Weekly Market Update – March 28, 2025

Quick Takes

• The major U.S. equity indices all declined for the week as tariff deadlines loom and economic data showed hints of inflation. The S&P 500 Index fell -1.5%, the small cap Russell 2000 Index was down -1.6%, and the tech-heavy Nasdaq Composite Index dropped -2.6%.
• Investors remain downbeat ahead of April 2, which the Trump administration has dubbed “Liberation Day,” in which President Trump is expected to announce details on his reciprocal tariffs that go into effect that day. Also weighing on markets was the Fed’s preferred measure of inflation, Core PCE, which came in a bit hotter than expected.
• Bond yields were mixed for the week with the 2-Year U.S. Treasury down -4 basis points, the 10-year Treasury unchanged, and 30-year Treasury up +4 basis points. That left the Bloomberg U.S. Aggregate Bond Index barely negative with a -0.04% decline. 

Source: Bloomberg. Data as of March 28, 2025.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

Stocks fall on trade policy, growth, and inflation concerns

The Trump administration’s continuing tariff threats, combined with hints of inflationary pressures in economic reports had investors hitting the “sell” button last week. The S&P 500 Index, the small-cap Russell 2000 Index and tech-dominated Nasdaq Composite Index all suffered losses last week and are now down seven of the past nine weeks. With just one trading session left in the month, all three indexes are likely to be down for two consecutive months and setting up to complete the worst quarter since 2022 as well. For the week the S&P 500 was down -1.5%, the Russell 2000 fell -1.6%, and the Nasdaq dropped -2.6%. 

Tariffs continued to dominate the headlines as markets gyrate ahead of April 2, which the Trump administration has dubbed “Liberation Day” in which President Trump is expected to announce details on his reciprocal tariffs that go into effect that day, as well as the 25% tariff on imported automobiles announced last week. Beyond the tariff turbulence, the key Core Personal Consumption Expenditures (PCE) Price Index inflation gauge came in a bit hotter than expected on Friday. Core PCE is the Federal Reserve’s preferred measure of inflation, and it was up +0.4% for the month of February, versus the Wall Street consensus forecast to come in at +0.3%. On an annual basis, the Core PCE Index ticked up +2.8%, versus an estimate of +2.7%.

Also weighing on the market was the weak debut of the highly anticipated CoreWeave initial public offering (IPO) on Friday. The IPO turned out to be a dud, despite weeks of hype for the artificial intelligence (AI) hyperscaler which was heavily backed by former market leader Nvidia. The IPO was significantly downsized in the final days before the IPO and the stock ended Friday flat in its first day of trading. The entire Technology sector has lagged all year and was down -3.6% last week – worst of the 11 S&P 500 sectors. The weak technology performance has helped value stocks outperform growth stocks for a sixth consecutive week.

Outside the U.S., stocks also fell but continued their relative outperformance over their U.S. counterparts. Developed market international stocks (as measured by the MSCI EAFE Index) were down -1.4% last week, the 10th consecutive week beating the S&P 500. Emerging market stocks (the MSCI Emerging Markets Index) had the week’s best equity index performance for the second straight week but were still negative with a -0.9% decline. The Stoxx Europe 600 Index, and the primary indices for France, Germany, Italy and Japan all lost ground last week. The U.K. and China were more or less flat for the week.  

Bonds were also flattish as yields were mixed across maturities. The yield for the benchmark 10-year U.S. Treasury was unchanged at 4.25% while the 2-year Treasury yield was down -4 basis points to 3.91% and the 30-Year Treasury yield was up +4 basis points to 4.63%. Bond prices and yields move in opposite directions and the Bloomberg U.S. Aggregate Bond Index was barely negative for the week with a scant -0.04% decline. Non-U.S. bonds, as measured by the Bloomberg Global Aggregate ex U.S. Bond Index, were barely up with a +0.09% rise for the week.

