WEEKLY MARKET SUMMARY

Global Equities: US equities just barely escaped a five-week losing streak after a Friday reversal from losses at the market open. The S&P 500 managed to gain 0.5% during the week, while the Nasdaq finished with a 0.2% weekly return. The Dow Jones Industrial Average lagged its large cap peers with a -1.2% weekly pullback. Small Caps underperformed on Friday but still ended the week with relative outperformance over large caps with a 0.7% gain. Developed International stocks were slightly negative with a -0.1% decline and Emerging Market stocks closed out the week unchanged.

Fixed Income: A relatively unsurprising Fed meeting kept bond yields mostly unchanged, although the Fed’s cautious stance on tariffs and inflation caused some safe-haven demand. The 10-Year Treasury yield fell slightly during the week to end at 4.26% after briefly slipping below 4.2% on Thursday. US high yield bonds bounced back after slipping below their 50-day moving average the prior week but gave back some of those gains to end the weekly session sitting right at critical technical support levels.

Commodities: US West Texas Intermediate (WTI) Crude prices ticked higher during the week despite concerns over economic growth. The average price of gas per gallon fell for the fourth straight week, with gas now below $3 in 34 states. Gold prices held gains above $3,000/oz, ending the week at $3,028.

WEEKLY ECONOMIC SUMMARY

Fed Holds Steady: The Fed kept both rates and its 2025 “Dot Plot” projection for rate cuts unchanged, citing a highly uncertain economic environment. The Fed did lean a bit dovish by slowing the pace of its balance sheet runoff, reducing the monthly cap from $25 billion to $5 billion for Treasury securities, while maintaining the $35 billion cap on agency and agency-backed MBS. During his press conference, Chairman Powell noted that the Fed is viewing tariff-induced inflation as “transitory”, while noting the difficulty in separating tariff-driven inflation from more entrenched inflationary causes. The Fed also revised its 2025 full-year GDP growth projection to 1.7% from 2.1% in December and increased its inflation forecast from 2.5% to 2.7%.

Consumers Keeping the Economy Afloat: While surveys show consumers are expressing concerns about the economy and inflation, their spending behavior doesn’t support those views, according to recent Retail Sales data. February retail sales bounced back into positive territory at +0.2% from a revised -1.2% decline in January. While consumers haven’t shown signs of tightening the purse strings, some companies are preparing for a slowdown. FedEx cut its 2025 profit forecast for the third time on Friday, citing “continued weakness and uncertainty in the US industrial economy.”

Tariff Reprieve? President Trump held firm on tariffs for most of the week, suggesting the April 2nd deadline would be celebrated as America’s “liberation day.” Yet on Friday, Trump showed signs of softening his hardline negotiations, stating there would be some “flexibility” in the reciprocal tariffs. Markets rallied on the comments, although there is still a massive degree of uncertainty over how Trump’s latest trade war will ultimately play out.

CHART OF THE WEEK

The Chart of the Week shows a 10-year view of the Federal Reserve’s balance sheet, which holds US Treasury securities, Agency mortgage-backed securities (MBS), and other assets such as foreign currencies, gold and loans to financial institutions. The Fed balance sheet ballooned massively during the 2008 financial crisis and then again during the 2020 pandemic. The Fed has stopped adding to the balance sheet and has been allowing assets to mature without being replaced, gradually reducing its balance sheet holdings. Yet despite this balance sheet runoff, the Fed still hasn’t brought assets down anywhere near the pre-pandemic levels. The Fed is now slowing the rate of the balance sheet runoff, citing concerns over the economy amidst tariff uncertainty.