CIO Monthly Observations - March 2025
Monthly Observations
March 3, 2025
Stock markets fell in February, as the S&P 500 dropped 1.4% (reducing its year-to-date gains to 1.2%) and the MSCI All Country World index fell -0.7% during the month (which lowered its year-to-date return to 2.6%). The Bloomberg BarCap U.S. Aggregate Bond index, on the other hand, jumped 2.2% during February, increasing its year-to-date return to 2.7%.
Concerns about the economy have created an environment that is positive for bonds and negative for stocks. Slower economic growth should help ease inflation fears, but a steep increase in unemployment – and a corresponding drop in consumer spending – could result in the pendulum swinging too far in the opposite direction and cause a recession. For now, the economy remains stable, but trade wars and tariff fights could upset the fragile balance.
Monthly Highlights
Tariffs on Mexico and Canada were delayed by one month
Economic fears have weighed on the stock market, but boosted bond prices Trump continues to threaten tariffs will go into effect in early March
News in Review
The stock market rallied earlier in the month, after President Trump agreed to delay 25% tariffs on Mexico and Canada. Although the president said he was serious about tariffs – and they aren’t just a negotiating tactic – the market reaction showed that investors have serious concerns about threatening our two neighbors with punitive tariffs, judging by the size of the rally after news broke that they were postponed.
Economic Jitters Spur Bond Rally
Consumer Confidence fell the most in 3.5 years as worries about economic growth in the face of so much policy uncertainty weighed down optimism over tax cuts and deregulation. Those concerns have caused the US market to begin underperforming international markets for the first time in almost 8 years.
Tariffs on Mexico, Canada, and China are Scheduled for March 4th
The tariffs on Mexico and Canada, which were postponed in the beginning of February, are again scheduled to go into effect in early March. The stock market has experienced heightened volatility over the past month as it has been whipsawed by on-again, off-again tariff threats, however, the bond market has seen gains, which can act as ballast to a portfolio with a combination of stocks and bonds.
Airport Theory Craze Ends Up Being Bad Advice
A bizarre theory is sweeping social media and younger flyers have convinced themselves that arriving at the airport only 15 minutes before their flight is scheduled to depart is an effective way to handle the unpleasantness of the airport experience. Needless to say, this is causing a lot of people to miss their flights and although the original video has gone viral, garnering 400 million views, airlines are hoping that people won’t take it too seriously.
