Market Insights Recap — Week of March 31, 2025

Hello. I'm Steve Orr, Chief Investment Officer at Texas Capital's Private Bank. 

Boy, let's wrap up this quarter and think about our portfolios. Three things on our plate this week. Bonds over stocks, tariff trauma is the only brick in the wall of worry and hard over soft data. Now, you can be forgiven if you think this has been a tough quarter for markets. As we wrap up the first quarter this week, the S&P 500 is on track to drop about 5% for the quarter. That's not earth shattering by any stretch. Just a typical consolidation. The 10% drop in the S&P 500 and the 14% drop in the Nasdaq from their highs had made the last six weeks pretty unsettling for a lot of folks. We get it. There's a lot going on in and out of the markets, so it always pays to take a step back and see the big picture. Corrections are like birthdays, even when you don't want them anymore, they keep coming. Usually about once per year. 

This correction was built on stock prices of the magnificent seven tech companies, running well ahead of company earnings over the last two years, and then triggered by tariff uncertainty. The on off on again tariff trauma coming out of D.C. has caused a lot of our business clients to just go sit on the sidelines. Some are even saying it's the most difficult environment to do business in in their last 40 years. That's their feelings, their sentiment. We call that soft data. The correction is not over. We need to retest that 5500 low on the S&P 500 that was set back on March 13. That retest should be in the next couple of weeks, we think. Unlike our real-world business clients, our stock portfolios can afford to be patient. 

When the markets turn in their report cards for the quarter, we're going to see the bond prices beat stock prices. Bonds rose about 2% in price against stocks falling around 5. Now you know that bonds have had the roughest three years in their history performance-wise, thanks to the fed raising rates off of 0%. But this is the first quarter since 2023's third quarter that bonds have actually outperformed stocks. So the 10-year Treasury yield now is about a quarter point lower from the end of last year. That could help some home buyers with a slightly lower mortgage rate. Commodities beat stocks, too, thanks to gold, copper and natural gas price rises. Short-term interest rates not changing anytime soon since the Fed is waiting to see the effects of tariffs. What to consider for your portfolio? Keeping some bonds in the portfolio is going to be a good idea this year, as the ride will still be bumpy for stocks. 

Looking ahead, this is jobs week. March unemployment steady at 4.1%. Payroll growth steady around 140,000 new jobs. Finally, job openings steady at 7.6 million. Even though sentiment is depressed thanks to tariff trauma, the economy is still rolling along in second gear. Remember I said steady for each of those big, hard data stats. So the hard data is still on the side of steady but lackluster growth. To summarize, stock correction following the usual cycle, looking for that next step of a retest of the March 13 low on the S&P 500. Interest rates are slightly lower thanks to tariff trauma worries. The Fed is not going to change short-term rates any time soon, so let us know how we can help you; 'til next time.