The Data
Equities declined last week as US government policy uncertainty grew.
S&P 500 -3.07% Dow -2.37% Russell 2000 -4.05%, Nasdaq -3.45%.[1]
The All-Country World Index lost -1.30%.1
S&P 500 sub-sectors were almost all lower last week.
Healthcare was the lone positive sector with a gain of +0.24%.1
Financial led sectors lower with a loss of -5.86%.1
The CBOE Volatility Index (VIX) rose 19% to end at 23.35.1
US Treasury bond yields moved lower last week.
US 2yr flat at 3.99%, 10yr +0.08% to 4.32%, 30yr +0.11% to 4.62%.1
With the short end stable and long yields rising, the yield curve steepened.
Commodities as an aggregate asset class were lower last week.
WTI Crude declined -3.9%.1
Gold rose +1.78%.1
The US Dollar index sank -3%.1
In our opinion, U.S. economic data was mixed last week.
The ISM Manufacturing Index ticked lower in February.1
The ISM Services Index increased for the month.1
The US job growth steadied last month while the unemployment rate rose, pointing to a softening labor market. 1
An index of equities outside the US (FTSE All-World ex-US) gained +2.95%.1
Conclusion
Stock markets in the US were lower across the board last week as the on-again-off-again tariff uncertainty and DOGE-driven government cuts were boosted by worries of a suddenly weakening domestic economy.
The Nasdaq, S&P 500, & Russell 2000 all lost in excess of 3%.1
The Mag 7 darling companies of the last couple of years are now down in excess of 12% in the last 3 weeks.1
Non-US equities dramatically outperformed last week.
The US Dollar index declined 3% for its worst weekly decline since Nov. 2022 which helped boost foreign markets.1
Germany’s plan to massively increase spending is boosting stocks in Europe while Chinese stimulus plans are strengthening that region.
Historically, when international equity outperformance begins a year like it has, this has led to continued strength throughout the year.1
US interest rates rose on the longer maturities last week but declined on the short-end.
Traders have been piling into short-dated Treasuries, pulling the 2-year yield down sharply since mid-February.
This is based on expectations the Federal Reserve will resume cutting interest rates as soon as May to keep the economy from deteriorating.
On Friday, Fed Chair Jerome Powell said he is in no rush to resume easing policy, saying “the economy continues to be in a good place” despite “elevated levels of uncertainty.”1
This movement marks an abrupt about-face for the Treasuries market, where the dominant driver of the last few years had been the surprising resilience of the US economy even as growth weakened overseas.
Commodities weren’t spared last week as they moved lower, led by oil’s decline of -3.9%.1
Oil prices suddenly have broken out of their months long slumber and have touched a 3-year low.1
A combination of factors have led to oil’s run lower of late such as OPEC’s surprise boost to supplies & demand concerns from China as well as the rest of the world.
Despite the equity market weakness, the current administration continues to indicate a reluctance to change course based on the stock market.
On Friday, Treasury Secretary Scott Bessent reinforced the view that Trump’s “America First” policies were a necessary antidote to remedy the Biden administration’s spending excesses.
He also emphasized that this administration is more than willing to tolerate any near-term pain in the stock market to implement structural changes in global trade and international relations.
[1] Source: Bloomberg – 3/7/2025
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