Markets opened the week on a positive note, thanks to renewed optimism following President Donald Trump’s recent tariff announcement. Trump signaled that he may withhold certain sector-specific tariffs, notably on autos, semiconductors, and pharmaceuticals, while still pursuing reciprocal tariffs aimed at countries with significant trade imbalances with the U.S. These broader tariffs, potentially targeting around 15% of U.S. trading partners, are expected to be implemented by April 2, though the situation remains fluid.
Economic data also added to the upbeat sentiment. The S&P Global Flash U.S. PMI showed manufacturing activity climbing to 53.5 in March from 51.6 in February, while the Services Index rose to 54.3 from 51.0. Some of this expansion may be linked to improved weather conditions, although input price inflation continues to be a headwind.
Key data this week includes Q4 GDP and February’s PCE Index, both forecasted to remain steady at 2.3% and 2.5% year-over-year, respectively. However, Core PCE is projected to tick up from 2.6% to 2.7%. Last week, the FOMC lowered its U.S. Real GDP growth forecast from 2.1% to 1.7% while raising its Core PCE estimate to 2.8%, hinting at potential stagflation concerns. The Fed also announced it will slow the pace of quantitative tightening, reducing monthly Treasury runoff from $25 billion to $5 billion starting in April, as a precaution amid economic uncertainty.
Globally, European markets were mixed following Trump’s comments on tariff flexibility, while the Bank of England opted to pause its rate cuts, citing elevated uncertainty. Asian markets also delivered mixed results, with Japan’s manufacturing sector contracting, while Hong Kong’s Hang Seng Index gained amid positive trade sentiment as it hosted the China Development Forum, where U.S. and Chinese business leaders gathered to strengthen trade. According to our Newton Model, Foreign Developed and Emerging Markets continue to lead, but U.S. equities are gaining momentum. Financials surged to the top of sector rankings, reversing recent underperformance, while Defensive and Cyclical sectors remained under pressure. In Fixed Income, Short-Term Bonds and Floating Rate continue to outperform, as long-term Treasuries and Corporate Bonds continue to face interest rate policy uncertainty and inflation headwinds.
Economic Releases This Week
Monday: S&P Flash US Services & Manufacturing PMI, Atlanta Fed Speaks
Tuesday: S&P Case-Shiller Home Price Index, New York Fed Opening Remarks, Consumer Confidence (March), New Home Sales
Wednesday: Durable Goods Orders, Minneapolis & St. Lous Fed Speaks
Thursday: Initial Jobless Claims, Q4 GDP (Second Revision), Advanced US Trade Balance, Pending Home Sales
Friday: Personal Income & Spending, PCE Index, Consumer Sentiment
Stories to Start the Week
Trump Plans Tariffs on Countries Buying Energy From Venezuela
23andMe Files for Bankruptcy, as CEO Anne Wojcicki Resigns
Beijing Pledges Greater Market Access as Top Global CEOs Gather at China Development Forum
US Turns to Brazil for Eggs and Considers Other Sources During Bird Flu Outbreak
South Korea’s Hyundai to Announce $20 Billion US Investment