Week in Review: March 21, 2025

March 24, 2025

Recap & Commentary

Markets ended the week modestly higher as the S&P 500 snapped its four-week losing streak. Unlike prior weeks, the White House issued no new major trade policy announcements. In the absence of new announcements, markets were left to focus on the Fed and a relatively modest economic data calendar.

As expected, the Fed left rates unchanged at 4.25-4.50% following its March meeting. The Fed also provided an update to its Summary of Economic Projections (SEP) in which it lowered its full-year GDP forecast from its December estimate of 2.1% to 1.7% while raising its core PCE inflation forecast from 2.5% to 2.8%.

Speaking at his post-meeting press conference, Powell stated that the economy is “strong” and labor market conditions are “solid”, while noting that recent surveys of households and businesses point to heightened uncertainty about the economic outlook. When asked about determining the impact(s) of tariffs on inflation, Powell said doing so is “very difficult.”  That said, Powell said the Fed does not need to be in a hurry to adjust monetary policy, describing the Fed as being “well positioned to wait for greater clarity.”

As April 2 nears, questions about new tariffs will intensify as that is the day President Trump previously indicated 25% tariffs will take effect on all imports from Canada and Mexico. However, having already twice threatened similar tariffs, only to then provide a one-month delay, markets remain hopeful that full implementation of the tariffs can be avoided.

Economic Commentary

After a disappointing start to the year, retail sales staged a modest 0.2% rebound in February after falling 1.2% in January.  However, spending at bars and restaurants, a key measure of discretionary spending fell 1.5%, the largest monthly decline in 13 months, suggesting a more cautious consumer, possibly the result of heightened economic uncertainty. Core retail sales, which exclude vehicles, gasoline, building materials and food services, increased 1.0% in February after falling 1.0% in January. The core sales figure more closely aligns with the consumer spending component used in the calculation of GDP.

Housing starts surprised to the upside, rising 11.2% in February after falling 11.5% in January. Economists had been expecting a modest 1% increase. While the increase was encouraging, concerns remain that higher tariffs could hinder future activity. In 2024, ~30% of all lumber sold in the US was imported from Canada. Higher tariffs on steel and aluminum could also pressure the prices for other building materials as well as appliances. Building permits, a sign of future building activity, slipped 1.2% after declining 0.6% in January.

Existing home sales rebounded 4.2% in February after declining 4.7% in January.  Compared to a year ago, sales fell 1.2%, the median price rose 3.8% to $398.4K, and inventory increased from 3.0 months to 3.5 months.

Initial weekly jobless claims were effectively unchanged at 223K, suggesting labor market conditions remain stable and healthy.

Of Note

On Thursday, the fin tech company Klarna and the popular delivery company DoorDash  announced a partnership allowing customers the option to “buy now, pay later”. Interestingly, in February discouraged borrowers – those who reported needing credit but not applying for fear of being denied — reached 8.5%, the highest since the Fed began its tracking in 2013.

​

Market Indices   (As of 03/21/2025)

• Manufacturing PMI
• Services PMI
• Core PCE Inflation
• Consumer Sentiment
• Personal Income & Spending
• New Home Sales
• Pending Home Sales
• Durable Goods Orders