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Market Update: Tariffied

The S&P 500 has fallen nearly 9% from its February highs, with the technology-heavy Nasdaq officially in correction terrority, while markets outside the U.S. continue to outperform.

March 2025, In the Loop

Key Insights
  • Trade tensions and economic uncertainty are fueling a broad equity sell-off, impacting investor sentiment and stock valuations.
  • Investors face a "transition period" as the administration signals willingness to endure short-term economic pain for long-term goals.
  • Market volatility may persist, but central banks could stabilize growth, creating opportunities in bonds and risk hedges.

Rising Uncertainty on “Transition Period”

  • What started with a decline in expensive tech stocks, including many of the Mag-7, has given way to a broad-based equity sell-off as the looming threat of extended trade wars and softer economic data has stoked fears of recession.
  • While it seemed investors had largely believed tariffs would be used as an initial tool to bring trading partners to the table and reach agreements to satisfy U.S. demands, recent comments by the administration signaling that they are willing to experience short-term economic pain in the pursuit of longer-term goals has rattled investors trying to adjust to this “transition period.”
  • Elevated stock market valuations, notably in the U.S. are being questioned, while at the same time, economic activity, both consumer and corporate are showing signs of softening, and is likely to lead to postponement on spending and hiring decisions.

Investor Implications

  • Taking President Trump at his word, we expect this uncertainty to persist over the near-term as his administration continues to take aggressive policy actions to achieve longer-term goals, which will likely weigh on growth and market sentiment, and possibly reignite inflation.
  • During Trump’s first term, trade negotiations with China lasted approximately 19 months, and while volatile, the markets largely responded positively to progress on negotiations. This time, however, seems different with the larger goals in mind.
  • While volatility may persist, we do believe the Fed and other central banks will likely step in to stabilize growth if the economy and labor markets deteriorate more quickly, with inflation possibly taking a backseat. As a result, in this risk-off environment, bonds could continue to offer support as yields may decline further, near-term.
  • Importantly, diversification away from previously narrow markets is providing support in the sell-off and we’re closely monitoring the markets as dislocation typically creates opportunities.

Tale of Two Terms: S&P 500 Price Change since Inauguration Day

As of 11 March 2025
market update: tarrfied

Performance data quoted represents past performance which is not a guarantee or a reliable indicator of future results.
Data shown in USD. Source: Bloomberg Finance, LP. Please see Additional Disclosures page for relevant index data provider legal notices & disclaimers for this Standard & Poor’s sourcing information.

ADDITIONAL DISCLOSURES

The Magnificent 7 (”Mag 7”) is Apple, Alphabet, Amazon, Meta, Microsoft, NVIDIA, and Tesla.

S&P 500 Index measures the performance of the large-cap segment of the market. It is a market cap-weighted index of 500 stocks representing major industries.

The S&P 500 Index is a product of S&P Dow Jones Indices LLC, a division of S&P Global, or its affiliates (“SPDJI”), and has been licensed for use by T. Rowe Price. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC, a division of S&P Global (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). This product is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.

Views expressed are as of 11 March 2025 unless otherwise noted.

The specific securities identified and described are for informational purposes only and do not represent recommendations.

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