The State of Markets: “US Equities: What’s Next?”
Volatility returned to markets in a meaningful way on Friday. After four prior days of relatively subdued volatility (and some hope amongst investors that calm was returning to the equity markets), the S&P500 sold off by 2.0% on Friday, the NDX100 was 2.6% lower while the Philly SOX closed down 2.9%. With that weakness, the SOX (NB largest component is Nvidia) reached at its lowest level since 1st February last year (and below its prior lows in this pullback on 11th March) – see chart. Neither the NDX100 nor the SPX made a new closing or intraday low below their recent mid-March lows. The NDX100, though, is close.
Renewed selling in markets yesterday appeared to be triggered by: i) the worse than expected PCE deflator data; & ii) nervousness about Trump’s further tariffs announcements due next Wednesday, 2nd April (& dubbed ‘Liberation Day in America’ by Trump).
The key question, therefore, is: What’s next? Are US markets about to make new lows below their mid-March lows? Or is there upside in equities over coming weeks? Is a relief rally about to get started (perhaps on a retest of the SPX lows)?
We outline our views on those questions in recent research (e.g. see recent ‘Daily Risk Appetite’ publications). Next week we will also publish our next ‘Tactical Equity Asset Allocation’ publication which forecasts the outlook for the US equity market on a 1 – 4 month basis. Having turned cautious in early February, the question is whether (and when) this current weakness is an opportunity?
This week’s US macro data includes ISM manufacturing and service sector PMIs for March (on Tuesday and Thursday respectively), as well as ADP employment on Wednesday, and nonfarm payrolls on Friday. In Europe, the first March estimates for inflation are due on Monday (for Germany) and Wednesday (for the Eurozone). Elsewhere there are speeches by key central bankers (e.g. Lagarde on Tuesday and Powell on Friday), while ‘Liberation Day’ on Wednesday will be watched closely (for tariff details). Please see below for a full list of key macro data and events this coming week.
Key chart: Philly SOX candlestick (cash index), with 50 & 200 day moving averages
Upcoming important data/events this week:
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Events: |
RBA policy decision (Tues, 4:30am); speech by the ECB’s Lagarde at an AI conference (Tues, 1:30pm); speech by the Fed’s Powell on economic outlook in Virginia (Fri, 4:25pm). |
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Monday: |
German headline CPI (March first estimate, 1pm). |
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Tuesday: |
US ISM manufacturing PMI (Mar, 3pm); US JOLTS job openings (Feb, 3pm); Eurozone headline & core CPI (March first estimate, 10am); Chinese Caixin manufacturing sector PMI (Mar, 2:45am). |
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Wednesday: |
US ADP employment change (Mar, 1:15pm). |
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Thursday: |
US ISM services PMI (Mar, 3pm); US Challenger job cuts (Mar, 12:30pm); Chinese Caixin service sector PMI (Mar, 2:45am). |
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Friday: |
US nonfarm payrolls, hourly earnings & unemployment data (Mar, 1:30pm) |
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Key earnings: |
N/A |
Key Research
Quarterly Asset Allocation Update No. 61, 28th March 2025:
“Navigating The Policy Flip: Fiscal to Monetary a.k.a Stay Defensive in Strategic Portfolio”
A potentially significant fiscal tightening is underway in the US, and will increasingly expose the ‘soft underbelly’ of economic growth. With that, the growth driver will need to switch (away from loose fiscal – and towards loose monetary policy).
That transition should create a challenging environment for risk assets. As is often the case, tighter financial conditions are the key mechanism for generating looser Fed policy. For now, therefore, we recommend staying defensive in the strategic portfolio.
