Equity Overview

Nine of eleven sectors in the S&P 500 declined in March, with technology and consumer discretionary tied for worst loser.  Value stocks outperformed growth.  Volatility was extreme, as the S&P 500 moved more than 1% on 12 of 21 trading days. The forward price/earnings ratio declined from 21.2 to 20.5, but was still well above the 5-year and 10-year averages.

Macro Overview

Economic headlines in March echoed the cautionary tone in February, driven in large measure by continued worries about the impact of tariffs.  Employment, retail sales, and housing numbers were unimpressive.  The Conference Board measure of consumer confidence fell to its lowest level in four years, as consumer inflation expectations for the coming year rose to 6.2% (against a backdrop of actual inflation of 2.8% over the past year).

The Fed kept interest rates unchanged at its March meeting.  However, it also lowered its forecast for economic growth and raised inflation expectations.  A week later those policy changes were reinforced as the Fed’s preferred inflation measure rose more than expected.

Markets got a reprieve on the last day of the month as the president suggested that the tariffs would not be as bad as feared.  But the whimsical nature of the president’s tariff policies continues to trouble investors.