Last week, both stock and bond markets saw movements influenced by geopolitics, economic data, and central bank policies. Here’s an overview:
Stock Market Overview:
- United States: The major indices managed to break a four-week losing streak. The S&P 500 and Dow Jones Industrial Average each edged up .1%, while the Nasdaq rose .5%. Despite these gains, year-to-date performances remain negative, with the S&P 500 down 3.6%, the Dow 1.3%, and the Nasdaq down 7.9%. (2)
- Europe: European markets experienced modest gains due to investor optimism regarding potential flexibility in U.S. trade policies. However, concerns over retaliatory tariffs from the European Union, set to be adopted in April, tempered enthusiasm. (2)
- Asia-Pacific: Japan’s stock market remained relatively stable, with the iShares MSCI Japan ETF showing minimal change, closing at $71.33, up 0.01% from the previous close. Emerging markets experienced slight declines, with the iShares MSCI Emerging Markets ETF closing at $44.58, down 0.48%. (2)
Bond Market Overview:
- U.S. Treasury Yields: Yields declined across various maturities. The 2-year Treasury yield fell .21% to 3.99%, the 5-year yield dropped .31% to 4.02%, and the 10-year yield decreased .33% to 4.21%. This flattening of the yield curve reflects investor anticipation of a potential economic slowdown. (1)
- Corporate Bonds: Investment grade spreads tightened by .05% to .89%, with yields falling 10 basis points to 5.14%. Conversely, high-yield spreads widened by .01% to 3.14%, with yields increasing.03% to 7.53%. Asset-backed securities (ABS) and commercial mortgage-backed securities (CMBS) continued to underperform Treasuries due to concerns about consumer health. (1)
Key influences:
- Trade policy uncertainty: Global markets remain sensitive to developments in trade policies, particularly concerning potential tariffs and geopolitical tensions.
- Central bank actions: The Federal Reserve’s decision to slow its balance-sheet runoff, reducing the monthly redemption limit on Treasury securities from $25 billion to $5 billion starting in April, added $20 billion of monthly demand to the Treasury market, potentially pushing yields lower and prices higher. (3)
- Investor Behavior: U.S. equity funds experienced weekly outflows surging to a three-month high, driven by tariff concerns. (4)
In summary, corrections are normal, and I always recommend sticking to your long-term investing strategy.
(1) Weekly Fixed Income Market Update: March 20, 2025 - Income Research + Management
(2) Trading Day: Consolidating while awaiting tariff clarity
(3) Here’s How to Read the Fed’s Latest Balance-Sheet Move
(4) US equity funds 'weekly outflows surge to a three-month high on tariff concerns
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