The Week Ahead

It will be a busy week with economic reports, with the labor market playing a big role. Investors will receive the February job openings on Tuesday, the weekly jobless claims on Thursday and then the big March employment report on Friday. This will be the first employment report to fully capture the DOGE-related government layoffs and tariff-related uncertainty that has led some companies to scale back on hiring. Other economic data coming includes the March Manufacturing PMIs from ISM and S&P Global on Tuesday, Factory Orders on Wednesday, and then the Services PMIs on Thursday. 

However, Wall Street’s focus will be squarely on April 2, a date U.S. President Donald Trump has dubbed “Liberation Day” in which he is expected to implement reciprocal tariffs, along with a 25% tariff on automobile and auto imports announced last week. The highly anticipated tariff announcements have had investors on edge and more volatility could come depending upon the details of the April 2 developments.

Only two S&P 500 companies are set to release earnings on the week: Conagra Brands and Lamb Weston Holdings on Thursday. First-quarter earnings season kicks off April 11 with JPMorgan Chase, Morgan Stanley, and Wells Fargo announcing results.

Chart of the Week

The final reading of the March University of Michigan Consumer Sentiment Index fell to a 32-month low of 57.0 from the preliminary reading of 57.9 two weeks ago, well below expectations for a 63.1 reading and down from the prior month’s 64.7. The Current Economic Conditions component increased to 63.8 from the preliminary reading of 63.5 but was down from the prior month’s 65.7. The Consumer Expectations component was down to 52.6 from the initial estimate of 54.2 and down from the prior month’s final reading of 64.0. One-year inflation expectations were increased to 5.0% from the preliminary reading of +4.9% and are up from +4.3% from the previous month. The five-year inflation expectations increased to +4.1% from the preliminary reading of +3.9% and is up from +3.5% the prior month. The bottom line from the report is that the Consumer Expectations component has dropped more than -30% since November 2024 and the decline in March cut across all demographic and political affiliations. The deteriorating expectations sank the overall index to its lowest level since November 2022 as more Americans think unemployment will rise in the year ahead and also cited concerns about personal finances, business conditions, and inflation.

Consumer Sentiment Falls to Lowest Level in Over Two Years

Housing Starts and Building Permits 3-Month Moving Average (thousands, SAAR)

Source: Trading Economics.

Did You Know?

FOUR – The S&P 500 entered “correction” territory on March 13 when it closed -10.2% below its February 19 all-time high. Of the fifty-five -10% corrections since 1952, roughly 25% have turned into -20%+ drawdowns that are usually characterized as bear markets. (Source: Bespoke)

LAG 7  – The mega-cap Magnificent 7 stocks [Alphabet (Google), Amazon, Apple, Meta Platforms (Facebook), Microsoft, Nvidia, and Tesla] entered bear market territory on March 18, with the Bloomberg “Mag 7” Index falling -20.8% from its December 17, 2024, record high. While the mega-caps Mag 7 have underperformed, the S&P 500 Equal Weight Index was down just -7.4% from its all-time high. (Source: Bloomberg)

RECORD REPURCHASES – Stock buybacks from S&P 500 companies increased +18.5% to a record annual high of $943 billion in 2024, surpassing the prior record of $923 billion in 2022. 399 S&P 500 companies executed buybacks in Q4, but the top 20 largest companies accounted for 49% of the total value. (Source: S&P Global)

This Week in History

DOW MILESTONES – 26 years ago, on March 29, 1999, the Dow Jones Industrial Average closed above 10,000 for the first time ever. The index fell to as low as 7,286 on October 9, 2002, a price decline of -37.8% from its then-record high of 11,722 on January 14, 2000. The Dow also suffered a -53.7% drawdown from October 9, 2007, to March 9, 2009, during the Global Financial Crisis. It took until January 2017 before the Dow crossed 20,000. But it only took until November 2020 to hit the 30,000 milestone and May 2024 to reach 40,000. The Dow suffered a -37.0% drawdown during the COVID pandemic in 2020 and also had a -21.9% drawdown in the bear market of 2022. As of Friday, March 28, 2025, the Dow Jones was at 41,584. Despite the four bear markets since hitting 10,000 26 years ago, the Dow has returned +65.5%, or +8.1% annually, with dividends reinvested.

