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S&P 500 Falls for Third Week, Nasdaq Enters Correction Territory as Growth Concerns Rise
Equity markets fell for a third consecutive week as concerns around slowing growth emerged given policy uncertainty, tariffs, and government funding. Global equities (represented by the MSCI All Country World Index) were down -1.2% while domestic stocks (represented by the S&P 500 Index) were down over 3%.
Institute for Supply Management’s (ISM) Manufacturing PMI
On Monday, the Institute for Supply Management’s (ISM) manufacturing Purchasing Managers’ Index released its latest reading of 50.3% showing manufacturing activity expanded slightly in February. One thing to note from the release was a large drop in new orders falling from 55.1% to 48.6%.
US Labor Market
February’s jobs reports came in on Friday showing a gain of 151,000 jobs, which was slightly below most analysts’ expectations but was above January’s revised number of 125,000. Overall, we have seen job growth begin to moderate over the past 12 months. The good news is that unemployment remains low at 4.1% and wage growth remains solid year over year.
GDP Growth Forecast
The Atlanta Fed’s real-time GDP last Wednesday showed a negative forecast for GDP growth, this can be attributed to companies pulling forward imports as economic policy and tariffs remain uncertain. This propelled the U.S. trade deficit to a record high of $131 billion in January. We do believe that the projected drop in GDP will get reversed once inventory and sales numbers are reflected.
Looking Forward
In the week ahead a CPI report scheduled with a release on Wednesday will show if the recent trend of hotter-than-expected inflation has extended into February. The most recent CPI report showed an annual core inflation rate of 3.3% in January.
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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