Weekly Outlook

Weekly Market Overview: After four consecutive weeks of losses

| 26 March, 2025 at 12:00 GMT

        After four consecutive weeks of losses, SPX finally closed positively in the last week, still down by almost -2% in 2025, followed by -3% loss in Nasdaq, 0.20% Doe Jones, outperformed by German DAX index 17%, FTSE100 6% , ES35 16.5%, and gold 15.4%. Chart: Bloomberg

    What happened in the last two weeks was that the markets started to absorb the short-term consequences of Trump’s massive tariffs. In other words, Trump’s tariffs will be used by the US administration for two main purposes: political negotiations & commercial success for Trump & US companies, but the question: is that doable?           

       Technically , Trump is able to impose the tariffs he wants, specify the percentage , and target the countries with very specific exemptions , if any. The delay of Trump’s tariffs and his plans to speak with Chinses President offered positive sentiments among the traders & policy makers. Is that sustainable? It will depend on the political developments from America, easing tensions between Russia – Ukraine and more economic data from the US that may continue to avoid the so called : recession. 

  Two weeks earlier, the second longest uptrend in Nasdaq 100 index ended after closing below 200-day moving average for the first time in nearly two years. The 1st longest uptrend in Nasdaq happened between 2016 &  2018, trading above 200-day moving average for 572 days and gained 58% . This uptrend  in Nasdaq gained 73% between 2023 to 2025. Chart : Charlie Bilello 

European equities indexes outperformed US counterparts in 2025. Vanguard Europe ETF returned of 12.7% YTD; SPX remained down by -4.4% YTD. 

    In the meantime, US trade deficit in goods was -$1.2 trillion over the last 12 months, the highest deficit in US history. The biggest deficit was with China ,with more than $290 billion, followed by Mexico $172 billion. Such huge deficit explains why Trump was very tough with Mexico & China, both countries have trade surplus with America.  

      As expected, & already priced in, Federal Reserve kept the interest rates unchanged at 4.5%  in last week’s FOMC, lowered the growth expectations and refrained from dovish stance as well. Federal Reserve is likely to closely monitor US CPI numbers, and short-term consequences of Trump’s tariffs, which means that the Fed policy will remain data-dependent even if the Fed may try to avoid  excessive reliance on data. According to the Fed projections, interest rates will be at 3.1% in two years, 3.4% in one year and at 3% in the longer run. 

         US Treasury Inflation Protected Securities – TIPS showed that the yields in one month fell & traded at 1.44%, while it remained above 2% in the longer -term, in more than 20 years. It means that the markets are still forecasting sticky inflation ahead even if US CPI slightly falls in months to come. Inflation remained the biggest & ugliest dilemma to any central bank & government’s policy makers. TIPS are inflation- protected bonds that are issued by US Treasury where the face value of the bond is pegged to CPI. Numbers: Bloomberg