The Markets
“If you can keep your head when all about you are losing theirs…”1
The advice offered by Rudyard Kipling’s poem “If—” resonated last week. A sharp escalation in trade tensions sparked a stock market downturn despite news that the United States economy created far more jobs in March than economists had expected, reported Lucia Mutikani of Reuters.2
Late Wednesday, President Trump announced tariffs on countries around the world. The tariffs were significantly larger than anticipated, and stock markets immediately moved lower. Over two days, the Standard & Poor’s (S&P) 500 Index lost about $5 trillion in market capitalization, reported Lynn Thomasson of Bloomberg.3
It was the “largest decline for stocks listed on major U.S. exchanges since March 16, 2020, when $3.5 trillion in value was wiped out, according to Dow Jones Market Data,” reported Connor Smith of Barron’s.4 (March 2020 was when the COVID-19 outbreak officially became a pandemic.5)
In contrast, government bonds rallied as yields fell. Investors preference for lower risk assets “resulted in rising demand for government debt in the U.S., U.K., Germany, Japan and Australia — which sent yields down across all those countries,” reported Vivien Lou Chen of MarketWatch.6
Three reasons for the stock market downturn
While tariffs were the catalyst for the market downturn, they weren’t the only reason for the decline. Other contributing factors included:
- A tsunami of uncertainty. You’ve heard it before: Markets hate uncertainty. The new administration’s tariffs brought a tsunami of uncertainty. Some investors opted for safe havens as they awaited greater clarity around key questions, including:
- Are the tariffs a negotiating tool or a permanent tax?
- How will tariffs effect the outlook for economic growth?
- How will tariffs effect corporate profitability?
- How will other countries respond?
“The scope, speed and magnitude of the Trump administration’s tariff blitz left investors with a lot of questions. But one point came through crystal clear: The post–World War II global world economic order is no longer. That is forcing a reassessment by countries on how to respond and pushing investors to reassess long-held assumptions about profit margins, investments, and inflation, reported Reshma Kapadia of Barron’s.”7
- High market valuations. Over the past two-plus years, excitement about artificial intelligence, an economic soft landing, pro-business policies, and other factors have helped lift stock prices to extraordinary levels. By many measures, U.S. stocks were expensive, which made them vulnerable to decline, reported Jacob Sonenshine of Barron’s.8 The imposition of extraordinary tariffs forced investors to reassess expectations for U.S. economic growth, corporate earnings, inflation, and share prices.
“Over the medium to longer term, Trump’s tariff and trade policy will likely accelerate the move to diversify supply chains, emphasize regionalization over globalization, and invest in becoming more self-reliant… But given the uncertainty and increasing costs of inputs, companies may rethink where they allocate long-term capital,” wrote Kapadia. “…’tariffs plus associated uncertainties provide more incentives to build around the U.S., not in the U.S.,’” stated to a source cited by Kapadia.7
- The tariff narrative. Narrative economics is a theory developed by Nobel-prize winning economist Robert Shiller. Its premise is that viral stories influence economic behavior.9 As a result, viral narratives can influence markets. Shiller explained, “…whether it’s the belief that tech stocks can only go up, that housing prices never fall, or that some firms are too big to fail. Whether true or false, stories like these—transmitted by word of mouth, by the news media, and increasingly by social media—drive the economy by driving our decisions about how and where to invest, how much to spend and save, and more.”10
Last week, a dominant narrative was that tariffs may cause a trade war, which could have unfavorable and long-lasting effects on the U.S. economy. “While trade wars don’t involve armies and bloodshed, some of the same rules apply—especially when it’s a war of choice. Strengths need to be assessed, allies cajoled, goals set, and preparations made. When done right, victory can be reached with relative ease and result in an increase in standing. When poorly planned, strengths turn into weakness, quick victories become battles of attrition, and unintended consequences can last for years,” reported Ben Levisohn of Barron’s.11
By the end of the week, the technology-heavy Nasdaq Composite Index was in bear market territory, down more than 20 percent from its previous high. The Dow Jones Industrial Average had moved into correction territory, and the S&P 500 Index had experienced its worst week since 2020, reported Amalya Dubrovsky, Karen Friar, and Ines Ferré of Yahoo! Finance.12 Yields on longer maturities of U.S. Treasuries moved lower, pushing the value of previously issued Treasuries higher.13
Stock market volatility is likely to continue as the tariff story plays out. While the tariff story plays out, it’s a good idea to stay calm and focus on your plan. Your portfolio allocation and diversification strategies were put in place to help you achieve your financial goals. Taking drastic action in response to a short-term market upheaval could affect your ability to reach those goals. If you have questions or would like to discuss recent events, please get in touch.
