- Stocks finish mostly higher ahead of tariff announcement – U.S. equity markets finished mostly higher on Tuesday, with investors awaiting tomorrow's tariff announcement. The S&P 500 and Nasdaq posted modest gains for the day while the Dow was little changed.* At a sector level, market leadership favored growth-oriented sectors, with communication services and consumer discretionary outperforming while health care lagged, driven by weakness in shares of Johnson & Johnson. Overseas, European markets finished mostly higher following eurozone inflation data that showed the consumer price index (CPI) rose by 2.2% year-over-year in March, down from 2.3% in the prior month.* On the economic front, JOLTS job openings for February were modestly below expectations, while the ISM Manufacturing PMI fell to from 50.3 to 49 in March. Bond yields traded lower, with the 10-year Treasury yield closing the day just below the 4.2% mark.*
- All eyes on April 2 tariff announcement – Tariff uncertainty has weighed on markets since mid-February, with the S&P 500 down by roughly 8% from its all-time high.* An uncertain policy backdrop makes it difficult for corporations to plan for future hiring and capital spending, and this has caused anxiety in markets. Additionally, tariffs have the potential to raise prices and could lead to slower economic growth, which has contributed to the risk-off move over the past month as well. Tomorrow could provide more clarity into the administration's plans, with President Donald Trump expected to announce the U.S. reciprocal tariff plans. In our view, April 2 will help provide clarity into the administration's approach; however, we expect uncertainty to linger over the coming months as countries respond to the U.S. levies. For investors, volatility in markets can be uncomfortable; however, diversification has showed its merit amid the uncertainty. Despite U.S. large-cap stocks finishing lower by over 4% in the first quarter, international developed large-cap stocks gained 7% while emerging-market stocks rose by 3%.** Additionally, U.S. investment-grade bonds gained 2.8%.* Maintaining a well-diversified portfolio aligned to your goals can help investors weather periods of market volatility and benefit from rotating leadership.
- Labor-market and manufacturing data in focus – Labor-market and manufacturing data was in focus today with the release of JOLTS job openings for February and the ISM Manufacturing PMI for March. Job openings fell to 7.6 million in February and were modestly below expectations. Job openings are a helpful gauge of the demand for labor, which has been strong over the past several years. In fact, despite today's modestly lower-than-expected reading, the number of job openings modestly exceeded the number of people unemployed in February, representing healthy labor-market conditions.* On the manufacturing side, the ISM Manufacturing PMI ticked lower from 50.3 to 49 in March, snapping a streak of two consecutive months of expansion. The ISM manufacturing PMI is a diffusion index where a reading above 50 represents expansion and a reading below 50 represents a contraction in manufacturing activity. Of note, the new orders component of the index fell to 45.2, the lowest reading since May 2023 and reflecting softening demand in the manufacturing sector despite certain industries reporting an uptick in orders as customers attempt to front-run tariffs. In our view, a sustained recovery in the manufacturing sector of the U.S. economy could be supportive of economic growth throughout 2025. Clarity on tariff policy and the potential for Fed rate cuts over the course of 2025 could provide support for the sector.
Brock Weimer, CFA
Investment Strategy
Source: *FactSet
**FactSet, Total return in USD.
U.S. large-cap represented by S&P 500.
International developed large-cap represented by MSCI EAFE
Emerging-market stocks represented by MSCI EM.
U.S. investment-grade bonds represented by Bloomberg U.S. Aggregate.
