Equities Climb as Outlook Shifts

After weeks of selling, the Major Markets finally caught a break and all closed higher. The positive performance broke a four-week losing streak with modest gains in much of the domestic market. The style boxes showed that this reprieve wasn’t exclusive to Large Caps as there was broad buying across every segment from small to large cap and value to growth. 

The highlight of the week was the FOMC Meeting Wednesday. It was wildly expected going into this week that the FOMC would keep interest rates unchanged. The Fed had taken a much more hawkish tone following the last interest rate cut back in December.  But as last week’s meeting shows, since December, the Fed has lowered their GDP growth projections from 2.1% to 1.7%. They also reduced their Personal Consumption Expectations and raised their unemployment expectations. These assumptions would lead one to believe that the Fed might continue with a more dovish, or lower interest rate mindset. However, the official Federal Reserve Statement highlighted the current scenario with the statement, “Uncertainty around the economic outlook has increased.”

Nonetheless, the market has continued to expect two additional rate cuts in 2025 with the first cut expected in June with another possible in September. This was supported by a revision to the Dot Plot which showed rates closing 2025 slightly below 4 percent. 

 

Major Markets		YTD as of 03/21/2025
	Nasdaq
	Dow Jones Industrial
	S&P 500
	MSCI World
	MSCI EM
	Russell 2000
	Bar US Agg Bnd

S&P Sectors		YTD as of 03/21/2025
	Comm. Services
	Cons. Discretionary
	Cons. Staples
	Energy
	Financials
	Health Care
	Industrials
	Info. Technology
	Materials
	Real Estate
	Utilities
		Agent/Broker Dealer Use Only

The impact of Tariffs loomed large as the opening question following the Fed Chair’s statement was focused on what impact tariffs were having on their forecasts. To which Powell replied,  

“Okay, so how much of it is tariffs? So, let me say that it is going to be very difficult to have a precise assessment of how much of inflation is coming from tariffs and from other — and that’s already the case. You may have seen that goods inflate on moved up pretty significantly in the first two months of the year. Trying to track that back to actual tariff increases, given what was tariff and what was not, very, very challenging. So, some of it. The answer is clearly some of it, a good part of it is coming from tariffs. But we’ll be, we’ll be working, and so will other forecasters to try and find the best possible way to separate non-tariff inflation from tariff inflation.” 

Presently, the market awaits the impact that President Trump’s reciprocal tariff strategy will have when the April 2nd “Liberation Day” comes to fruition. 

https://www.federalreserve.gov/monetarypolicy/files/monetary20250319a1.pdf

https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20250319.pdf

https://www.forbes.com/sites/dereksaul/2025/03/25/trump-says-he-may-give-a-lot-of-tariff-breaks-heres-what-to-know-about-liberation-day-as-reciprocal-tariffs-loom

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