Market Minute
Weekly analysis from the FS Investments Research team
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March 31, 2025
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Equities
S&P 500 volatility picked back up last week as the VIX rebounded and ended the week above 20. Tariff concerns returned with a vengeance, combining with negative consumer economic data to push markets toward an ugly end to the week. The U.S. announced 25% tariffs on imported cars and certain auto parts, sending global carmakers (save for Tesla) plummeting. The Magnificent 7 fell -2.95%, led lower by Nvidia’s -6.82% decline as the AI trade has wavered. Foreign equities, which have shown resilience in the face of U.S. weakness for much of the year, succumbed to global growth concerns last week.
Fixed income
Rates moved higher for much of the week before plunging Friday on underwhelming economic data. The 10-year Treasury yield ended around 4.25%, unchanged on the week, and the 2-year ended at 3.91%. Rates markets continue trying to triangulate the Fed’s reaction to a world in which growth is slowing and inflation is rising. For now, the base case seems to be 1-2 rate cuts in 2025, with markets pricing in a fat “left tail” in the case there is a recession. High yield bonds declined -0.44% as spread widened 23 bps to their widest level since August 2024.
Commodities
Crude prices rose slightly, touching $70/bbl intraweek for the first time since late Feb. Oil’s resilience in the face of trade war-related demand concerns is somewhat surprising and suggests an expectation OPEC will provide a floor on prices if necessary. Copper fell but has risen around 20% YTD amid expectations the U.S. will implement tariffs on the metal. Gold remains perhaps the world’s best-performing asset, gaining another 2.15% last week.
Economic overview
Economic data last week were mixed, although Friday’s household data ended the week on a sour note. Personal income rose 0.8% (cons. 0.4%) but real spending was up just 0.1% (cons. 0.3%) after a dip in January, signaling mediocre Q1 consumption. Core PCE inflation was +0.4% in Feb, above expectation and contributing to a stagflationary backdrop. Combined with deterioration in sentiment surveys, a sharp increase in the savings rate YTD points to a potential consumer pullback. In better news, initial jobless claims remain muted, and a 0.9% gain in durable goods orders points to healthy business investment.
Source: Bloomberg, as of 12:00pm on March 28, 2025.