Data as of 4/4/25 | 1-Week | YTD | 1-Year | 3-Year | 5-Year | 10-Year |
| Standard & Poor’s 500 Index | -9.1% | -13.7% | -1.4% | 3.5% | 13.8% | 9.3% |
| Dow Jones Global ex-U.S. Index | -5.6 | -0.2 | -1.0 | 0.0 | 7.6 | 1.9 |
| 10-year Treasury Note (yield only) | 4.0 | N/A | 4.3 | 2.4 | 0.7 | 1.9 |
| Gold (per ounce) | -0.6 | 17.0 | 33.2 | 16.5 | 13.1 | 9.7 |
| Bloomberg Commodity Index | -5.8 | 0.9 | -2.5 | -7.4 | 9.7 | -0.1 |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
FIRST QUARTER REVIEW: CHANGING EXPECTATIONS. In late January, as the new administration took office, markets anticipated that proposed tariffs would create economic headwinds that could be offset by the positive effects of deregulation (a productivity boost) and tax cuts (economic stimulus), reported Ben Levisohn of Barron’s.14 By the end of the quarter, market expectations had changed dramatically.
“The highest-conviction trades coming into 2025 – buy U.S. exceptionalism and the Mag 7, avoid the rest of the world, sell bonds – have been turned on their head. Chinese and German stocks are up by double digits since Jan. 20, while the U.S. – and notably information tech and consumer-discretionary stocks – is down since then,” reported Randall Forsyth of Barron’s.15
A market rotation
Financial markets experienced a rotation during the first quarter as market expectations shifted. Rotations occur when a dominant trend fades. Typically, investors sell investments that were in favor and buy assets that they believe are better opportunities, reported Sarah Hansen of Morningstar.16 During the first quarter of 2025, we saw sector, style, and regional rotations.
U.S. technology stocks lost their luster. In the United States, the information technology, communication services, and consumer discretionary sectors – home to the Magnificent Seven – delivered stellar total returns in 2023 and 2024. However, their dominance faded in the first quarter of 2025, while more defensive sectors of the market delivered positive returns. 17,18
Value stocks came into favor. “Worries over historically elevated tech stock valuations, combined with a tariff-induced bout of risk avoidance, have driven the recent rotation from growth into value,” reported Esha Dey of Bloomberg.19 The S&P 500 Value Index was up 0.28 percent during the first quarter, while the S&P 500 Growth Index dropped 8.47 percent.20
International stocks outperformed. “As the US stock market lost ground in the quarter, international markets surged amid a global shift. Chinese markets gained 14.17 [percent], while eurozone markets rose 12.24 [percent], thanks in part to major fiscal initiatives designed to stimulate growth and enhance the region’s defense capabilities amid the ongoing conflict between Russia and Ukraine,” reported Sarah Hansen of Morningstar.21
Rotations can be healthy. The key is “to focus on emerging leadership in other sectors demonstrating relative strength,” stated a source cited by Levisohn.14
Weekly Focus – Think About It
“When I hear somebody sigh, ‘Life is hard,’ I am always tempted to ask, ‘Compared to what?’”22
– Sydney J. Harris, Journalist
* These views are those of Carson Coaching, not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the 3:00 p.m. (London time) gold price as reported by the London Bullion Market Association and is expressed in U.S. Dollars per fine troy ounce. The source for gold data is Federal Reserve Bank of St. Louis (FRED), https://fred.stlouisfed.org/series/GOLDPMGBD228NLBM.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
Sources:
2 https://www.reuters.com/markets/us/us-job-growth-beats-expectations-march-2025-04-04/
3 https://www.bloomberg.com/news/newsletters/2025-04-04/stock-market-crash-trump-trade-war-hits-s-p-500-nasdaq-100 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-07-25-Bloomberg-Trump-Takes-Wrecking-Ball%20-%203.pdf
