Stocks Drop and Bonds Rise in Choppy Week
Good morning, and welcome to March!! The longer daylight hours have become a lot more noticeable, and that’s a wonderful thing.
The Dow (+0.9%), NASDAQ (-3.5%), and S&P 500 (-0.9%) were mixed for the week. Meanwhile, taxable bonds (+1.3%) and tax-free municipal bonds (+0.6%) rose sharply for the week. The 10-year Treasury yield also fell sharply, as it dropped 0.23% to finish the week at 4.42%.
Volatility and uncertainty are the key words for last week, as there was a risk-off mood. While a lot of economic data was reported last week, the headlines coming from Washington were the key to market movements. The markets took a sudden and sharp drop on Thursday because of President Trump imposing the tariffs on Canada, Mexico and China to begin Tuesday, March 4. Then on Friday, the markets surged to recover the losses from the prior day, but still not enough to bring it into positive territory for the week. The “Magnificent 7” AI-related technology stocks took a beating, dragging the NASDAQ down over 3%, with Tesla (-13.2%) Nvidia (-7.1%), and Google (-5.2%) leading the way.
As for economic data, it was mixed last week. New home sales fell sharply for January but could be attributed partly to the cold weather. Durable goods orders rose more than expected, and core goods orders rose for the 3rd straight month, suggesting that manufacturing may be strengthening. Lastly, the Fed-favored inflation gauge – Personal Consumption Expenditure (PCE) – met analysts’ expectations and was saw investor enthusiasm.
Volatility and uncertainty may be the themes for the next several weeks, as Washington is grappling tariffs, the forthcoming budget talks in Congress, and the potential for a Russia / Ukraine ceasefire. Despite the well-publicized argument between the Ukraine President and the US President and Vice President Friday in the oval office, there seemed to be little to no effect on the markets. In fact, the markets rose sharply afterward, but that may have been independent of that meeting. As noted by our CFA consulting team, the markets didn’t drop much when the war began, so it may similarly have little to no effect if there is a peace resolution.
See below for a very interesting and compelling chart that shows the continued diversion between the top 10% of US earners, compared to the other 90%. The slow down of lower US wage earners has also been reflected in Walmart’s earnings reports, as the lower wage earners have used up their savings from the COVID era. The graph below shows this trend over the last 35 years.
Have a great day and terrific week!
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The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
