Market View: March-April 2025

By Argent Wealth Management, LLC on March 5, 2025

Conclusion

• Recession odds remain low.  If this remains the case, the bull market is likely to continue.
• However, uncertainty about economic policy out of Washington is weighing on consumer confidence. 
• The stock market has remained resilient in the face of this uncertainty, a good sign.
  • If that changes, it would signal investors’ belief that policy uncertainty is starting to affect investment and consumption habits, and therefore the economy.
• Expect volatility to continue until uncertainty dissipates. 
• For details beyond this Market View, see Argent’s quarterly investment outlook: https://argentwm.com/blogs/newsletters/

Economy Remains Strong

• NDR’s Recession Probability Model shows recession odds are low, and declining.
• This model looks at leading indicators for 35 countries around the world.
• Leading indicators include yield curves, building permits, share prices, sentiment, and business surveys. 

Credit Conditions

• The availability of credit to consumers and businesses is favorable.
• Credit is available to expand your business or buy a home.
• This measure would likely be on a downward trajectory if a recession was imminent.

Unemployment

• There remains over 1x the number of job openings per unemployed in the United States. 
• Despite coming down, it is still above the average since 2000.

Inflation Remains Sticky

• With the economy strong, aggregate demand remains elevated.
• Therefore, inflation remains sticky and higher than the Federal Reserve (the Fed) would want. 
• NDR’s inflation timing model is now in its neutral zone, where CPI increases .26% points per annum.

Consumer Confidence

• Despite a strong economic backdrop, consumer confidence dropped below expectations on 2/25/2025. 
• It was a steep drop and caught investors by surprise. 
• It likely reflects consumers’ angst about inflation and the uncertainty in Washington D.C. over economic policy.

Economic Policy

• At the time of writing this, Trump has signed executive orders imposing a 25% tariff on all goods imported from Canada and Mexico, and a lower 10% tariff on Canadian energy exports. These tariffs are set to take effect March 4. 
• In addition to existing tariffs, Trump announced a 10% tariff on Chinese imports, and that was effective February 4.  That would be doubled on March 4.
• Trump also announced on February 26 plans to impose a 25% tariff on goods imported from the European Union. 
• Tariffs will increase the cost of imported goods at a time when inflation is already sticky and higher than the Fed would like.
• Stock investors dislike uncertainty, and there are three layers of uncertainty.
  • First, what will policy be exactly?
  • Second, when policy is implemented, what will affect be?
  • Third, how much of his proposals are a negotiating tactic?

Economic Policy Uncertainty

• Uncertainty can lead consumers and businesses to lower the amount they invest and consume in the future thus impacting economic growth.

Yield Curve

• Despite a strong economy and sticky inflation, yields have come down over the last month.
• Economic policy uncertainty is weighing on the markets.  In times of uncertainty, investors reach for the safety of bonds.

Fed Easing Cycle

• The Fed has penciled in only 1 rate cut for this year, but further policy uncertainty and/or negative economic data could bring their stance in line with the market, which is predicting 2-3 rate cuts this year.
• If the Fed were to lower rates faster than is currently expected, it would help buttress the stock market.

Sector Returns Year-to-Date

• Despite uncertainty, the S&P 500, and most sectors, have done well to start the year.
• The MAG 7 Stocks (MSFT, Apple, NVDA, Tesla, Meta, Google, Amazon) have been sold off.
• The Mag 7 ETF (MAGS) that owns each stock in equal proportion is still up over 35% in the last year, but this is close to 20% down from its peak in late 2024.

Sentiment

• Like consumer confidence, investor sentiment is pessimistic.
• Stocks tend to do well when investors are fearful.

Magnificent 7 Valuation

• Valuation for MAGS is more reasonable now.
• The fact that the market has remained resilient in the face of such influential and large companies dropping significantly is a healthy sign.
• If there was more of a broad-based sell-off it would be a warning sign that stock investors expect the economy to deteriorate.

Sector Returns 1-Year

• Despite the correction in MAGS, it has still outperformed all sectors in the S&P 500 over the last year.
• Valuations are more reasonable, sentiment is pessimistic, and the economy remains in good shape.  If that remains the case, a stock market correction in the 10-15% range would be a buying opportunity.

Learn more about our investment strategies:

Matthew Sapir Ristuccia, MBA, CFA

Chief Investment Officer, Principal

Matt is Argent’s Chief Investment Officer (CIO). Matt joined Argent in 2011 as an Analyst and became Director of Investment Research in 2013. In 2017 Matt was named Co-CIO, leading all aspects of Argent’s investment programs and processes. In 2019, Matt was named Chief Investment Officer. This includes setting the direction and oversight of internal and external asset allocation strategies, equity strategies, fixed income strategies, and private equity and private real estate investments.

Matt joined Argent after graduating summa cum laude (top 5% of class) from Olin Graduate School of Business at Babson College where he also received The Student Leadership Award. Matt completed all three levels of the CFA program in 2011. The CFA Designation is globally recognized as the highest set of credentials in the investment management industry. In 2017 Matt completed the Investment Management Workshop at Harvard Business School (HBS). Started in 1968, this selective executive education program brings together leading HBS faculty with leading investment executives from around the world and focuses on investment and business strategy.

At Babson Matt was selected to help manage Babson’s Endowment, specializing in healthcare stocks. During this time Matt worked closely with the head of this program who was the former Head of U.S. Equity Research at Fidelity and a disciple of Peter Lynch. Matt received his B.A. from Wheaton College where he was a First Team All-New England soccer player and helped lead the team to a final four appearance in 2003. After graduating in 2005 Matt worked with his grandfather, Louis Sapir, an esteemed disciple of Benjamin Graham, the “father” of value investing, before attending Olin.

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