March Market Commentary

US stocks sank in March over concerns of a global trade war. The Trump administration moved ahead with 25% tariffs on steel imports and 10% tariffs on aluminum imports, however a number of countries could be spared. The President also targeted China with a threat of $60 billion in tariffs and China retaliated with plan s of tariffs on US goods. The decision to go ahead with the protectionist policies resulted in Trump’s top economic Advisor Gary Cohn deciding to resign. First quarter corporate earnings are expected to increase 14.8% over 2017. Economic news remained mix with 313,000 new hires in February, the largest monthly gain since July 2016. Unemployment remained at 4.1% as 800,000 people joined the workforce and wage growth eased and January’s increase was revised down. Inflation declined and durable goods orders rose at their best pace in eight months. However, auto sales fell 2.4%, and retail sales and consumer spending disappointed. Oil prices have gained 5.4% for the month and 8.5% for the first quarter. US stocks dropped 2.01% in March, bringing them down 0.64% for the first quarter.

Foreign stocks fell as well on trade war concerns. In Europe first quarter corporate earnings are expected to rise 3.4% from 2017. The ECB stated at its March meeting that it would keep interest rates unchanged and continue its asset purchase program until September. Business activity in the Eurozone slowed for a second straight month in March. An indicator comparing economic data to expectations in Europe has hit its lowest level in two years. China kept its target growth rate for 2018 at 6.5%. Its growth rate for 2017 was 6.9%. Japan’s industrial production jumped 4.1% in February and manufacturers expected further gains in the coming months. Emerging markets well outpaced developed markets in March and the first quarter. International stocks fell 1.70% for the month and have declined 1.13% for the year to date.

Bonds rose in March as investors moved to safe haven investments over concerns of a trade war. The Fed voted to raise the Fed Funds rate 0.25% to a range of 1.5% to 1.75% at their March meeting. They also said they expected to raise their benchmark rate another two to three times this year and three times in 2019. The Fed projects faster growth, higher inflation and lower unemployment in coming years. The interest rate increase at the meeting and the projections for the year were in line with expectations. The 10 year Treasury yield fell over the month ending at 2.74% down from 2.87% to start the month. For the month and quarter higher credit quality bonds led the way. On the maturity side longer term bonds outpaced in March but trailed short term bonds for the quarter. The broad bond market rose 0.64% in March, but is down 1.46% for the year to date.