Economic Review

• The preliminary “flash” S&P Global U.S. Composite Purchasing Managers Index (PMI) showed economic growth perked up in March after a sluggish January and February, rising to 53.5 from 51.6 the prior month. Wall Street was expecting a decline to 50.9. Levels above 50 indicate economic expansion, while levels below 50 indicate contraction. The Manufacturing PMI did decline, falling back into contraction territory to 49.8 from 52.7 the prior month, which was the highest level since June 2024. However, the Services PMI rebounded to 54.3 from 51.0 the prior month, where Wall Street expected it to remain. The service side of the economy — such as retailers, banks, and hospitals — employs most Americans and has driven the expansion since the pandemic. The S&P Global “flash” PMI surveys are among the first indicators of each month to give a sense of how well the U.S. economy is doing. The report showed Prices Received by manufacturers rose at the fastest rate since February 2023. The composite index of Prices Paid increased at the fastest in nearly two years, including the sharpest rise for manufacturers since August 2022. A measure of Factory production declined, and a gauge of Employment dropped for the first time since October. “Business expectations for the year ahead fell to their second lowest since October 2022 as companies grew increasingly cautious about the economic outlook,” S&P Global said.
• The Federal Reserve Bank of Chicago reported that U.S. economic activity improved in February. The Chicago Fed National Activity Index (CFNAI) dropped to +0.18 from -0.08 the prior months (which was revised down from the originally reported -0.03). That is much better than expectations for a decrease to a -0.17 reading. Readings below zero indicate below-trend-growth in the national economic activity. Three of the four broad categories of indicators used to construct the index improved from the prior month, and two were in positive territory. The Production and Income category contributed +0.19 points, down from +0.02 the prior month. The Employment, Unemployment, and Hours category contributed +0.02, down from +0.08 the prior month. The Personal Consumption and Housing category improved to -0.01 from -0.14. The Sales, Orders, and Inventories category contribution was -0.01, up from -0.04 the prior month. Overall breadth of the index was better with 47 of the 85 individual indicators making positive contributions, while 38 indicators detracted from the index and 51 components improved while 34 indicators declined. The CFNAI three-month moving average increased to +0.15 from +0.07 the month before, the highest level since April 2022. During the last 20 years, there has been a 91% correlation between the three-month index level and the quarterly change in real GDP.
• Personal Spending increased +0.4% in February, short of expectations for +0.5% but up sharply from -0.3% decrease the prior month (revised lower from -0.2% which was the first drop in 22 months). After adjusting for inflation, Real Personal Spending increased +0.1% for the month, behind expectations for +0.3% and up sharply from -0.6% the prior month (revised lower from -0.5%). The results seem to corroborate suspicions the poor January results were impacted by a nationwide cold snap. Meanwhile, Personal Income rose +0.8%, well above expectations for +0.4% and up from a +0.7% increase the prior month (revised lower from the originally reported +0.9%). Real Disposable Income was up 0.5% month-over-month, and up +1.8% year-over-year. The Personal Savings Rate rose to +4.6% from +4.3%. The bottom line is that there was a noticeable improvement in incomes and spending rebounded nicely from a very weak January. 
• The cost of goods and services rose for the fifth straight month in January, with the Personal Consumption Expenditure (PCE) Deflator (aka PCE Price Index) up +0.3% for the third straight month, matching expectations. On a year-over-year basis, the PCE Price Index was up +2.5%, also in line with expectations and unchanged from the prior month. The Core PCE Price Index, which excludes food and energy and is the Fed’s preferred inflation gauge, rose by +0.4% for the month, a tick higher than expectations for +0.3% where it was the prior month (unrevised). Year-over-year, the Core-PCE Price Index was up +2.8%, versus a +2.7% annual rate the prior month which is where it was expected to stay. 
