Market Insights Recap — Week of March 24, 2025

Hello, I'm Steve Orr, Chief Investment Officer at Texas Capital's Private Bank. Let's take a quick look at the investing landscape and run through a portfolio tune-up. Three things on our plate this week: Stocks remain in correction mode, bonds are trapped in a range waiting on tariffs and debt ceiling. The fed is in no hurry to change rates. And the growth scare may turn out to just be that. 

Stocks have yet to bottom in this correction, but we're drawing closer. Corrections usually run down to a bottom, have a brief rebound or two and another pullback usually to a lower low. That lower low almost always has less selling. That tells you the weak hands are washed out. Usually there's some bad news or unusual reaction to news. Finally, there are grinding days where it just does not look like much is happening. But underneath the surface, energy is building. We use technical indicators that are the heartbeat of the market. For example, whether the advanced decline line is firming or winner volume is increasing over loser volume. If we can follow through over the next couple of weeks with a firming advanced decline line and improving volume, then we can look for the correction to end in the next few weeks. You should focus in the meantime on sectors other than big tech. The growth scare narrative appears to be more in the consumer and business sentiment and survey data. The hard data we're watching, industrial production, retail sales, for example, they're hanging in there. Not great, just rolling along in second gear. A bit different from the growth scare worries that you see on TV. But the growth scare and tariff worries did drive sentiment down sharply back in February. Sentiment pulls on prices in both directions. When stocks are overvalued, say with the high price to earnings ratio, they're more sensitive to changes in sentiment. That's how tariffs and news noise were the trigger to this correction. 

Helping the tone last week was the Federal Reserve Open Market Committee's press release and Chairman Powell's press conference. The FOMC left short-term rates unchanged at 4.25% to 4.5%. But Chairman Powell said they're ready to shift the rate gears higher or lower, depending on what happens in the economy. The committee lowered their growth projection for the economy and raised their inflation target for year-end in a bow to tariff uncertainty. We get the uncertainty, mainly in regards to tariffs. How much, on who, how long? We think tariffs will have a milder effect on inflation than most of Wall Street. 

So what to do with portfolios? If you have money to put to work, you can afford to be patient. Our indicators are keeping us invested around the globe in a number of countries, but not all of them. We have a little higher cash in most portfolios, as we think later in the year the Treasury bond supply may push up rates temporarily. News that may move markets this week: consumer confidence, more of those sentiment readings, new home sales and final GDP growth in the fourth quarter of last year. In summary, we are seeing the typical technical and breath signs of a correction. No fun but not unusual. Expect some rallies this week in stocks thanks to quarter-end rebalancing by pension funds. Rates continue to be on hold, as is the Fed. They want to see what happens with tariffs and job growth in the coming months. Let us know how we can help you with portfolio design and construction; 'til next time.