Key North American macro data & events:
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Events: |
Speeches by the Fed’s Jefferson on communication (Thurs, 5pm) & Powell on economic outlook in Virginia (Fri, 4:25pm). |
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Monday: |
US Chicago PMI (Mar, 2:45pm); US Dallas Fed manufacturing sector activity (Mar, 3:30m). |
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Tuesday: |
Canadian S&P Global manufacturing sector PMI (Mar, 2:30pm); US S&P manufacturing sector PMIs (March final estimate, 2:45pm); US construction spending (Feb, 3pm); US JOLTS job openings (Feb, 3pm); US ISM manufacturing PMI (Mar, 3pm); US vehicle sales (Mar, 3pm); US Dallas Fed service sector activity (Feb, 3:30m). |
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Wednesday: |
US ADP employment change (Mar, 1:15pm); US durable goods orders (February final estimate, 3pm). |
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Thursday: |
US Challenger job cuts (Mar, 12:30pm); US trade balance (Feb, 1:30pm); US weekly jobless claims (1:30pm); Canada S&P service sector PMI (March final estimate, 2:30pm); US S&P service sector PMIs (March final estimate, 2:45pm); US ISM services PMI (Mar, 3pm). |
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Friday: |
US nonfarm payrolls, hourly earnings & unemployment data (Mar, 1:30pm); Canadian employment data (change in employment, unemployment rate & participation rate) (Mar, 1:30pm). |
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Key earnings: |
N/A |
Fig B: US Challenger job cuts (number, shown with US recession bands)
Key European macro data & events
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Events: |
Speeches by the ECB’s Panetta in Rome (Mon, 9am), Villeroy in Paris (Mon, 9am), Lagarde & Lane at an AI conference (Tues, 1:30pm & 5:30pm) & Schnabel in Paris (11:30pm); ECB publishes account of March 5-6 policy meeting (Thurs, 12:30pm). |
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Monday: |
German retail sales (Feb, 8am); Italian core CPI (March first estimate, 10am ; German headline CPI (March first estimate, 1pm). |
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Tuesday: |
HCOB manufacturing sector PMIs for Spain (8:15am), Italy (8:45am), France (8:50am), Germany (8:55am) & EZ (9am) - all March final estimates apart from Spain & Italy; Italian unemployment rate (Feb, 9am); Eurozone headline & core CPI (March first estimate, 10am); Eurozone unemployment rate (Feb, 10am). |
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Wednesday: |
Spanish unemployment rate (Mar, 8am). |
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Thursday: |
HCOB service sector PMIs for Spain (8:15am), Italy (8:45am), France (8:50am), Germany (8:55am) & Eurozone (9am) – all March final estimates apart from Spain & Italy; Eurozone PPI (Feb, 10am). |
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Friday: |
German factory orders (Feb, 7am); French industrial & manufacturing production (Feb, 7:45am); Spanish industrial production (Feb, 8am); HCOB construction sector PMI for Germany (Mar, 8:30am); Italian retail sales (Feb 9am). |
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Key earnings: |
N/A |
Fig C: EZ headline & core CPI (Y-o-Y %, shown with recession bands)
Key UK macro data & events
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Events: |
Speech by the Bank of England’s Greene on ‘UK monetary policy/macro conjuncture’ (Tues, 9:15am). |
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Monday: |
Lloyds business barometer (Mar, 12:01am); Net consumer credit, mortgage approvals & M4 money supply (Feb, 9:30am). |
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Tuesday: |
BRC shop price index (Mar, 12:01am); Nationwide house prices (Mar, 7am); S&P manufacturing sector PMI (March final estimate, 9:30am). |
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Wednesday: |
N/A |
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Thursday: |
S&P service sector PMI (March final estimate, 9:30am). |
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Friday: |
New car sales (Mar, 9am); S&P construction sector PMI (Mar, 9:30am). |
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Key earnings: |
N/A |
Fig D: UK Nationwide house prices (Y-o-Y %, shown with recession bands)
Key Asia-Pacific macro data & events
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Events: |
RBA policy decision (Tues, 4:30am); speeches by the RBA’s Kent (Wed, 12:25am) & Bullock (Wed, 11pm); Market holiday in China on account of ‘Ching Ming’ festival (Fri). |
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Monday: |
Japanese industrial production (February first estimate, 12:50am); Japanese retail sales (Feb, 12:50am); Australian headline CPI (Mar, 1am); Australian private sector credit (Feb, 1:30am); Japanese housing starts (Feb, 6am); Australian S&P manufacturing PMI (March final estimate, 11pm). |
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Tuesday: |
Japanese jobless rate (Feb, 12:30am); Australian retail sales (Feb, 1:30am); Japanese Jibun Bank manufacturing sector PMI (March final estimate, 1:30am); Chinese Caixin manufacturing sector PMI (Mar, 2:45am). |
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Wednesday: |
Japanese monetary base (Mar, 12:50am); Australian building approvals & private sector houses (Feb, 1:30am); Australian S&P services sector PMI (March final estimate, 11pm). |
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Thursday: |
Australian imports/exports, & trade balance (Feb, 1:30am); Japanese Jibun Bank services sector PMI (March final estimate, 1:30am); Australian job vacancies (Feb, 1:30am); Chinese Caixin service sector PMI (Mar, 2:45am). |
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Friday: |
Japanese household spending (Feb, 12:30am); Australian household spending (Feb, 1:30am). |
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Key earnings: |
Kweichow Moutai (Thurs); Yaskawa Electric corp (Fri). |
Fig E: Chinese Caixin manufacturing & service sector PMIs (index)
Last week:
Longview on Friday, 28th March 2025:
“The Shifting Shape of Global Growth”
Quarterly Asset Allocation Update No. 61, 28th March 2025:
“Navigating The Policy Flip: Fiscal to Monetary A.k.a Stay Defensive in Strategic Portfolio”
Valuation Quarterly Asset Allocation Update No. 61, 27th March 2025:
“The US vs. The Rest”
The SHORTVIEW (& market positioning), 25th March 2025:
“Copper (+27% YTD): Tariffs & China”
Prior week:
Longview on Friday, 21st March 2025:
“Trump -> Is It Just Chaos? Or Is There A Plan?”
China Quarterly Asset Allocation Update No. 61, 20th March 2025:
“China: ‘Sugar Rush’ Economics”
US Quarterly Asset Allocation Update No. 61, 19th March 2025:
“US: Mid-Cycle Slowdown NOT Recession”
Commodity Fundamentals Report No. 186, 18th March 2025:
“OIL: BUY Case Brewing”