- Stocks finish higher, with trade policy in focus – After opening the day sharply lower, U.S. equities finished mostly higher, as markets digested the latest trade headlines. Reports surfaced over the weekend that suggest the April 2 reciprocal-tariff announcement, which was expected to raise tariffs to match those of other countries, could be more aggressive than originally planned, which weighed on sentiment in early trading. These reports followed last week's announcement that the U.S. will tariff all autos not made in the U.S. Despite the lower open, stocks found their footing midday, with the S&P 500 and Dow both finishing higher for the day. Value-oriented sectors, such as consumer staples and utilities, were among the top performers, while growth-oriented sectors, such as technology, lagged. Bond yields finished the day lower, with the 10-year Treasury yield falling to around 4.22%.* While there are plenty of unknowns in today's market, we believe investors would be better served focusing on what's known. As we outlined in our recent Weekly Market Wrap, we believe fundamental drivers of market performance, such as healthy corporate profit growth and a strong labor market, should be supportive of the economy and markets, despite the uncertainty.
- All eyes on April 2 tariff announcement – Tariff uncertainty has weighed on markets since mid-February, with the S&P 500 down by roughly 9% from its all-time high.* An uncertain policy backdrop makes it difficult for corporations to plan for future hiring and capital spending, and this has caused anxiety in markets. Additionally, tariffs have the potential to raise prices and could lead to slower economic growth, which has contributed to the risk-off move over the past month as well. On April 2, the U.S. is expected to unveil its plans for reciprocal tariffs, which are expected to match tariffs from other countries. More recently, reports have surfaced that suggest the U.S. could take a more aggressive approach when announcing reciprocal tariffs; however, details remain uncertain. In our view, April 2 will help provide clarity into the administration's approach; however, we expect uncertainty to linger over the coming months as countries respond to the U.S. levies. For investors, volatility in markets can be uncomfortable; however, diversification has showed its merit amid the uncertainty. Despite lackluster performance thus far in U.S. equities, international developed large-cap stocks are higher by over 9% and emerging-market stocks are higher by 4.5% through Friday's close.* Additionally, U.S. investment-grade bonds have gained over 2.5% year-to-date.* Maintaining a well-diversified portfolio aligned to your goals can help investors weather periods of market volatility and benefit from rotating leadership.
- Labor-market data in focus – In addition to the April 2 tariff announcement, markets are eyeing a busy week of labor-market announcements. Tomorrow will bring JOLTS job openings for February, where expectations are for job openings to tick lower to roughly 7.7 million.* Job openings are a helpful gauge of demand for labor, which has been strong over the past several years. In fact, through January, the number of job openings modestly exceeded the number of people unemployed, representing healthy labor-market conditions.* Perhaps the most anticipated labor-market datapoint this week will be the nonfarm-payrolls report on Friday. Expectations are for nonfarm payrolls to grow by 123,000 and the unemployment rate to tick higher to 4.2%.* While labor-market conditions could cool from current levels, we believe they will remain healthy throughout 2025, providing support to economic growth.
Brock Weimer, CFA
Investment Strategy
Source: *FactSet
- Stocks move sharply lower after sentiment data falls – U.S. equity markets closed sharply lower on Friday, down 1.5% to 2.5% across the board. The S&P 500 is about 1% away from re-testing the recent lows on March 13. The volatility continues to be driven by uncertainty around tariff policy, as well as fresh sentiment data this morning, which pointed to weaker consumer confidence and higher inflation expectations. The Michigan Consumer Sentiment survey was revised lower from 57.9 to 57 in March, the lowest reading since 2022 and reflecting a softening mood from consumers amid the uncertain policy backdrop. The S&P 500 is on pace for the second month of declines and is down around 5% for the year. The technology-heavy Nasdaq, however, is down nearly 10% this year thus far, underscoring the rotation away from mega-cap technology sectors*. Markets are awaiting next week's April 2nd reciprocal tariff announcement, and many investors are likely remaining on the sidelines ahead of that news. The bond market, however, has remained a safe-haven asset class in 2025, as yields have come down from recent highs. The 10-year Treasury yield, for example, has fallen from about 4.8% in mid-January to around 4.25% today*. In our view, yields will likely remain in the 4% to 4.5% range and could move towards the lower end if the Fed embarks on rate cuts later this year.
