Weekly Market Update: March 10, 2025

The Trump Administration’s tariff policies have been unsettling for Wall Street, with the stock market selling off on each announcement by the President. As we went to press, tariffs on selective goods coming from Canada and Mexico, which had been delayed for a month while the nations attempted to negotiate new trade and immigration deals, were implemented. In addition to the tariffs on our North American neighbors, a series of reciprocal tariffs against several nations around the world are set to commence on April 2nd. Wall Street is worried that the tariffs, which remain fluid, will be inflationary at a time when the pace of price growth at the consumer and producer levels has reaccelerated. 

The specter of continued inflation is weighing on the consumer sector. The U.S. consumer, who has powered the nation’s economy the last few years, is starting to show signs of fatigue. Fears about higher prices have been seen in the recent sharp declines in the University of Michigan’s Consumer Sentiment Index and The Conference Board’s Consumer Confidence survey in February. On point, the Commerce Department reported that, although incomes were up, consumer spending fell 0.2% in January, marking the first decline in nearly two years. The weak spending data followed a separate report from the Commerce Department detailing a 0.9% drop in retail sales during the first month of 2025. 

Inflation remains sticky. The Personal Consumption Expenditures (PCE) Price Index and the core PCE, which excludes the food and energy components, each increased 0.3% in January, with the latter measure up from the prior month. On a 12-month basis, the PCE and core PCE climbed 2.5% and 2.6%, respectively, with both running above the Federal Reserve’s target rate of 2.0%. Given this backdrop and the uncertainty with regard to near-term fiscal policy, we expect the central bank to keep the federal funds rate steady until the second half of the year, barring an unforeseen sharp deterioration in the economy. 

Conclusion: The pickup in stock market volatility witnessed last month has continued in March, with investors facing a wall of worry, including uncertainty about fiscal and monetary policies. In this environment, we recommend a portfolio consisting mostly of high quality stocks and cash-equivalent securities. 

Source: ValueLine.com