Markets ended another week in the red. Will they make a U-turn or are they heading in the wrong direction?
Monday
S&P 500 2.70% | NASDAQ 4.00%
Stocks tumbled on Monday as the fear of a harder economic landing rose to the top of headline news. It is premature to be thinking in this dramatic fashion as if it’s a foregone conclusion. Although markets don’t always think that way. The President made remarks that mentioned the country is in a “period of transition” which, at least in the short-term, rattled equity markets. Risk-on asset classes suffered the most.
Tuesday
S&P 500 0.76% | NASDAQ 0.18%
The slide continued after increased tariffs were announced against Canada who had imposed a surcharge on electricity to the U.S. The S&P500 index fell short of correction territory which is defined as a 10% correction from a previous high. Investors appear to be growing weary of the back and forth of tariffs – specifically regarding the timing and size. On a positive note, job openings rose in January, which slowed down further sale activity.
Wednesday
S&P 500 0.49% | NASDAQ 1.22%
Good news came when good news was needed as the “fear-gauge” showed signs of cooling. The Consumer Price Index (CPI) for February fell from January and came below forecasts. This was welcome news with the Federal Reserve starting their March meeting next week.
Thursday
S&P 500 1.39% | NASDAQ 1.96%
Producer Prices followed consumer prices lead by falling in February, but the news couldn’t prevent the S&P500 from entering correction territory. More tariff threats discouraged equity investors on the day. Sudden swings in markets do not represent economic shifts, per se, but do show investors tolerance for risk.
Friday
S&P 500 2.13% | NASDAQ 2.61%
Shutdown averted! The government funding deadline came with a bill that was passed, and, inevitably, the dip-buyers came out to take advantage of the weeklong slew of selling. Consumer sentiment, however, has continued to fall since it reached its recent highs in December 2024
Conclusion
S&P 500 2.27% | NASDAQ 2.43%
Markets were less than impressed with the direction of the economy again this week. There is a sense of optimism falling from consumers and the outlook is being closely watched. In an uncertain market environment, this year’s journey is most akin to going on a long drive without a map. There are only signs that show up a little later to tell whether you are going in the right or wrong direction. There were some positives to note—however. The Consumer Price Index and Producer Price Index both show signs of cooling in February and jobless claims were not off trends as of late. If tariff threats begin to subside, the U.S. dollar will again take the lead after a recent fall. This was evidenced by a recent fall in U.S. treasury yields due to the shift to safety. In a slowing economy, while not necessarily recessionary, the best move is to diversify into other markets to spread downside risk while also looking at sectors that weather the storm. In a previous market that was considered “overvalued”, a return to more reasonable market valuations will allow investors to look at possible discounts as well as look for less overconcentration in specific asset classes.
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