• The U.S. economy grew slightly faster than previously reported in the final three months of 2024. The third and final estimate of real Gross Domestic Product (GDP) for Q4 2024 was revised higher to +2.4% from the previous estimate of +2.3%, which is where Wall Street expected it to stay. Even better, inflation was a bit lighter than the previous estimate. The GDP Price Index (GDP Price Deflator) came in at +2.3%, down a tick from the prior estimate of +2.4%, where it was expected to remain. Consumer spending, the main engine of the economy, rose less than expected with Personal Consumption Expenditures (PCE) reported at a +4.0% annual pace, down from the prior estimate of +4.2% where Wall Street consensus estimates expected it to stay. That is up from +3.7% in the third quarter and contributed 2.70 percentage points to the Q4 real GDP. At +3.1%, Government Spending was also higher than the previous estimate of +2.9% but was down from a 5.1% annual rate in the third quarter. Government spending contributed 0.52 percentage points to Q4 GDP versus 0.86 percentage points in Q3. The Personal Saving Rate slipped to 3.7% from 3.8% in the prior estimate and 4.1% in the third quarter.
• The Commerce Department reported Durable Goods Orders for long-lasting items such as televisions, appliances and transportation equipment rose +0.9% in February, well above expectations for -1.0% decline but below the prior month’s +3.8% rise, revised up from +3.2%. Durable Goods Orders Excluding Transportation were up +0.7%, beating expectations for +0.2% and up from the prior month’s +0.1%, which was revised down from 0.0%. The important Core Capital Goods Orders (capital goods excluding volatile sectors like transportation and defense), a proxy for business spending, was down -0.03%, badly missing expectations for +0.2%. That follows a +0.9% rise the prior month (revised higher from +0.8%). Core Capital Goods Shipments, which are factored into GDP, rose +0.9%, beating expectations for a +0.2% increase and up from -0.2% the month before (revised up from -0.3%).  
• The Conference Board’s Consumer Confidence Index retreated to a four-year low of 92.9 in March, down from 100.1 the prior month (which was revised up from 98.3). That was below Wall Street expectations for a decline to 94.0 and the fourth decline in a row. The Present Situation gauge slipped to 134.5 from 138.1 (which was revised higher from the originally reported 136.5). The Expectations gauge — which reflects consumers’ six-month outlook — dropped to 65.2 from 74.8 the prior month (revised higher from 72.9), the lowest level in more than 12 years. Sustained levels below 80 on the expectations index can signal a recession within the next year. In good times, the index can top 120 or more. A key takeaway is that inflation and interest rate expectations rose further as consumers grow anxious about President Donald Trump’s tariffs. 
• The Richmond Fed Manufacturing Survey fell to -4 in March after rising to +6 the prior month, which was the first expansion reading following fifteen consecutive months of negative readings. The disappointing March result was far below expectations for an improvement to a +8 reading. All three component indexes declined and are all in contraction territory. The Shipments component fell sharply to -7 from +12. The New Orders slipped to -4 from 0.0 the prior month. The Employment index decreased to -1 from +9. The future indexes for activity six months from now were lower as well. The Richmond Fed Service Sector Survey decreased to -14 from +1 the prior month.
• The Kansas City Fed Manufacturing Survey improved but stayed negative at -2 in March from the unrevised -5 reading the prior month which was what expectations were. Current business conditions were mixed. The Production index improved to +1 from -13 the prior month. New Orders ticked down to -12 from -7. Employment-related indexes improved with the Number of Employees improving to -4 from -14 and the Average Employee Workweek rising to +6 from -9. The Prices Paid index increased to +42 from +38. The Kansas City Fed Service Sector Outlook Survey slipped to 0 from +2 the prior month (unrevised).
