its fourth straight week of losses, officially crossing into correction territory and closing the week down 2.3%. Developed international (-0.85%) and emerging markets (+0.36%) again managed to outperform U.S. markets despite the USD (-0.12%) closing relatively flat on the week. Interest rates remained relatively unchanged while overall commodity markets ended flat with WTI oil closing at $67.18, natural gas falling 6.7%, and upside moves in both industrial and precious metals.
Market Anecdotes
- Inflation and growth impacts of tariff policies are key concerns for corporations and markets. While recession calls are growing (again), a more convincing widening of credit spreads, fall in corporate earnings, and rally in treasury markets is needed for us to join the call.
- Policy uncertainty continued last week with a barrage of POTUS announcements, roiling stock markets and taking effective tariff rates near 1930’s era Smoot-Hawley levels.
- Productive meetings between Canada and U.S. trade representatives happened on Thursday, moving both sides closer to striking a compromise.
- Economic reports on inflation, jobs, and sentiment last week included soft inflation, slowing labor markets, and deteriorating business/consumer sentiment.
- Lower oil prices, due to reduced growth expectations and increased supply will act as a tax cut to consumers and deflationary to the overall economy. The stock market would certainly applaud the former but not the latter.
- Chinese stocks staged a nice rally last week on a NFRA pledge to focus on stimulating consumer demand.
- 2025 has seen the worst USD performance since 2008, down over 3%, due to a combination of moderating growth outlooks, tariff policies, and narrowing sovereign interest rate spreads.
Constructive Asset Allocation Narratives
- Fundamentals (growth and earnings) ultimately drive markets and remain sound.
- The stock market or approval ratings will likely eventually discipline POTUS and trigger a flip from “spinach” to “candy”.
- U.S. tax cuts will help offset the growth/economic headwinds from tariffs.
- The bond market looks past deepening fiscal deficits and unfunded tax cuts.
- U.S. monetary policy leaning slightly toward the incrementally more dovish side of the ledger.
- Fiscal stimulus and structural reform may boost growth in Europe, Germany in particular.
- AI utilization may translate to material gains in global productivity and lower prices.
Cautious Asset Allocation Narratives
- Oversold conditions are mounting in U.S. equity markets but not yet at capitulation levels.
- A continuation of adverse trade policy into the summer would accelerate deterioration in sentiment and economic growth, representing a key risk to markets and the overall economy.
- Higher bond yields and tighter financial conditions in Europe pose risks to debt sustainability.
This communication is provided for informational purposes only and is not an offer, recommendation or solicitation to buy or sell any security or other investment. This communication does not constitute, nor should it be regarded as, investment research or a research report, a securities or investment recommendation, nor does it provide information reasonably sufficient upon which to base an investment decision. Additional analysis of your or your client’s specific parameters would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any client or portfolio and is not presented as suitable to any other particular client or portfolio.