Weekly Market Update: March 24, 2025
The Federal Reserve received some positive news on the inflation front. After the February Consumer Price Index (CPI) came in cooler than expected, the Labor Department’s companion report on producer prices showed an even sharper decline in the pace of price growth at the wholesale level. Of note, the Producer Price Index (PPI) was unchanged last month after climbing 0.4% in January. Likewise, the core PPI, which excludes the energy and food components, was up just 0.2%, coming in below forecast.
The Federal Open Market Committee (FOMC) held the federal funds rate steady at its March monetary policy meeting. Although inflation eased a bit in February, the central bank is not in a rush to cut the benchmark short-term interest rate again. The Fed prefers to take a wait-and-see approach with monetary policy, as it assesses the impact of the Trump Administration’s tariffs on consumer and producer prices and the overall pace of economic growth stateside.
The uncertain fiscal policy may be taking a toll on the U.S. consumer sector. Shoppers are worried that the tariffs placed on imports will drive prices higher in the months ahead. On point, the University of Michigan’s preliminary Consumer Sentiment Survey plunged to 57.7 this month, down double digits from the February figure and the lowest reading since November of 2022. The Commerce Department reported that retail sales, after falling 1.2% in January, rose just 0.2% last month, which was well below the consensus forecast of 0.6%. If consumer spending were to sputter, the nation’s gross domestic product (GDP) would likely suffer.
Ongoing concerns about inflation and the strength of the U.S. economy have pushed gold to a record high price. The precious metal climbed above the $3,000-an-ounce mark in mid-March. Gold is viewed as a “safe-haven” asset, with demand typically increasing during periods of economic uncertainty, high inflation, or a weaker U.S. dollar.
Conclusion: Investors are nervous right now, as anxiety about tariffs and the strength of the U.S. economy build. Given this back- drop, we recommend that investors focus on the stocks of high-quality companies that have a long history of generating steady profit and cash flow growth.
Source: ValueLine.com
