Market Update – March 17th, 2025

Financial Markets

Last week, CPI data was released ahead of this week’s Federal Reserve meeting, while the S&P 500 entered a technical correction, falling just over 10% from recent highs before partially rebounding on Friday. As of Friday, March 14th, the Dow Jones Industrial Average declined 3.07%, the Nasdaq Composite fell 2.43%, and the S&P 500 was down 2.28% for the week. Bond markets remained stable, with the Barclays Aggregate Bond Index slipping just 0.07%.
 

Source: Zacks

 
Market News

Correction Territory

 On Thursday, March 13, 2025, the S&P 500 touched a technical correction, falling 10% from its mid-February all-time high before partially rebounding on Friday. The selloff appears driven by economic and tariff concerns, as market sentiment has become increasingly reactionary to geopolitical events. President Trump continues to signal a willingness to escalate tariffs, with the scope of potential trade policy changes, larger than many analysts had priced in.
 
Although the market has been reflecting significant uncertainty, recent economic data may not justify the magnitude of this recent sell-off. Coincident economic indicators remain largely stable, with February’s CPI and PPI reports better than expected and initial jobless claims declining last week. Still, markets have largely overlooked these positives, focusing instead on trade policy risks.
 
Looking ahead, last week’s correction and Friday’s rebound may have indicated a short-term bottom, supported by stable economic data. Point and figure charting suggests the market was at or within 1% of a potential bottom, assuming the longer-term trend holds. However, this is not a definitive signal, and conditions remain dynamic.

 

Source: Nasdaq Dorsey Wright

 
February CPI

February’s Consumer Price Index came in lower than expected, with annual inflation slowing to 2.8% and core CPI at 3.1%. On a month-over-month basis, both headline and core prices rose by 0.2%, indicating a continued moderation in inflationary pressures, following several months of rising inflation. This was the first CPI report reflecting potential impacts of new tariffs enacted under the Trump administration, raising concerns about price increases. So far, however, tariff-related impacts appear to be muted.
 

Source: FRED
 
Inflation Breakdown by Category:

• Groceries: Prices were flat month over month and up only 1.9% year over year, following a few months of staples like eggs rising sharply.
• Energy Costs: Down 0.2% from a year ago, driven by lower gasoline prices.
• Vehicles: New car prices declined 0.3% year over year, while used vehicle prices rose 0.8%.
• Shelter Costs: Inflation remained elevated but showed signs of moderation, with a 4.2% year-over-year increase in shelter prices.
• Transportation Services: One of the stickier inflation categories, transportation prices fell 0.8% in the month.

Source: Bureau of Labor Statistics
 
With inflation continuing to cool and little evidence of tariff-driven price pressures on consumer inflation yet, this report strengthens the case for the Federal Reserve to begin cutting rates sooner rather than later. If this trend holds, expectations for multiple rate cuts before year-end could gain momentum as the Fed shifts its focus toward supporting economic growth.

 
February PPI

 February’s Producer Price Index also came in lower than expected, with annual producer inflation easing to 3.2%, while core producer inflation slowed to 3.3%, both down from January. On a monthly basis, producer inflation was flat, while core producer inflation rose 0.2%, reflecting a more moderate pricing environment.
 
Unlike CPI, food prices were a key inflationary pressure for producers, rising 1.7% in February alone. This sharp increase could pose challenges for consumer inflation in the coming months if higher input costs are passed on to consumers. Offsetting some of this pressure, energy prices declined 1.2% for the month, similar to the CPI report.
 
Examining inflation by wider category, goods prices rose 0.3% in February, while service costs declined 0.2%. While the PPI report was better than expected, producer inflation remains elevated, and its impact on future consumer prices will depend on how businesses manage cost pressures. If companies choose to pass on rising food costs, consumer inflation may remain choppy in the months ahead.
 

Source: Bureau of Labor Statistics

 
Consumer Sentiment

The University of Michigan’s Consumer Sentiment Index fell sharply in March, coming in worse than expected with a 10.5% decline from February and a 27.1% drop year over year. This marks the third consecutive month of declining sentiment, bringing the index 22% below its December 2024 level.
 
The decline was primarily driven by a 15.3% month-over-month drop in future expectations, reflecting growing concerns about the economic outlook. Expectations for unemployment, short-term inflation, and long-term inflation all rose, contributing to the decline. Confidence declined across all demographic groups, including differences in age, education, income, wealth, political affiliation, and geographic region.
 
Despite better-than-expected inflation data last week, consumers remain worried about prices and the overall state of the U.S. economy. The persistent decline in sentiment underscores the gap between improving economic data and consumer perceptions, which could impact spending patterns in the months ahead.

Source: University of Michigan

 
Recession Indicators

While consumer sentiment has weakened, several key economic indicators point to stable to positive conditions. Our recession model currently reflects three bullish, two bearish, and three neutral factors, signaling a steady outlook. While conditions can change, and the stock market is forward-looking, recent market pessimism appears more severe than economic data suggests it should be.
 

Summary

The S&P 500 hit a technical correction last week before rebounding slightly on Friday, with slowdown concerns weighing on sentiment despite some encouraging economic data. CPI and PPI reports showed inflation easing, and jobless claims declined, signaling labor market strength. Consumer sentiment fell for a third consecutive month, reflecting heightened economic concerns from consumers.  
  
We appreciate your continued trust.

Thank you,

Joseph M. Maas,
CFA, CFP®, ChFC, CLU®, MSFS, CCIM, CVA, ABAR, CM&AA

The information contained herein is general in nature. It does not take into account your particular investment objectives, financial situation, or needs. It is provided for illustrative or informational purposes only, and should not be construed as advice. Our advisors can meet with you to discuss your retirement plan.

Content is used with the permission of Synergy Asset Management. This information is being provided to you as it has been determined by SPG Advisors LLC to be suitable in relation to your portfolio, needs, objectives, and other considerations. SPG Advisors, LLC and Synergy Asset Management are affiliated. All such information is provided solely for convenience, educational, and informational purposes only. Past performance does not guarantee future results. All investing comes with risk, including risk of loss. No investment strategy can guarantee a profit or protect against loss in periods of declining values. All rights reserved. No part of this publication may be reproduced, distributed or transmitted in any form without the prior written permission of the publisher.

More Market Updates