March trading begins on Monday and let’s hope it looks better than what we have experienced over the last four months. By the way, I couldn’t help include a reference from the show ‘Severance’ on Apple TV in the above headline but it does remind me of the current state of economic data.
A mixed picture emerged this week with steady GDP growth, a robust Q4 consumption that contrast with rising jobless claims, declining consumer confidence, and weaker housing sales. Inflation pressures persist, while policy uncertainties (e.g., tariffs) cloud the outlook. The narrative from the markets is mixed and there is an emerging delta among market prognosticators as to the forward path of the economy as some whisper recession.
This uncertainty adds to worries that consumers might be adopting a more careful stance, which could hinder overall economic expansion. As fresh data becomes available, investors and analysts will keenly observe whether this deceleration is short-lived or a sign of a longer-lasting decline.
Still An Ugly Chart
The chart below of the S&P 500 futures looks like a giant see-saw since November. As you can see, there is a defined range as I have highlighted resistance and support zones at the top and bottom of the chart. The high for the month of February was in the resistance zone on the 19th and you can see the reversal and fall into the monthly close on Friday (far right side of the chart).
The good news is that we had enough of a rebound in the last hour of trading to indicate a bottom may have formed in the neighborhood of the support zone.
The Yield Curve Dropped
We can see below that Treasury yields dropped over the last month and notable is that 2-5Yrs are flirting with 4%. What is causing the drop? Recession fears or an adjustment to expectations of falling inflation?
It looks as though longer tenors will continue to have a bid until stocks break free of the current trading range. Eventually, the cloudy picture will dissipate and we will have clarity.
For next week, we will get another read on the strength of the labor market with the February payrolls report on Friday which will be highly anticipated for clarity on the economy.
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Paul J McCarthy III CFA
President, Kisco Capital
