by Ivan Martchev
March 25, 2025
While last week finally delivered an up-week for the S&P 500, it was clearly messy, which is normal in a bottoming process. I do not believe the recent decline has anything to do with a deteriorating economy but rather with the aggressive policy agenda of the new Trump administration and the President’s tweets that are spooking investors. I don’t know if I am imagining it, as I certainly want to be the case, but it seems that the President’s tweeting style has calmed down, as if someone he trusts talked to him, explaining that tweeting too aggressively might be counterproductive. Since Mr. Trump is known to be a pragmatic man, it would not be surprising that he heard the message, for the time being that is. If he keeps it up and we get some wins in his blunt trade negotiations, the stock market will likely rebound more.
The fact that the stock market is rebounding does not mean it cannot trade under the March low, as none of us know the future, and things can get pretty messy in a negative news-flow scenario, but if we don’t get bad news in the next couple of weeks, and especially if we get good news, the stock market is likely to rally further. One piece of news that needs to be on the positive side is the March employment report, which is due at the end of next week. It also comes just after the April 2 tariff headline. Since we know some of the worst tariff offenders are trying to cut a deal, we may get some good news before April 2.
The issue is that the lopsided nature of the stock market is making the latest rotation very messy. Nvidia contributed 22% to the S&P 500’s return last year, as measured by market cap. Obviously, many stocks went down and others went up, but if the majority of last year’s return came from one stock, this is one explanation why December was so messy, with institutional investors hedging their huge previous gains.
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