March 2025 - Market Update

Data Dashboard

Stock Market

At close on 4th April, the S&P 500 is down 17.5% from its highs, driven by retaliatory tariff announcement, growing inflation fears and consumer sentiment

Energy & Utilities were the only positive sectors in March, while Technology and Consumer Discretionary sectors kept getting hammered down.

After the retaliatory tariff announcements, international equity markets have continued to shed trillions in market cap, on concerns over global supply chain disruption and tariff-induced inflation pressures on consumer spending.

Its important to keep level headed on such market pullbacks, and assess risk tolerance from a long-term perspective, and avoid panicking.

March Monthly Returns (by US Sector)

Bond Market

Amid rising inflation expectations, the breakeven rate for the 2-year Treasury Inflation-Protected Securities (TIPS) climbed to 3.28%. Additionally, high-yield spreads widened to 3.47%, up from 2.80% at the end of February. Investors have increasingly turned to Gold as a safe haven asset, favoring it over long-term treasuries. Despite minimal movement in long-term yields, Gold has surged by 9.45% this month, driven by growing market uncertainty and heightened volatility. This shift reflects broader concerns about inflationary pressures and the potential risks to traditional financial instruments, with Gold emerging as a strong alternative amidst market turbulence.

Economics

At the FOMC meeting, the Federal Reserve kept rates steady at 4.25 - 4.5%. Chair Jerome Powell maintained that the Fed is continuing with their wait-and-see approach. He acknowledged the upward pressure on inflation and the resilience of the US labor market. The swaps markets are pricing in 2 rate cuts in 2025. Treasury yields had little movement, with the 10Y remaining at 4.21%, and the 2Y nudging lower.

The Fed's preferred inflation gauge, the core PCE index, rose to 2.79%. Investors are nervous about the impact of tariffs, especially because an endgame isn't in sight.

The VIX Index, also referred to as the market's "fear gauge", rose in March, ending at 22.28%.

March Economic Dashboard

Tactical Trades

In our tactical ETF portfolio, we increased our Europe exposure in March, while reducing US Financials & Utilities.

We also increased the duration in our tactical fixed income portfolio to include intermediate term treasuries.

General Client Considerations

2025 IRS annual contribution limits for 401(k), 403(b), most 457 plans and Thrift Savings Plans (TSP) increased from $23,000 to $23,500. Changing your elections at the beginning of the year can help spread out contributions evenly, and ultimately maximize your tax advantaged retirement savings. If you are participating in a company sponsored retirement plan and maxing out your contribution, please reach out to your HR department to ensure your contribution amount has been updated to reflect the new maximums.

Additionally, if you are 50 or older, the catchup contribution limit for 401(k), 403(b) and TSPs has remained the same at $7,500. If you are born in 1975 or earlier, you can contribute up to $31,000 to these accounts in 2025. You do not have to wait until your 50th birthday to make catchup contributions - the contributions can start on January 1st of the year you turn 50.

Starting 2025, if you are aged between 60-63, you can contribute up to a total of $34,750 (eligible for a higher catch-up contribution due to SECURE 2.0).

For more information, check out our newsletter on 2025 Retirement Account Limits.

As always, reach out with any questions or concerns.

Thanks,

The Friedenthal Financial Team