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Equity Markets End Week Strong, After S&P 500 Falls into Correction Territory
Equity markets fell for a fourth consecutive week as the S&P 500 fell into correction territory on Thursday. Friday was the highlight with the S&P and Nasdaq rallying 2+% for the day. Overall for the week global equities (represented by the MSCI All Country World Index) were down -1.8% while domestic stocks (represented by the S&P 500 Index) were down over 2%.
Consumer Price Index (CPI)
A recent Consumer Price Index report, along with a subsequent reading on wholesale prices, reversed the trend of slightly higher-than-expected inflation. On Wednesday, the consumer price report revealed that core inflation, which excludes the often fluctuating energy and food prices, increased at an annual rate of 3.1% in February. This was a decrease from 3.3% in January and fell below economists’ consensus expectations.
U.S. Consumer Sentiment
U.S. consumer sentiment has dropped to its lowest point since November 2022, according to Friday’s preliminary monthly report from the University of Michigan survey. The decline from a February reading of 64.7 to 57.9 was much larger than economists had anticipated, with an increasing number of participants expecting both inflation and unemployment to rise. One thing to note here is the market tends to perform well on a forward 12-month basis when consumer sentiment is low as seen below.
Looking Forward
It is widely anticipated that the U.S. Federal Reserve will maintain interest rates at their current level when it wraps up its two-day meeting on Wednesday. However, the Fed’s updated economic projections and comments from Chair Jerome Powell could influence market movements. The timing of any future rate cuts remains uncertain due to conflicting inflation data and concerns over tariffs.
I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.
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