Market Outlook
Last week, domestic equity markets resumed their decline as investor uncertainty regarding foreign trade policy overshadowed solid economic data. With growth stocks leading the decline, the S&P 500® Value is now on pace to have its biggest quarterly outperformance over its growth counterpart since 2022.
In our view, last week’s pullback was driven by weakening sentiment. For example, the S&P Global US Manufacturing Purchasing Managers’ Index (PMI®) fell into contraction territory following two months of expansion. Additionally, not only was the University of Michigan Consumer Confidence Index revised lower, but the report’s outlook for longer-term inflation jumped to 4.1%, a new 30-year high. In contrast, building permits and core durable goods new orders beat consensus expectations, and improved from the prior month.
We continue to believe market volatility remains driven by foreign trade policy uncertainty rather than a material weakness in economic data.
Chart of the Week
Despite potential upcoming changes to foreign trade policy on April 2, last week’s inflation report showed that year-over-year (y/y) price growth for motor vehicles remained negative.
In our view, market sentiment is negative due to rising inflation expectations, not recent economic data.
Against a highly uncertain backdrop, we continue to recommend quality large-capitalization equities.
