Weekly Market Insights 03.17.25
Confusion is the Enemy
Financial Markets
This past week continued the theme of uncertainty that has persisted since the beginning of the year. Financial markets are always subject to speculation and volatility, but the extent of the confusion seen recently is unusual. All three major U.S. equity indices lost ground throughout the week, only seeing some relief on Friday. Surprisingly, markets had a tepid response to Wednesday’s better-than-expected Consumer Price Index (CPI) report, which showed year-over-year inflation at 2.8% versus the expected 2.9%.
Investor sentiment remains vulnerable to speculation and shifting narratives. To understand the pressures facing markets, we must examine economic fundamentals and the broader political environment.
Economics
The U.S. remains the strongest economy among developed nations, with resilient employment, steady corporate earnings, and a strong U.S. dollar. Inflation has moderated, and employment remains stable, supporting an overall solid economic backdrop.
However, policy uncertainty continues to weigh on the confidence of investors and company management teams. The new administration has started a trade war by introducing a range of aggressive trade policies that involve imposing tariffs on rivals and key allies alike. Potentially in jest, President Trump has also suggested that he will convert a war-torn Gaza from a destroyed desert country into a grand vacation destination.
At home, the president has proposed a highly ambitious agenda—reducing tax rates while balancing the budget, deporting millions of foreign workers without disrupting wages or inflation, and drastically cutting the size of the government.
While new administrations often set ambitious policy goals, some initiatives—particularly in trade and immigration—have raised concerns among economists about potential negative consequences for the U.S. and global economies.
Conclusion
While all administrations make promises they may not fully deliver on, the current one appears committed to certain policies that many economists believe could have adverse effects. Despite these uncertainties, the U.S. economy remains strong by most measures. Businesses and investors must closely watch financial markets, economic data, and government policy decisions, as the coming months could bring further volatility. We and other credible and thoughtful investment professionals believe that the risk of recession has increased as an unintended consequence of the policy changes and related uncertainty. We will continue to monitor markets and data for early warning signs.
While unsettling, market corrections are a normal and healthy part of the investment cycle. Investors should remain disciplined and avoid making impulsive decisions based on short-term volatility.
For more information on the current market environment, we direct readers to the Investment Update published last Friday. We will release our more in-depth quarterly Investment Review & Outlook in early April.
Read pdf here.