- Personal consumption expenditure (PCE) inflation slightly hotter than expected – Headline PCE inflation for February was in-line with expectations at 2.5% year-over-year, steady versus last month's reading. Core inflation, excluding food and energy, however, was up 2.8%, above forecasts of 2.7% and last month's reading of 2.6%*. While this implies that services inflation continues to remain sticky, we have not yet seen a substantial uptick in goods inflation. This may occur in a more meaningful way as tariff policy is implemented across a variety of sectors in the goods economy. Meanwhile personal consumption rebounded somewhat in February, up 0.4% for the month after falling 0.2% the prior month. Real spending, adjusted for inflation, was up more modestly at 0.1% after falling 0.5% the month prior*. Overall, the data shows households that continue to spend despite stickier inflation trends, perhaps ahead of potential tariff policy updates.
- Tariff policy update set for April 2nd – Tariff policy, and the uncertainty around the size, scope, and timing of potential tariffs, have weighed on stock market performance. This is largely because 1) markets do not like uncertainty, and 2) the potential impacts of tariffs could mean higher prices and lower consumption overall. However, we expect to see some more clarity on tariff policy coming on April 2 as the U.S. administration unveils its reciprocal tariff policy. In our view, the administration may be taking a bifurcated approach to tariffs: certain industries will be deemed critical, including steel and aluminum (for defense), semiconductors, and perhaps autos and pharma, while reciprocal tariffs with key trading partners may be more of a basis for negotiation. Once tariff policy is outlined and in place, while there will be ongoing debate and adjustments made, consumers and corporations should have a better sense of the policy backdrop in which they are operating. And the hope is that policy focus then shifts to a more pro-growth agenda that includes tax reform and deregulation, which could support better market sentiment overall.
Mona Mahajan
Investment Strategy
Source: *FactSet
- Stocks finish modestly lower following auto tariff announcement – U.S. equity markets closed slightly lower on Thursday, as markets digested the latest round of tariff announcements. Yesterday afternoon, President Donald Trump announced a 25% tariff on all cars not made in the U.S. In response, shares of auto manufacturers such as Ford and General Motors were under pressure, however, the broader market fared better. The S&P 500 posted a 0.3% decline today but remains in positive territory for the week.* At a sector level, defensive segments outperformed with consumer staples and health care among the top performing sectors of the S&P 500.* Overseas, Asian markets were mixed overnight while European equities traded lower with the U.S. auto tariff announcement weighing on the region. On the economic front, initial jobless claims for last week were 224,000, little changed from the prior week and highlighting that labor market conditions remain healthy. Bond yields finished slightly higher with the 10-year Treasury yield rising to 4.36%.*
- Trade policy in focus – On Wednesday afternoon, President Donald Trump announced a 25% tariff on all autos not made in the U.S. The tariffs will be applied to all imported passenger vehicles as well as auto parts such as engines, transmissions, powertrain parts and electrical components.** However, importers of autos under the United States-Mexico-Canada Agreement (USMCA) will only be tariffed on the value of their non-U.S. content.** Yesterday's announcement comes ahead of the highly anticipated reciprocal tariff announcement on April 2nd. Recent commentary has suggested the U.S. administration could take a more lenient approach when applying reciprocal tariffs, perhaps allowing for negotiations, although, the final outcomes remain uncertain. In our view, trade policy is likely to remain a source of uncertainty for markets over the coming weeks and months which strengthens the case for portfolio diversification. Despite volatility in U.S. equity markets, international developed large-cap stocks have gained nearly 10% this year including dividends while U.S. investment grade bonds have gained roughly 2%.* We believe investors should view any pullbacks as an opportunity to add to quality investments in line with their goals with an emphasis on diversification.
