Weekend Update, March 24th, 2025

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Index, Sector & Asset Performance

U.S. equity futures started higher during the 2nd half of last Friday and are +1% higher this Monday on signs that the April 2 round of tariffs may be more targeted than previously communicated. Last Friday, President Trump hinted that there could be “flexibility” in the coming programs.

With this late week move, the S&P500 broke its 4-week losing streak and ended up a little over +.5%. Before last week’s late rally, the S&P 500 had declined a little more than -10% peak to trough falling into correction territory. The S&P 500 last week at 5,667. The index is currently down -4.8% for the month, and has dropped -3.6% from where it ended 2024.

Investors continue to struggle with the extent of the “normal” seasonal economic slowdown, the Fed’s attempt to thread the stagflation needle, and increased risks to both growth and inflation. The biggest focus of last week was the Federal Reserve kept the federal funds rate steady at around 4.3%. The latest dot plot (which is much discussed, and history shows has little forecast ability) showed that 11 of 19 policymakers expect the central bank to cut rates at least twice this year. In December, 15 officials penciled in at least two cuts this year. The impact from tariffs led the central bank to increase its inflation forecast to 2.7% from 2.5%.

That said, behind the scenes, growth expectations look to have troughed the last 2 weeks while inflation expectations are peaking. Check out our weekly stock talk videos for the recent real-time data.

Market breadth improved dramatically last week (advance-decline readings have recently been above 90%), including back-to-back 9.5-10.5/1 advancing to declining issue days. Another follow-through day like this, over the next 10 trading days would likely trigger an extremely rare and bullish, Zweig Breadth Thrust (last discussed in October 2023). Stay tuned. Many contrary indicators have recently flashed bullish buy signals including, Merrill Lynch/BAC Cash Rule:

As well as an exceptionally quick recoil from the “American Exceptionalism” trade that was parroted in 4q24 as compiled by Merrill Lynch/BAC. the 4q24.

Year to date, growth stocks, cyclical stocks and technology stocks have led the markets losses. by \ Tariff-inflicted uncertainty has caused transport-related equities such as autos and airlines to decline. Traditional bond proxies and defensives have held up best in the selloff.

Energy and financial stocks were winners last week and were up +3.2% and +1.9%, respectively. “Boring, safety” stocks such as consumer staples had the largest drop, down -0.26%, followed by a -0.25% decline in materials, a -0.21% loss in utilities and a -0.1% decrease in communication services.

Last week’s returns compiled by FS Investments:

The 10-year yield fell -7 bps to 4.25%, while the Fed-sensitive 2-year yield fell to 3.95% with the market now pricing three rate cuts this year.

Economic Indicators and Earnings Commentary

Retail sales reports showed a partial rebound from a poor January. Housing starts beat to the upside, though a slow rise in permits suggest housing activity is not set to recover anytime soon. Fed regional business surveys say that activity is expected to decline. Initial claims rose just 223k as labor market resilience remains the key to the business cycle. On Wednesday, durable goods orders are expected to drop -0.5% in February following January’s rise. Core capital goods orders likely softened after spiking in January. On Friday, February’s personal income and spending report is released. FedEx guided their 1h25 lower on reduced TEMU shipping and pull forward of shipping volumes on pre-tariff ordering.

Global Market Trends/Commodities/Currencies

Oil rose but remained below $70/bbl since the start of March. While sanctions against Russia and Iran will tend to push prices up, a trade war and higher domestic production work to keep prices lower.

Gold rose for the 11th time in 12 weeks this year. The price of gold has risen more than +15% YTD to over $3000/oz.

Bitcoin looks to have troughed around $80k and this morning is trading near $86,500.

The U.S. dollar continues lower albeit it at a slower pace right now.

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The preceding discussion is for informational purposes only. Investing involves risk and no reference to any security listed above should be considered a buy or sell recommendation. Past performance is no guarantee of future results. Advisory services are provided through Oak Harvest Investment Services, LLC, a registered investment adviser.