Market Update: March 3, 2025
Economic data included U.S. GDP for Q4-2024 coming in unchanged, but Q1 expectations were revised downward. Personal income and spending were strong, while PCE inflation continued to decelerate. Housing data was mixed with home prices continuing to rise, although at a slower pace, and new home sales fell sharply. Consumer confidence continued to show lackluster results.
Equities were mixed, with U.S. value and U.K. outperforming, and negative results elsewhere. U.S. bonds fared positively as interest rates declined along with inflation and some fears about growth. Commodities fell back across the board, along with a stronger U.S. dollar.
U.S. stocks saw a back-and-forth week, highlighted by news clips and worries about potential tariffs and mixed economic data. By the end of the week, the President’s confirmation that tariffs on Canada and Mexico are set to take effect next week, along with a vow to double tariffs on China, resulted in weaker market sentiment. By the end of Friday an apparent chaotic meeting between President Trump and Ukrainian President Zelensky, set up as a potential deal for U.S. reconstruction aid in return for natural resources, left more uncertainty about near-term European activity.
Sector results were also mixed, with gains of at least a percent in the ‘value’ areas of financials, health care, industrials, and consumer staples. Technology was the laggard, down -4% upon a negative response to NVIDIA’s fairly decent revenue and earnings report, with the narrative closely watched for any deviations in AI hardware demand trends. Real estate also gained several percent for the week, along with the fall in interest rates.
Foreign stocks were mixed, with gains in the U.K. offsetting declines in Japan and the emerging markets. Much of this was due to positive local results that were negatively offset by a roughly 1% rise in the U.S. dollar. Most recently, European earnings have improved somewhat in addition to specific strength from local defense companies assumed to benefit under greater demanded spending and lessened U.S. support. Over the last few weeks, European equities have experienced among their strongest levels of inflows in the last five years, with rising hopes for a Ukraine/Russia peace deal. Emerging markets continued to be plagued by doubt about potential impacts of U.S. tariffs, with additional potential tariffs on China announced, with most key countries in the EM index down 3-5% for the week.
Bonds saw gains of over a percent in the U.S. as longer-term interest rates pulled back upon signs of some inflation and economic softening. Accordingly, governments and investment-grade corporates outperformed high yield and bank loans. Foreign developed market bonds lost ground upon a stronger dollar, while emerging market debt was mixed.
Commodities were down across the board last week, following the dollar’s strength and some concerns over potential tariff impacts on trade and specific commodity products to be determined. Agriculture and precious metals suffered the strongest declines. Crude oil fell nearly a percent last week to just under $70/barrel, with supply and demand factors remaining in a relative balance. Natural gas prices fell -7% along with warmer temperatures across the country.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.