March 8, 2025 Market Update

The U.S. stock market experienced significant volatility this past week, primarily due to escalating trade tensions and mixed economic data.  Investor sentiment was further dampened by a decline in consumer confidence to a four-year low, raising concerns about economic growth.  Stocks saw a partial rebound on Friday following the release of a Labor Department jobs report showing the creation of 151,000 new jobs in February and comments from Federal Reserve Chair Jerome Powell suggesting no immediate changes to interest rates.  Despite the late-week recovery, the S&P 500, Dow Jones, and Nasdaq all posted weekly losses.

In contrast, the 10-year Treasury yield rose 9 basis points to 4.32%, snapping a five-week streak of continuous declines amid renewed inflation concerns.  As a result, bond prices took a modest hit with the Vanguard Total Bond Market ETF (BND) falling by 0.60%.

Despite being announced well in advance, President Trump’s tariff proposals have introduced a fresh wave of uncertainty into the markets as Mr. Market begins to price in their potential economic impact.

The primary concern is the potential for rising costs.  Tariffs can disrupt supply chains, push up consumer prices, and add to inflationary pressures.  These factors could squeeze corporate profit margins, creating headwinds for stock prices.  They have also reinforced concerns that the Federal Reserve may keep interest rates elevated.  In a speech on Friday, Federal Reserve Chairman Powell said the central bank is content to wait for more clarity on the direction of the economy before adjusting interest rates.

Our systematic, rules-based investment strategies are currently positioned in a risk-on stance, with equity allocations approximately 10% above benchmark weightings on a relative basis.  This positioning reflects market signals that until recently had been indicating favorable conditions for equities.  Those signals do not yet fully reflect the market’s recent volatility stemming from uncertainty around new tariff policies.

Many market observers still believe the tariffs hikes being proposed by President Trump are primarily a bargaining tool to pressure other countries into helping curb illegal immigration and drug trafficking, and will be rolled back once his strategic objectives are met.  If this proves to be true, the current market volatility could be short-lived, with a potential rebound once there is greater clarity.

As always, our focus remains on maintaining a disciplined, research-driven approach.  While short-term market movements may lead to periods of underperformance, history has shown that adhering to a well-defined process—rather than reacting to temporary volatility—produces better long-term outcomes.

We will continue to monitor conditions and provide updates as necessary.

That’s all for now.  Have a great weekend and invest wisely, my friends.