- Despite an uncertain policy backdrop, U.S. economic data appears healthy – The third estimate for fourth quarter real GDP was revised up from 2.3% to 2.4%, driven primarily by downward revisions to imports. While GDP data is backward looking, the healthy fourth-quarter GDP reading provides evidence that the U.S. economy entered 2025 with strong momentum. Additionally, initial jobless claims for last week were 224,000, little changed from the prior week's reading of 225,000.* The current level of jobless claims is well below the 30-year median of 324,000, highlighting that labor market conditions remain broadly supportive. While tariffs and policy uncertainty could create a moderate but likely manageable headwind to economic growth, we'd reiterate this comes from a strong starting point. In our view, the U.S. economy is likely going through a mid-cycle adjustment after two years of strong economic growth, not headed for recession.
Brock Weimer, CFA
Investment Strategy
Source: *FactSet **whitehouse.gov
International developed large-cap stocks represented by MSCI EAFE Index. Return in USD.
U.S. investment-grade bonds represented by the Bloomberg U.S. Aggregate Bond Index.
- Stocks turn lower amid tech weakness – U.S equity markets closed lower on Wednesday, with the S&P 500 snapping a streak of three consecutive trading days with positive returns. Equity-market weakness was primarily concentrated in growth sectors of the market following a report that NVIDIA could face more stringent regulations in China, which weighed on sentiment for the broader technology sector. Tariff concerns resurfaced today as well, with President Donald Trump expected to announce tariffs on auto imports later this afternoon.* The tech-heavy Nasdaq was lower by 2% while the Dow fared better, closing lower by roughly 0.3%.* Overseas, markets in Asia were mostly higher overnight, while European markets were mostly lower despite a U.K. inflation reading that was below expectations.* On the economic front, durable goods orders rose by 0.9% in February, above expectations for a -1% contraction.* The stronger-than-expected February reading followed a robust 3.3% monthly gain in January, likely driven by companies attempting to front-run tariffs by placing goods orders before tariffs take effect. Bond yields finished higher, with the 10-year Treasury yield climbing to 4.35%.*
- Inflation in focus – U.S. inflation and its implications for monetary policy will be in focus for markets this week, with personal consumption expenditures (PCE) inflation out on Friday. Expectations are for headline PCE to rise by 0.3% in February and 2.5% on an annual basis. The Fed's preferred measure of inflation, core PCE, is expected to post a 0.3% gain in February and rise by 2.7% on an annual basis.* Consumer price index (CPI) and producer price index (PPI) inflation, which were released earlier this month, were both lower than expectations, helping ease market concerns after higher-than-expected inflation readings in January. While tariffs pose an upside risk to inflation over the coming months, we believe they would represent a one-time increase in the level of prices as opposed to an ongoing source of inflation that would cause long-term inflation expectations to become unanchored. This should allow policymakers to look through an increase in prices related to tariffs, although they will closely monitor market conditions to ensure that inflation expectations remain contained. Our base-case is for the Fed to lower its policy rate to between 3.5% -4% by the end of 2025. However, we expect the Fed to remain on hold in the near term as it awaits more clarity on the impact of tariffs.
- Rotation in leadership is underway – After two consecutive years of mega-cap tech dominance, equity-market leadership has rotated in the first months of 2025. Energy is the top-performing sector year-to-date, higher by nearly 10% including dividends, followed by health care, which has gained 6%, and financials, which has gained 4.7%.** Meanwhile, last year's leaders have lagged behind. Consumer discretionary is lower by roughly 9%, while information technology has declined by over 7%.** While we acknowledge there are reasons for optimism in mega-cap technology companies, the rotation in leadership beyond these names in the early part of 2025 reiterates the importance of diversification. As part of our opportunistic equity sector guidance, we recommend investors consider overweighting health care and financials while underweighting the materials and consumer staples sectors. We recommend a neutral allocation to all other sectors. We expect the broadening of leadership beyond mega-cap tech stocks to be a key theme of 2025, potentially rewarding those with well-diversified portfolios.
Brock Weimer, CFA
Investment Strategy
Source: *FactSet
**FactSet, total return through 3/25/2025. GICS sectors of the S&P 500 Index.