Weekly Market Update: March 31, 2025
The Federal Reserve is taking a wait-and-see approach on the monetary policy front. After cutting the federal funds rate by a full percentage point last fall, the central bank kept the benchmark rate steady at the first two Federal Open Market Committee (FOMC) meetings of 2025. The lead bank is likely to maintain this stance over the next few months, as it assesses the impact of the Trump Administration’s tariff policies on the pace of price growth and the overall health of the U.S. economy.
The central bank, though, is still expected to lower interest rates later this year. The bank’s “dot plot,” which tracks where the 19 FOMC members believe the federal funds rates will be in the future, suggests two reductions in 2025. Although it still needs to bring inflation closer to the bank’s target rate of 2%, which may be made more difficult by President Trump’s tariffs, the Fed seeks to accomplish this task without pushing the economy into recession. At the March FOMC meeting, the central bank reduced its 2025 GDP forecast from 2.1% to 1.7%, owing to tariff worries.
The health of the U.S. consumer remains in focus. That is because personal consumption has powered the multiyear economic expansion. Here, sentiment data are showing signs of fatigue. The Conference Board’s Consumer Confidence Index fell to 92.9 in March, the fourth-consecutive monthly decline and the weakest level since January of 2021.
Meanwhile, first-quarter earnings season is fast approaching. The consensus is forecasting high-single-digit profit growth for the period, which would mark the seventh straight quarter of earnings growth. This progress has proven supportive for equities, especially with continued concerns about near term fiscal and monetary policies. In addition, Wall Street will be paying attention to what corporate leaders are saying about tariffs and their impact on the consumer sector.
Conclusion: The mood on Wall Street is being driven by trade policy news emanating from the White House. Given this uncertain backdrop, we think investors should continue to focus on the stocks of high-quality companies that have demonstrated a history of steady earnings and cash flow growth.
Source: ValueLine.com
