March 17, 2025

Happy St. Patrick’s Day!

“This too shall pass”

Abraham Lincoln

After another tumultuous week it is wise to consider these words. But first the numbers. The S&P 500 finished the week off 1.16%, the Dow Jones Industrial average retreated 2.4%, the Nasdaq almost recovered down .48%. Internationally, the FTSE 100 was off .55% and the MSCI-EAFE almost broke even off .03% for the week. The 2-Year Treasury paid 4.023% and the 10-Year yield was 4.32%.

Picking up on last week’s theme, last week the market continued into a correction, Equity markets continued to sell off last Thursday as tariff and recession fears gripped the market. The S&P 500 shed more than 1.5% at the session’s low, setting a new low for the move and putting it on track to decline by 20% or more by the time the sell-off is through. The only good news is that the S&P 500 was long overdue for a major correction; selling off will set the market up for its next rally and move to a new all-time high. True to form, last Friday all the markets had a big day recovering a significant portion of previous losses, but not enough to turn the week positive. How long will fear grip the market is the question. Feeding that concern, naturally after a burst of optimism after Donald Trump won the presidential election has evaporated. Americans worry about rising inflation due to the president’s tariffs, a new survey shows, and they are put off by all the uncertainty in Washington.

Market Watch noted, A survey of consumer sentiment fell to a 29-month low of 57.6 in March from 64.7 in the prior month, the University of Michigan reported. The stock market has fallen sharply in response to President Trump’s tariffs and renewed talk of recession. “Many consumers cited the high level of uncertainty around policy and other economic factors,” said Joanne Hsu, director of the survey. “Frequent gyrations in economic policies make it very difficult for consumers to plan for the future, regardless of one’s policy preferences.” The gauge that measures what consumers think about the current state of the economy slid to 63.5 in March from 65.7 in the prior month. The future of the economy has become clouded by the rapid-fire actions of the Trump White House to reshape the government and the economy.

Barrons points out in an interview with Weitz funds: “Fortunately, market corrections are usually a short-term event, occurring an average of once per year and lasting three to four months,” fund managers at Weitz Investment Management, an Omaha-based firm focusing on long-term investing, said in a report. “The average market loss during a correction is about 13%, and historically, that loss has been recovered over a period of about four months. In the grand scheme of things, a correction can be little more than a blip on the radar for investors with a long-term focus.”

By the way we have endured 16 corrections in the last 10 years, and still moved ahead. My point, they are necessary and good for overall long-term market health.

Back to my point about the similarities to the early 80’s when Reagan allowed Fed Chairman Paul Volker to employed some economic pain to destroy inflation and unleash one of the biggest economic expansions in US history. President Trump and his economic team are applying the proper measures an in a relatively short time should create the desired effect, so a little patience is in order.

As an obvious side note, with this perceived widespread economic turmoil, the price of gold has soared to levels never seen before. Gold futures surpassed the $3,000 per troy ounce for the first time last week. Concerns rattled the commodity market last Friday, pushing gold to a record $3,004.86 per ounce, up 14% this year as investors seek a safe haven.

We continue to believe that fundamentally the steps this administration is taking to deal with the massive deficits, reckless spending and corruption unmasked in our federal government will be the medicine required to return the US Government to efficiencies and curtail the ridiculous and corrupt spending, requiring less taxes and wealth confiscation thereby presenting an opportunity for economy to begin renewed and invigorated strength.

With out spending too much time getting into the weeds, the “T” word the media and the globalists, who got us into this mess, will lose its power to scare the American public as the effects of these policies take hold on kitchen table issues, we are already seeing some progress on food and energy prices.

Some other calming news, The Senate voted 54-46 and passed a six-month funding bill last Friday, averting a government shutdown hours ahead of the midnight deadline. Sen. Rand Paul was the lone GOP dissenter, while nearly all Democrats opposed the bill, except for Sen. Jeanne Shaheen, with Independent Sen. Angus King voting in favor. The bill required only 51 votes. Earlier, 10 Senate Democrats, including Minority Leader Chuck Schumer, provided the necessary votes to clear a procedural hurdle, drawing condemnation from other party members. (Schumer realized that the Democrats will get blamed for the first time if they caused the shutdown). The bill is now before President Donald Trump who is expected to sign it into law.

In the bond market, Economic data largely moved sideways in February, as mentioned before, the threat of tariffs on major U.S. trading partners injected new uncertainty into inflation expectations and consumer confidence. As a result, the yield on the 10-year U.S. Treasury bond fell over 40 basis points from its intra-month high, which reinverted the yield curve between 3 months and 10 years. Credit spreads widened across risk sectors as the market assessed new downside risks to the U.S. economy. The spread move was relatively more acute in investment-grade corporates, where the market was simultaneously contending with higher-than-expected supply. The performance of municipal bonds largely kept pace with taxable alternatives until the final week of the month, when the decline in Treasury yields accelerated. The market was still able to absorb two jumbo-sized, unrated deals, which demonstrated strong demand. What all this mumbo jumbo means is bonds are doing well so far this year.

Other good news is mortgage rates dropped last week and there seems to be some daylight for home buyers going forward into the spring selling season.

Next week will likely bring more volatility to equity markets. The FOMC is slated to release its policy statement this Wednesday and is unlikely to give the market what it wants, a clear indication that rate cuts are coming. The likely scenario is that the FOMC will hold steady, citing high inflation and risks, leaving the policy in an as-is condition and market participants in wait-and-see mode. So, we are not done with our nervous markets yet.

Enjoy the wearing of the green today, and may we all avoid a market hangover.

Mike