Last Week on Wall Street – March 14th, 2025

S&P 500: -2.43% DOW: -3.10% NASDAQ: -2.41% 10-YR Yield: 4.32%

What Happened?

Over the past week, Wall Street saw significant volatility, driven primarily by escalating trade tensions and economic uncertainty. The S&P 500 officially entered correction territory on Thursday, tumbling more than 10% from its February peak, while the Dow Jones Industrial Average and Nasdaq Composite also suffered substantial losses. The downturn was largely triggered by President Trump’s announcement of steep tariff hikes, including a 200% levy on European wines, which reignited fears of a global trade war. Adding to concerns, consumer sentiment plunged to its lowest level since November 2022, reflecting growing anxieties over inflation and economic policy. News which could potentially reflect in Gold’s recent valuation above $3,000 per OZ, which many investors flock to in times of uncertainty in the market.

Despite these headwinds, fresh economic data provided some relief, with cooler-than-expected Consumer Price Index (CPI) and Producer Price Index (PPI) reports suggesting that inflationary pressures may be lesser than that of sentiment concern. However, investors struggled to find enough justification for a sustained rebound in valuations. Nevertheless, on Friday, markets staged a comeback as investor sentiment improved following the Senate’s approval of a Republican-backed stop-gap funding bill, which helped avert a government shutdown. However, the late-week rally wasn’t enough to erase earlier losses, marking Wall Street’s fourth consecutive weekly decline—the longest losing streak since August 2024.

In the sections below, we take a deeper dive into the latest inflation reports, the outlook for consumer sentiment, and the ongoing trade tensions under the Trump administration, which show no signs of de-escalating anytime soon.

Landing Is Still Our Scenario for World Economy

CPI came me in at 2.8%, lower than the 2.9% expectations.
PPI came in at 3.2%, much lower than last month’s 3.7%

The key takeaway – The latest Consumer Price Index (CPI) report for February
delivered a reassuring signal for investors, reinforcing the narrative of at
least a soft landing, according to the Bank for International Settlements
(BIS). The report indicated that current financial data does not suggest
heightened inflationary pressures, contrary to consumer expectations.

However, despite this relatively positive outlook, this
report fails to account for the recent uncertainty surrounding Federal Reserve
policy remains high, particularly in the wake of former President Trump’s
recent hearing. While he did not rule out the possibility of a recession, he
instead described the current market environment as a “period of
transition.” This statement further fueled investor concerns about the
Fed’s next moves. Analysts believe that this lingering uncertainty will weigh
on consumer spending, business investment, and hiring in the coming months.
With the Federal Reserve meeting next week, markets now await clarity on
monetary policy and the potential impact of ongoing trade disputes.

Market analysts emphasize that while daily sentiment fluctuations drive short-term market movements, any meaningful market shift
requires substantial economic data. Reports from Europe—particularly
Germany—highlight increased spending in defense and infrastructure, which,
alongside elevated European equity valuations, suggests stronger economic
momentum. Given key trade partnerships with the U.S., this trend could
contribute to debt reduction and further economic growth in the United States.
Paired with cooler inflation data, these developments reinforce the BIS’s
assessment that recent economic indicators continue to point toward expansion.

Consumer Sentiment Slides in March as Inflation Expectations Jump

Consumer sentiment reading fell to 57.9, with expectations of 64.
Inflation expectations jumped to 4.9% ahead of the 4.3% expectations in February.
Retail sales for February are projected to rise .7%.

The key takeaway – Mixed signals continue to rip through markets, with consumer sentiment latching on to anything that can find. The most recent consumer sentiment reading fell 10.5% short of expectations, continuing the trend, making it the third consecutive week of a decline. This news paired with inflationary expectations amid the Trump administrations tariff negotiations has painted a poor picture for the future of the U.S debt expenditure.

This downturn in sentiment is largely attributed to rising inflation expectations and economic uncertainties stemming from recent tariff policies. Consumers now anticipate a 4.9% increase in prices over the next year, the highest expectation since 1993. The Trump administration’s tariff negotiations, particularly the recent decision to double tariffs on Canadian steel and aluminum imports to 50%, have heightened concerns about escalating prices and potential trade conflicts.

Despite these challenges, some economic indicators present a mixed picture. While retail sales experienced a 0.9% drop in January, this followed four consecutive months of gains, suggesting that consumer spending has been resilient in the face of recent headwinds. However, the decline in consumer sentiment, coupled with increasing inflation expectations, raises concerns about the sustainability of consumer spending and the broader economic outlook.

Sentiment however, as it is just insight into public perceptions, has not had a reputable history of predicting future market conditions. Nonetheless, there is a clear divergence between market indicators and consumer sentiment on the effects of the overall future of the economy.

Trump Administration’s tariff plan – and retaliation from competitors

The U.S. places 25% tariffs on metal imports, including aluminum and steel.
The EU places $28B tariff on U.S. goods
Tariffs on Canada and Mexico get postponed till April 2nd, if they comply with USMCA

The key takeaway – The global trade war involving the U.S., Canada, Mexico, the EU, and China has continued to escalate in recent weeks. The Trump administration, aiming to level the playing field for U.S. manufacturing, has announced a 25% tariff on imported metals such as aluminum and steel, with Canada being one of the most affected countries. While the administration argues these measures will boost domestic manufacturing, analysts and consumer concerns are mounting over the potential ripple effects on consumer and industrial goods. Aluminum, a key component in many products, particularly automobiles, has also been targeted through tariffs on imports from other countries, including Canada who supplies the U.S. with 50% of their overall supply. This raises a critical question: Will these policies drive up costs across industries, creating a compounding effect on prices, or will they accelerate improvements in domestic manufacturing efficiency?

The response from affected nations has been swift. Canada has imposed $20 billion in retaliatory tariffs on U.S. goods and has even floated the idea of 25% price hikes on the U.S. for using its power grid. Meanwhile, trade discussions are ongoing, and tariffs on Canadian and Mexican imports have been delayed until April 2nd. Analysts warn that these policies could backfire, potentially harming the very industries they aim to protect by triggering mass layoffs if businesses struggle to adapt. The EU has simultaneously responded with tariffs on American boats, motorcycles, and bourbon, while Mexico’s president has been hesitant to wait until the April 2nd deadline before considering reciprocal measures. With tensions rising, the global economic landscape remains uncertain, and the full impact of these trade policies is yet to be seen as inflationary data, mentioned above, has continued to come in cooler than expected.