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Top of Mind - Week of March 31, 2025

  • For much of the last six weeks, policy uncertainty driven by tariff rhetoric has dominated headlines, shaping the market narrative. 
     
  • Wednesday, April 2nd is the day circled on many calendars as Tariff Day, or T-Day, in which the administration is set to announce a litany of new tariffs on imported goods.
     
  • The lack of clarity and fluid nature of the tariffs that have already been declared, delayed, and/or withdrawn suggests that Wednesday’s announcements will likely be a starting point for negotiations.
     
  • The current effective tariff rate, as estimated by the Bureau of Economic Analysis, is roughly 2-3%. As details and negotiations unfold, the effective tariff rate is expected to trend toward a higher level by year-end, and markets will adjust accordingly.
     
  • Once policy uncertainty peaks, we anticipate that volatility in the equity markets will begin to recede as the administration transitions focus from tariffs to deregulation and tax policy.
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Top of Mind - Week of March 24, 2025

  • Following its second meeting of 2025 on Wednesday, the Federal Reserve (Fed) held the Federal Funds Rate steady at 4.25-4.50%, as expected, adopting a cautious stance to assess the impact of tariffs on prices before delivering further rate cuts.
     
  • The Fed’s latest Summary of Economic Projections (SEP) revealed a dimmer outlook than December’s, with lower GDP growth, alongside higher inflation and higher unemployment forecasts for 2025. 
     
  • In addition, the Fed adjusted its balance sheet reduction program (quantitative tightening), reducing the monthly Treasury cap from $25 billion to $5 billion per month while maintaining a cap of $35 billion per month on mortgage-backed securities. 
     
  • The Treasury just received price-agnostic buyer signaling that they will be buying nearly $200 billion more in Treasury securities this year than previously anticipated, an incremental positive for the Treasury market that is expected to have a massive level of issuance this year. 
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Top of Mind - Week of March 17, 2025

  • On Thursday of last week, the S&P 500 officially entered correction territory, defined as a decline of 10% or more from its most recent high, in this case, since February 19th. 
     
  • Elevated policy uncertainty, driven by a persistent focus on tariffs throughout much of the past few weeks, fueled fears of a growth slowdown. With equity markets priced for perfection, it didn’t take much to send stocks lower. 
     
  • While the broad-based S&P 500 Index fell roughly 10%, many Mag-7 stocks that drove much of the returns over the last couple of years have dropped by 20% or more. 
     
  • We believe the policy uncertainty fueling this pullback will subside, and we view the recent equity market correction as encouraging long-term development. Much of the froth in the market has been re-rated lower, creating opportunities for investors. 
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Top of Mind - Week of March 10, 2025

  • The biggest political news of last week wasn’t in the US, or even tariff-related, instead it came from the off-balance sheet fiscal stimulus package proposed by the German government. 
     
  • The package marked a material shift in Germany’s approach to fiscal policy and a departure from the country’s fiscally constrained nature.
     
  • The proposed increase in fiscal spending covers both infrastructure and defense spending. While this would be a net positive for the Eurozone’s largest economy, it also has implications on the shared currency and interest rates. 
     
  • In reaction to this news, the Euro strengthened against the US dollar as interest rates in Germany leapt higher. 
     
  • For the Eurozone, this is a positive structural development for economic growth and investor sentiment has already seen an improvement, however demographic and regulatory challenges remain headwinds. 
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Top of Mind - Week of March 3, 2025

  • Tariff threats and potential Federal spending reductions fueled economic growth concerns in February, sending volatility higher and yields lower.
     
  • Bonds benefited from the fall in yields, sending the Bloomberg US Aggregate Bond Index up +2.20% for the month and +2.74% year-to-date.
     
  • With the increased volatility, US equities didn’t fair as well, falling -1.92% during the month and now up just +1.18% for the year as measured by the Russell 3000 Index.
     
  • International equities, represented by the MSCI ACWI ex-USA Index, posted a second consecutive strong month, returning +1.39% in February, extending the year-to-date return to +5.47%.
     
  • We anticipate that volatility will remain elevated as investors seek clarity on tariffs, Federal spending cuts, and sticky inflation.
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The S&P 500® Index is a large-cap market index which measures the performance of a representative sample of 500 leading companies in leading industries in the U.S.

The MSCI ACWI ex USA Index captures large and mid cap representation across 22 of 23 Developed Markets countries (excluding the US) and 23 Emerging Markets countries. With 1,843 constituents, the index covers approximately 85% of the global equity opportunity set outside the US.

The Bloomberg US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, USD-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, mortgage-backed securities, asset-backed securities, and corporate

The Magnificent Seven stocks are a group of high-performing and influential companies in the U.S. stock market: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla.

The harmonized index of consumer prices, abbreviated as HICP, is the consumer price index as it is calculated in the European Union (EU), according to a harmonized approach and a single set of definitions. It is mainly used to measure inflation.

The federal funds rate is the target interest rate range set by the Federal Open Market Committee (FOMC) for banks to lend or borrow excess reserves overnight. It influences monetary and financial conditions, short-term interest rates, and the stock market.