March Market Overview

MACRO Consulting Group
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March was another challenging month for the stock market with the S&P 500 down over 2.50% for the month. Bond markets fared a little better, with the Bloomberg Barclays Aggregate Index rising about 0.50% and recovering some of the loss experienced in the first two months.

There were a couple of noteworthy happenings during the month of March that grabbed the market’s attention:

The first was the Federal Reserve. While the decision to raise short-term interest rates 0.25% was widely anticipated, this was the first press conference featuring the new chairman, Jerome Powell. While the Fed Chair’s comments were largely in line with market expectations, there were a couple items of interest. First, he noted he would not put much weight on forecasts out past this year, referring to the “dot plots” forecasted for 2019 and beyond. Second was the possibility of doing a press conference with every meeting. Presently, the chairman is on an every-other-meeting schedule, and the market widely believes that only those meetings will have interest rate decisions. Moving this way could potentially cause the market to perceive every meeting as “live,” perhaps increasing volatility around those meetings.

The second was the prospect of a trade war. Early in March we learned that the President planned to impose tariffs on steel and aluminum, a move that looks aimed at China. This caused many to fear China would retaliate, which they have since done on goods such as soy beans, airplanes, and autos. Presently, President Trump is mulling increasing the scope of the tariffs to include $100 billion of other items, and China is threatening to retaliate more.

What do we think? Right now, market participants are focused on all the sabre rattling and brinksmanship, yet there is a big difference in the rhetoric and how it may actually play out. There is also a good amount of time before these things actually get enacted. Most economists will tell you that nobody wins in a trade war and it is in everyone’s interest to get this sorted out relatively amicably. There is still risk that it escalates further, and that would make for a more difficult investing environment in general, at least for a time; yet we are not inclined to be reactionary until we know to what we are reacting.

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