Market Outlook
Last week, all major domestic equity indices rebounded, snapping a four-week decline for the Russell 3000®. While the Federal Open Market Committee (FOMC) held interest rates steady at its March 19 meeting, the Summary of Economic Projections, as well as comments made by Federal Reserve (Fed) Chair Jerome Powell, gave investors hope that the potential economic impact of tariffs will be short-term in nature. Despite ongoing fiscal policy uncertainty, economic data last week such as retail sales, industrial production, and housing starts were good enough to reassure investors that economic data is solid. As a result, smaller capitalization and value stocks outperformed. In Germany, lawmakers voted to allow a large increase in defense and infrastructure spending, which boosted investor sentiment for developed international equities. This week, the Core Personal Consumption Expenditure (PCE) Price Index reading, the Fed’s preferred inflation gauge, will be released; economists expect to see a slight year-over-year increase.
Chart of the Week
The FOMC’s median expectation for the 2025 core PCE climbed to 2.8%, a 30-basis point increase from the December projection.
The market was calmed by the Fed’s messaging that longer-term inflation assumptions remain anchored and that short-term inflationary pressures may be transitory.
We continue to believe that the recent market pullback has been driven by negative investor sentiment, rather than a material weakening in economic data.
