Weekly Market Commentary March 24th to March 28th 2025
The recent release of Personal Consumption Expenditures (PCE), the Federal Reserve’s preferred measure of inflation, has raised concerns about the potential for a reacceleration in prices. The headline PCE increased by 0.3% month-over-month, aligning with both the previous month’s data and the expectations of economists. However, the Core PCE, which excludes changes in food and energy prices, showed a meaningful increase of 0.4% month-over-month and 2.8% year-over-year, surpassing consensus estimates. Prices for goods saw a 0.2% increase, driven by higher costs for recreational goods and vehicles, which rose by 0.5%, while gasoline prices decreased by 0.8% and offset some of the overall increase in the headline figure. This data supports the Federal Reserve’s current modestly restrictive stance on monetary policy.
Personal income increased by 0.8% but consumers are choosing to save more as they battle resilient inflation and uncertain economic conditions. This dynamic was evident in the Personal Savings Rate, which increased to 4.6%, the highest level since June 2024 but still remains below historical averages (5.7% last 25 years).
The Manufacturing Purchasing Managers’ Index (PMI) has fallen back into contractionary territory at 49.8, which was lower than the expected 51.5. PMI Services continue to be a strength of the economy, easily surpassing expectations at 54.3 which compared favorably to the 51.5 that was anticipated. Despite the Federal Reserves’ restrictive stance, which is considered favorable for the U.S. Dollar, we have seen the Dollar Index decline from over 108 this year to 104.
We continued to see a risk-off sentiment from investors. Indices declined for the fifth time in a six-week period. The S&P 500 closed at 5,581, down 1.5% with most of the decline happening on Friday. While the Nasdaq closed down 2.6% at 17,322 and Dow Jones Industrials fell to 41,583, lower by 1.0%. The 10-Year U.S. Treasury remained relatively unchanged at 4.26%.
Next week’s key economic data includes more Manufacturing data and the all-important Unemployment Report.
