February Recap & Looking Ahead to March

As we begin the month of March, the end of the first quarter of 2025 is already looming large. Market volatility picked up in February as investors weighed the impact of tariffs, government spending cuts, and shifting economic data. The question on everyone’s mind: Is the economy heading toward a recession?

With uncertainty surrounding trade policies, inflation, and Federal Reserve policy, let’s take a look at how the markets fared in February and what investors should keep an eye on heading into March.

February Market Recap

Stocks Struggle Amid Uncertainty

February was a challenging month for equities, with all major indices experiencing declines:

• S&P 500: Finished February down 1.4% (Nasdaq)

• Dow Jones Industrial Average: Decreased by 1.6% (Advisor Perspectives)

• Nasdaq Composite: Declined by 4.0% (Advisor Perspectives)

The market downturn was influenced by President Trump’s announcement of new tariffs on imports from Mexico, Canada, and China, which raised concerns about escalating trade tensions and potential global economic impacts (Reuters).

Economic Data Sends Mixed Signals

Despite market volatility, economic data in February provided a mixed picture:

✔ Jobs Market Remains Strong – The U.S. economy added 170,000 jobs in February, keeping unemployment steady at 4% (MarketWatch).

✖ Inflation Concerns Persist – The latest Consumer Price Index (CPI) report showed inflation running at 3.1% year-over-year, prompting debate over whether the Federal Reserve will hold or cut rates in the coming months (Nasdaq).

✖ Retail Sales Slump – Consumer spending fell 0.4% in February, raising concerns that higher borrowing costs and inflation are taking a toll (Nasdaq).

✔ Corporate Earnings Resilient – With 90% of S&P 500 companies reporting, earnings were better than feared, though guidance remains cautious for the remainder of the year (Nasdaq).

Interest Rates & The Fed

The Federal Reserve held the federal funds rate steady at 4.25% to 4.50% during its January 2025 meeting, aligning with market expectations (Federal Reserve Bank of San Francisco). Fed officials signaled a cautious approach, emphasizing the need to monitor incoming economic data before making further rate adjustments.

• Governor Christopher Waller stated he was not in favor of a rate cut at the March policy meeting, citing the importance of assessing more economic data before making a decision (Barron’s).

• New York Fed President John Williams suggested he was content to hold interest rates steady at the upcoming meeting, citing no urgent need for changes (MarketWatch).

• Meanwhile, the European Central Bank (ECB) cut rates by 0.25%, citing weakening global demand and trade concerns (Nasdaq).

March 2025 Market Outlook

As we move into March, recession fears are growing, with Brian Wesbury (First Trust) and Morgan Stanley strategists both warning of a potential economic downturn later this year.

Key Themes to Watch This Month:

1. Trade Policy & Market Volatility

Markets will continue reacting to tariff developments. Investors should prepare for heightened volatility as businesses assess the cost impact and supply chain disruptions (Reuters).

2. The Recession Debate

Some indicators suggest economic weakness ahead:

• Retail sales have declined, signaling consumer caution.

• GDP growth projections are softening, with some analysts increasing recession odds from 23% to 32% (Reuters).

Still, the labor market remains stable, providing a buffer against immediate recession fears (MarketWatch).

3. Federal Reserve Policy & Interest Rates

With inflation above the Fed’s 2% target, policymakers remain data-dependent. Investors should closely watch Fed statements in March, as speculation about potential rate cuts later in 2025 increases (Nasdaq).

4. DOGE (Department of Government Efficiency) & Fiscal Policy Uncertainty

A major policy shift to watch in March is the implementation of the Department of Government Efficiency (DOGE) initiatives. These efforts, aimed at cutting waste and streamlining government operations, have led to significant layoffs in federal agencies.

• Some view this as a step toward fiscal responsibility.

• Others worry about rising unemployment and reduced government spending affecting economic growth.

Markets will be closely monitoring how these job cuts impact consumer confidence and spending (MarketWatch).

Bottom Line

As we enter March, markets remain in a delicate balance. While economic fundamentals are still holding up, uncertainty over tariffs, government job cuts, and Fed policy could create more volatility ahead.

At WWM, we take an active approach to risk management, using technical indicators and data-driven analysis to make objective, informed investment decisions. Our Gather & Protect philosophy ensures we identify opportunities, mitigate risks, and adjust portfolios dynamically to navigate evolving market conditions.

If you have any questions or want to review your investment strategy, don’t hesitate to reach out.

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