March Market Update
Market Indices Performance
March Recap
The S&P 500 fell -5.6% in March; every index was lower as the first of President Trump’s tariffs were enacted, notably on Canada, Mexico, and China.(1) The yield on the benchmark 10yr Treasury hovered around 4.3%, down from a January high of 4.8% as investors fear a possible trade war and recession could derail future growth. Inflation, measured by the Consumer Price Index (CPI), rose 2.4% from last year, marking the 49th straight month above the Federal Reserve’s 2% target. However, the -0.1% month-over-month decrease was the first decrease since May 2020 (figure 1).(2) The economy added a better-than-expected 228k jobs in March and the unemployment rate ticked slightly higher to 4.2%, marking its 11th straight month in the 4.0%-4.3% range.(3) Job openings came in at 7.6m, and the ratio of jobs available to unemployed people remains healthily above 1.(4) All this points to a persistently strong labor market, even with talks of a recession, trade war, and the need to cut rates swirling.
The Present
April has begun with a bang as President Trump’s reciprocal tariff announcement sent global markets into a whirlwind of volatility. The market fell over 10% in the two days following the announcement, then historically gained over 9% in one day (figure 2) the next week after Trump announced a 90-day pause on the reciprocal tariffs.(5,6) The S&P 500 narrowly avoided a bear market, but the tech-heavy Nasdaq and small and mid-caps weren’t so lucky. While uncertainty around a trade war and recession, lofty stock valuations, and declining growth expectations merit a drop, we also see this as a healthy, even necessary, pullback after impressive gains since the last correction in October 2023. The bond market has experienced volatility as well, with the benchmark 10yr Treasury falling to 4.0% after the reciprocal tariff announcement before jumping to 4.4% after the pause announcement.(7) Mortgage rates have bounced between 6%-8% since the beginning of 2023, and now sit around 6.5%.(8)
The Future
Analysts predict earnings growth of 7% for Q1 2025 and 11% for all of 2025, with growth finally widening out from the Big Tech names.(9) Wall Street is now expecting 3-4 interest rate cuts this year, while the Federal Reserve’s latest prediction was 2; Chairman Jerome Powell said they are in no hurry to cut.(10,11) April is historically the second best month for the stock market.(12) There remains significant uncertainty around tariffs and the heath of the economy in the future; the market has not liked this uncertainty, but the Trump administration sees this short-term pain as a worthy price to pay for long-term gain.
1. https://ycharts.com/indices/%5ESPXTR, https://ycharts.com/indices/%5EDJITR, https://ycharts.com/indices/%5ENACTR, https://ycharts.com/indices/%5ERUTTR, https://ycharts.com/indices/%5EMSEAFETR, https://ycharts.com/indices/%5EBBUSATR – Index Performance
2. https://tradingeconomics.com/united-states/inflation-rate-mom - CPI MoM
3. https://www.investing.com/economic-calendar/nonfarm-payrolls-227 - Jobs reports
4. https://fred.stlouisfed.org/graph/?g=12kNG - Job openings
5. https://taxfoundation.org/research/all/federal/trump-tariffs-trade-war/ - Tariff tracker
6. https://www.cnbc.com/2025/04/09/stock-market-posts-third-biggest-gain-in-post-wwii-history-on-trumps-tariff-about-face.html - Historic gains in the market
7. https://www.cnbc.com/bonds/ - Treasury yields
8. https://fred.stlouisfed.org/series/MORTGAGE30US - Mortgage Rates
9. https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_041125A. pdf - Earnings outlook
10. https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html – Investor rate expectations
11. https://www2.deloitte.com/us/en/insights/economy/spotlight/fed-rate-cuts-and-us-labor-market-trends.html - Fed Outlook
12. https://www.nasdaq.com/articles/heres-the-average-stock-market-return-in-every-month-of-the-year
– Monthly market history
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