Weekly Market Recap
Stocks rebounded impressively last week, with the S&P 500 climbing +3.9%, nearing its recent “Liberation Day” highs. The rally was driven by tech-heavy stocks, pushing the Nasdaq up +5.3%, while the S&P 500 Equal Weight posted a solid +3.2%. Growth stocks outperformed value, and a broader risk-on sentiment was evident: the Russell 2000 surged +4.2%, high-beta sectors beat low-volatility counterparts, and cyclical industries outpaced defensive ones. Bonds were stable, reflecting steady Treasury yields, though corporate high-yield credit notably improved—a sign of renewed investor confidence.
Key Takeaways:
1. Headline Volatility Still Dominates
Market swings continued as conflicting news emerged: Trump’s threat to remove Fed Chair Powell, later retracted, and hints of reduced tariffs on China. Treasury Secretary Bessent tempered optimism, suggesting a comprehensive trade deal with China could take years.
Implication: Expect continued volatility; market stability hinges on clearer policy signals.
2. Dollar Weakness Signals Investor Concern
Despite its traditional safe-haven appeal, the USD fell to a three-year low amid ongoing Fed criticism from Trump and persistent tariff uncertainty.
Implication: Capital could flow away from the U.S. market, aligning with narratives about fading American economic dominance.
3. Gold Hits Record High Amid Uncertainty
Macro fears drove gold prices briefly above $3,500 per ounce, marking an all-time high. Investors opted for gold over more traditional havens such as the dollar or Treasuries, highlighting deep caution in the market.
Implication: Elevated gold prices underscore heightened market anxiety and the preference for tangible, perceived safer assets.
4. Tariff Impacts Showing in March Data
Economic data surged as consumers and businesses accelerated purchases ahead of tariff impacts. Retail sales, manufacturing indices, and home sales rose sharply.
Implication: While positive for Q1 GDP, this front-loaded demand might lead to weaker growth later in the year.
5. Soft Data Continues to Signal Risks
Weakness persists across forward-looking indicators like consumer sentiment, CEO confidence, and PMI readings. The Leading Economic Index showed a significant decline, hinting at slower growth ahead.
Implication: Investors should brace for softer economic conditions in coming months.
6. Policy, Not Fundamentals, Driving Market Moves
Current market volatility stems predominantly from policy uncertainty rather than fundamentals like earnings or economic health.
Implication: Markets remain speculative and reactive to headlines; stable fundamentals will regain importance only once policy clarity emerges.
7. Market Bottoming Signals Emerging—But Caution Advised
Signs of market bottoming such as rising volatility (VIX), expanding credit spreads, and deteriorating sentiment are evident. However, substantial economic and earnings clarity is still required.
Implication: Expect continued volatility; shorting remains risky, but strong technical resistance will likely cap upside potential.
Looking Ahead:
Stay vigilant—policy shifts will dominate headlines. Keep an eye on macroeconomic signals and remain flexible until clearer economic trends emerge.
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