Decoding a gloomy week of moody markets and bleak outlooks
Last week delivered a flurry of economic data—and none of it helped investors feel more optimistic. Consumer sentiment dropped sharply, inflation proved sticky and U.S. equities endured one of their worst weeks of the year. With recession concerns increasing and policy uncertainty around tariffs, the current mood can best be summed up in one word: gloomy.
Let’s unpack what’s driving this shift in sentiment and what to watch in the days ahead.
Chief Investment Officer Thierry Hasse
Consumer Pessimism Deepens
Consumer confidence took a significant hit last week, as Americans expressed growing concern about the economy’s future. The Conference Board’s index of future expectations fell to a 12-year low, driven by fears of a potential recession within the next 12 months. Not to be outdone, the University of Michigan’s consumer sentiment index plunged to 57 in March—a nearly 12% drop from February and a 28% decline from the same time last year.
A key factor behind the unease? Inflation expectations. Americans now expect prices to rise 4.1% over the next five years, according to the University of Michigan survey—marking the first time that reading has topped 4% since February 1993. This is despite Federal Reserve Chair Jerome Powell’s recent statement that “long-term inflation expectations are well anchored.”
Inflation Proves Persistent—and Problematic for the Fed
On Friday, the Bureau of Economic Analysis confirmed that inflation remains uncomfortably high. The Personal Consumption Expenditures (PCE) index—the Fed’s preferred inflation gauge—rose 2.5% year-over-year in February, in line with expectations. However, the core PCE, which strips out food and energy, climbed by 2.8%, up from 2.7% the previous month.
While the Fed continues to emphasize its data-dependent approach, these figures suggest it’s too early to expect a pivot toward rate cuts. Inflation isn’t just sticky—it may be reaccelerating. And that’s before any impact from potential new tariffs is factored into the economic equation.
Market Sell-off as Concerns Mount
Equity markets reflected this sour mood, posting sharp losses across sectors. With signs that consumers are pulling back on spending—highlighted by cautious sales outlooks from Nike and Lululemon—investors responded by selling risk assets. Friday marked the second-worst trading day of the year for U.S. markets.
Technology stocks bore the brunt of the sell-off. The Nasdaq fell 2.6% for the week and is now down 8% for March, on track for its worst monthly performance in more than three years (Source: CNBC). The only glimmer of resilience was that the S&P 500 held above its March 13th low. While we remain in correction territory, some market participants are wondering: Could we be nearing peak pessimism?
All Eyes on the Administration’s Tariff Announcement
Looking ahead, market watchers will be focused on the administration’s expected announcement regarding reciprocal tariffs, scheduled for April 2. With tensions high, the beginning of the week could bring continued volatility. In theory, clarity around trade policy might provide some relief. In practice, the upcoming announcement may raise more questions than it answers.
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