Last Week
The adage goes, “March comes in like a lamb and out like a lion.” For investors, March 2025 came in like a bear, or perhaps, as referenced in the 1977 Heart song, “like a barracuda.”
“And if the real thing don’t do the trick
You better make up something quick
You gonna burn, burn, burn, burn, burn to the wick
Ooh, barracuda, oh yeah”
Indeed, the market posted its worst weekly performance since early September 2024.
The tariff trick was once again the match lighting the sell-off wick. President Trump’s back-and-forth with our three largest trading partners, China, Canada, and Mexico, has created tremendous uncertainty for many U.S. companies. Meanwhile, investors are struggling to understand the rules of the reality show, otherwise known as the global economy. The economic impact of these policies showed up in January’s trade numbers, which revealed a massive spike in imports ahead of tariff implementation, resulting in the trade deficit hitting a record. One can expect first quarter GDP to take a hit, although the future of trade balances is uncertain.
The “Trump Bump” looks increasingly like a slump, as all the gains following the election have evaporated. Additionally, inflation expectations have ballooned, the labor market has weakened, and consumer sentiment is in the dumps.
The key economic data release was Friday’s February nonfarm payrolls report, which showed that job growth in the month was less than expected, as federal employment took a DOGE hit. The worst is yet to come on that front.
There was another modest Friday bounce, perhaps aided by Federal Reserve Chair Jerome Powell’s speech in which he stated that the U.S. economy continued to be “in a good place.” We think the Fed should consider where the puck is going rather than where it has been. It is more likely that the buying came in from trading firms taking their profits and covering their shorts in front of the weekend.
For the week, the S&P sank 3.1%, the Nasdaq Composite slumped 3.5%, and the Russell 2000 shed 4%. Small caps are now down 15% since their high in November, highlighting investors’ concerns over the health of the U.S. economy. Concerns over the impact of the tariffs on consumers were also the big headlines in the quarterly earnings reports from Target (TGT) and Costco (COST), leading to sharp declines in their share prices.
The bond market, the U.S. Dollar, and Crude Oil suffered losses. The yield on the 10-year Treasury rose nine basis points to 4.32%, the Dollar skidded 3.5% (a huge downward move), and Crude fell almost 4%.
The Chicago Sports Scene provided no relief from the pain. The Blackhawks have the second-worst record in the NHL. The Bulls are awful, but there are a handful of even worse teams, so we won’t even have a shot at “Capturing the Flagg” (Cooper Flagg) in the upcoming draft. Perhaps most heartbreaking was the one-point loss by the Chicago Maroons in the opening game of the Division III NCAA tournament over the weekend.
This Week
The key economic releases will be the CPI report on Wednesday and the University of Michigan Consumer Sentiment Index for March on Friday. Economists expect the CPI to remain stuck around 3%, while Consumer Sentiment has been plunging to levels last seen during the summer of 2022 when inflation was running hot and the Fed was raising rates at the fastest pace in history.
One can expect more dissonance from our nation’s capital and hope for a quick end to the tricks before we burn down the house.
The stocks mentioned above may be holdings in our mutual funds. For more information, please visit www.nsinvestfunds.com.