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April 3, 2025
March market review
Dear Clients and Friends:
The equity market remained turbulent through March, with the S&P 500 dipping into correction territory – 10% off its February peak – largely spurred by tariff policy uncertainty and related fears of potentially rising inflation and dwindling growth.
"The extreme optimism that was embedded in US equity valuations at the start of the year has reversed, with sentiment turning decidedly more negative following the recent correction,” said Raymond James Chief Investment Officer Larry Adam. “However, with more attractive valuations and more reasonable expectations, equities are now better positioned to rise moving forward. The key catalyst is likely to be greater policy clarity, especially concerning tariffs, which remains elusive so far."
At its March meeting, the Federal Open Market Committee (FOMC) left target interest rates unchanged, raising inflation expectations for 2025 and lowering growth forecasts through 2027. Chairman Jerome Powell indicated that if growth falters, rate cuts would not be delayed.
Before we dive into the details of last month’s news, here’s where the major indices stand.
Tariff concerns steered the ship
One common thread was observed across the major indices through March: Tariffs were a main driver of contraction. The combination of unknowns surrounding the tariffs themselves as well as their imminent impact could be similarly seen across industry data, such as the ISM Manufacturing Index and construction spending. Tariffs also contributed to the largest US trade deficit in traded goods since at least 1992, as producers pre-stocked inventories.
Positive signs beneath the surface
Despite the fog of policy uncertainty, there are still positive factors at play. With clarity, those factors may bubble to the surface. The economy is poised to remain resilient with a healthy earnings outlook, an expected easing of Fed policy, and evidence that inflation will not likely get out of control despite remaining sticky today.
Bond rates flat as treasury nears debt limit deadline
Treasury yields were largely unmoved in March, with municipal yields edging closer to long-term averages. The larger story is the federal government’s impending inability to pay back its bills as soon as August should the current debt limit remain intact. The Treasury has resorted to creative accounting maneuvers in order to avoid breaching the $36 trillion debt ceiling. Treasury Secretary Scott Bessent assured lawmakers that the US will not default on its debt under his watch.
Have we mentioned tariffs yet?
While individual tariffs typically wouldn’t have the widespread effects we’re seeing, President Donald Trump’s trade agenda comprises multiple types of tariffs across various sectors that combine to produce the levels of volatility we observed last month. Global reciprocal tariffs, sector-specific tariffs and the rollback of exemptions on USMCA-compliant goods from Mexico and Canada are all looming threats to economic growth in the short term. Timing continues to be a source of anxious uncertainty, but the Mexico and Canada tariffs could be resolved with a claimed “victory” over border issues surrounding immigration and fentanyl.
Oil prices touch six-month lows
Some of the more encouraging economic news for consumers to come out of the month of March has been the price of oil, which touched six-month lows before slightly bouncing. Cheaper oil is making its way to the fuel pump, with energy prices posting their sixth decline in the last seven months. US market weakness related to tariffs and record EV sales in China are likely contributors. Despite the drop in the oil market, energy stocks are doing well. Of the 11 economic sectors tracked by separate S&P 500 indices, only Energy finished March in positive territory.
A historic shift for German debt policy
The big news last month among international markets was Germany’s sudden pivot away from a longstanding conservative approach to fiscal policy. The decision to reform the “debt brake,” which capped the national deficit at 0.35% of gross domestic product, passed with a two-thirds supermajority, sending waves across European financial markets already in flux over the gradual and uncertain peace process in Ukraine.
The bottom line
Turbulence is expected to continue until the markets have a chance to adjust to policy changes, which will require clarity from the administration. Time will tell if tariffs will stand as indicated, or if they will be lessened or removed amid ongoing negotiations with the countries and industries affected. Equities may continue moving sideways as the market reacts to headlines and eventually settles at a historically normal bottom for pullbacks of this nature.
We hope this update finds you well and, as always, we invite you to get in touch with us to discuss how we can help you achieve your financial goals or answer your questions.
Broadening Our Horizons - A time to recognize our individuality
Embracing diversity opens the door to new opportunities. By learning from the lived experiences of others, we can discover fresh perspectives, explore creative ideas and find new ways to solve problems. April marks Celebrate Diversity Month in the United States, and we encourage you to explore some of the ways you can get involved.
Celebrate Diversity Month started in 2004 with the idea that building a better world would require deeper understanding of cultures different from our own. Today, as multiculturalism continues to take root around the world, the idea behind the observance has remained largely the same. The importance of diversity, equity and inclusion is apparent in all aspects of our everyday lives – from more effective ideation and decision-making in the workplace to strengthening our interpersonal skills in social situations.
So, what can you do to get involved in Celebrate Diversity Month with your friends, loved ones and coworkers? First, your celebration should be done with intention. Allow us to share a few ideas:
1. Food is a universal language. We recommend trying dishes from another culture or part of the world. One option is to take your family or friends out to a new restaurant that specializes in a type of cuisine that’s new to you. If you’re feeling creative, you might even try your hand at making a meal or dessert that’s significant in a culture other than your own. You never know, stepping outside your comfort zone might mean you find a new favorite dish!
2. Representation and visibility matter. There’s an advantage to consuming diverse media, including TV, movies, books and more. With a vast array of streaming services comes a wide variety of movies and TV shows to watch. Fictional or not, hearing the stories of casts and characters that are different from our own can broaden our view of the world.
3. Consider charitable action. In just a few minutes, you can donate time, resources or funds to an organization focused on amplifying diversity initiatives in education, the arts, business or politics. Alternatively, you may actively choose to support services and businesses led by immigrants, people of color or other underrepresented groups as a means of contributing to a more diverse society.
Diversity is a vital component in helping us deepen our understanding of one another, in our personal and professional lives. We are proud to work for a firm that is committed to fostering a workplace and a culture where everyone feels welcomed, respected, and valued for who they are.
Please note that the markets will be closed on Friday, April 18th in observance of Good Friday. Our office will be closed on Friday, April 18th and Monday, April 21st for the Easter holiday. While our office is closed, you can access your account(s) online using Raymond James Client Access.
We hope Spring is blossoming in your area and you enjoy the beautiful colors!
Sincerely,
Tricia L. Tripp, CPA, CFP®
Financial Advisor
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