• The Commerce Department reported New Home Sales rose +1.8% in February to a rate of 676,000 units after the prior month’s -6.9% decrease, or a 664,000 units annual rate, revised up from -10.5% and 657,000 units. That was shy of expectations for a +3.5% increase to a 680,000 unit annual rate. New Home Sales data tend to be volatile month-on-month and are often revised. New home sales remain far below the recent peak of over 1 million units in August 2020. Year-over-year, sales of new homes were up +5.1% following a flat annual rate the prior month (revised up from -1.1%). By region, sales in the South were up +6.6% for the month and +19.0% for the trailing year. In the Northeast sales were down -21.4% for the month and -48.8% for the year. The West was down -13.6% for the month and -11.4% for the year. The Midwest saw sales rise +20.6% for the month and +2.7% for the year. The South was down -148% for the month and up +6.8% for the year. The Median New Home Price decreased to $414,500 from $427,000 the prior month. The months of supply at the current rate of sales was 8.9, down from 9.0 the prior month. 
• The National Association of Realtors (NAR) reported that Pending Home Sales rose +2.0% in February after last month’s -4.6% drop (unrevised), which was ahead of Wall Street expectations for a +1.0% increase. Year-over-year sales were down -7.2%, below the -5.2% fall the prior month (unrevised) and short of the -3.5% slide expected. From a regional perspective, the Midwest expanded +0.7%, the South jumped +6.2%, the West was down -3.0%, and the Northeast saw a modest dip of -0.9%. Year-over-year, contract signings lowered in all four U.S. regions, with the Midwest seeing the greatest falloff. According to NAR Chief Economist Lawrence Yun, “Despite the modest monthly increase, contract signings remain well below historical levels. A meaningful decline in mortgage rates would help both demand and supply—demand by boosting affordability, and supply by lessening the power of the mortgage rate lock-in effect.”
• According to the Case-Shiller S&P CoreLogic 20-City Home Price Index, U.S. housing prices rose again in January and marked a new record high price level. Home prices in the 20 biggest U.S. metropolitan areas increased a seasonally adjusted +0.46%, above expectations for a +0.40% increase and up from a +0.54% increase the prior month (revised up from +0.52%). On a year-over-year (YoY) basis, the 20-city index was up +4.67%, below expectations for +4.80% and up from the prior month’s +4.52% annual pace (revised higher from +4.48%). New York remained in the top spot over Chicago with the biggest year-over-year home-price gains (up +7.7% and +7.5% respectively). Tampa remained at the bottom of the list of annual gains at -1.5%.
• The competing Federal Housing Finance Agency (FHFA) House Price Index (HPI) also showed U.S. home prices move up in January, with the index hitting an all-time high of 436.5. The government agency reported prices rising +0.2%, down from +0.5% the prior month after it was revised higher from +0.4%. Wall Street was expecting a +0.3% rise. It was the 8th month of increases. The government data showed home prices up +4.8% year-over-year, unchanged from the prior month. House prices were up YoY in all of the 9 regions, with the highest rate in the Middle Atlantic (+8.2%). The Mountain division recorded the smallest YoY appreciation, at +3.7%.
• Weekly MBA Mortgage Applications fell -2.0% for the week ending March 21 following a -6.2% drop the prior week. The Purchase Index rose +0.7% after a rise of +0.1% the prior week. The Refinance Index dropped -5.3% after sinking -12.8% the prior week. The average 30-Year Mortgage Rate slipped to 6.71% from 6.72% the prior week.
• Weekly Initial Jobless Claims fell by -1,000 to 224,000 for the week ending March 21, better than expectations for claims of 225,000. The prior week was revised higher by 2,000. The number of people already collecting unemployment claims (i.e., Continuing Claims) fell by -25,000 to 1,856,000 in the week ending March 14, better than expectations for 1,886,000 claims. Last week’s reading was revised lower from 1,892,000 to 1,881,000.

Asset Class Performance

Source: Bloomberg.

Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by 30% US Bonds, 5% International Bonds, 5% High Yield Bonds, 10% Large Growth, 10% Large Value, 4% Mid Growth, 4% Mid Value, 2% Small Growth, 2% Small Value, 18% International Stock, 7% Emerging Markets, 3% Real Estate.

* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.