Market Recap: March 2025

Market commentary

• The Fed adjusted its GDP growth forecast for 2025 down to 1.7% from the previous 2.1%, while slightly increasing its inflation projections for the same period.
• Inflation moved further above the Fed’s 2% target with their preferred measure, the Personal Consumption Expenditures (PCE) index, rising from 2.6% to 2.8%.
• Consumer sentiment started the year at 74.0 but fell to 57.0 in March, marking its lowest point since November 2022.
• Rising domestic and international political tensions, along with government layoffs and uncertainty about future tariffs, are fueling investor insecurity. 

Select economic and market data

Equities

• U.S. equity markets declined in March for the second consecutive month with the S&P 500 falling 5.63%.
• Nine of the 11 sectors in the S&P 500 ended lower in March.

Fixed income

• The Federal Reserve kept rates steady in the March meeting, continuing to take a wait-and-see approach. Expectations for two rate cuts this year remain.
• Treasury yields showed little movement over the month, with the 2-year Treasury experiencing a slight decline and the 10-year yield holding steady at 4.21%.
• Reflecting the equity market decline, both Corporate and High Yield bonds dropped.

Strategic outlook

• Some caution warranted on equities in the near-term, particularly in large-cap stocks with above-average valuations; currently favoring small-cap and mid-cap domestic stocks longer-term.
• Near-average expected returns projected for fixed income with the Fed on pause and rates reflective of conditions.
• Above-average volatility is likely given central bank involvement and geopolitical uncertainty.