4 https://www.barrons.com/livecoverage/stock-market-today-040325?mod=hp_LEDE_A_1 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-07-25-Barrons-Stock-Market-Worst-Day%20-%204.pdf
5 https://www.yalemedicine.org/news/covid-timeline
7 https://www.barrons.com/articles/trump-tariffs-u-s-trade-war-china-europe-cf9a1227 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-07-25-Tariff-Damage-Cant-be-Undone%20-%207.pdf
8 https://www.barrons.com/articles/stock-market-expensive-rally-cd5f460e or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-07-25-Barrons-Stock-Market-Avoid-Bloodbath%20-%208.pdf
9 https://news.yale.edu/2019/11/04/robert-shiller-power-narratives
11 https://www.barrons.com/articles/stock-market-trump-tariff-bear-288ed46b?refsec=up-and-down-wall-street&mod=topics_up-and-down-wall-street or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-07-25-Barrons-Trump-is-Fighting-Trade-War%20-%2011.pdf
[1]4 https://www.barrons.com/articles/stock-market-outlook-rethink-trump-tariffs-federal-reserve-policy-5776184b?refsec=up-and-down-wall-street&mod=topics_up-and-down-wall-street or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-07-25-Barrons-2025-Market-Prediction-Soured%20-%2014.pdf
[1]5 https://www.barrons.com/articles/u-s-stocks-suffer-trump-economic-paradigm-shift-86306db0?mod=article_inline or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-07-25-Barrons-Trump-Engineering-Paradigm-Shift%20-%2015.pdf
16 https://www.morningstar.com/markets/stock-market-rotation-is-underway-will-it-last
[1]7 https://www.spglobal.com/spdji/en/documents/performance-reports/spdji-sector-performance-matrix.pdf
[1]8 https://www.spglobal.com/spdji/en/documents/performance-reports/dashboard-us-sector.pdf
[1]9 https://www.bloomberg.com/news/articles/2025-03-28/value-stock-gains-need-fresh-catalyst-with-earnings-a-wild-card or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-07-25-Bloomberg-Value-Stock-Gains%20-%2019.pdf
20 https://www.spglobal.com/spdji/en/indices/equity/sp-500-value/#overview and https://www.spglobal.com/spdji/en/indices/equity/sp-500-growth/#overview [Factsheets]
21 https://www.morningstar.com/markets/13-charts-q1s-dramatic-rotation-stocks
22 https://www.inc.com/bill-murphy-jr/365-inspirational-quotes-for-2025/91066225
The Markets
Risk-on. Risk-off.
If you read the financial press, you may have seen the terms “risk-on” and “risk-off”. When investing, there is a risk-return spectrum. Stocks typically have higher risk and higher return potential than high-quality bonds. High-quality bonds have lower risk and lower return potential than stocks, although they typically have higher risk and higher return potential than cash.1
In financial speak, investors are:
- Risk-on when they are excited about investing in stocks (and other types of assets that have higher risk profiles). “Risk-on environments can be carried by expanding corporate earnings, optimistic economic outlook, accommodative central bank policies, and speculation. As the market displays strong influential fundamentals, investors perceive less risk about the market and its outlook,” reported Adam Hayes for Investopedia.2 A risk-on environment may lead to rising stock prices.
- Risk-off when they become cautious and concerned about losses. Risk averse investors may sell some types of stocks (and other types of assets that have higher risk profiles) in favor of dividend-paying stocks and more stable types of investments that can help preserve principal. Risk-off environments may arise when economic growth slows, economic uncertainty rises, company earnings slide lower, consumer confidence wavers, or financial markets experience other kinds of disruptions. A risk-off environment may lead to falling stock prices.2
Last week, investors moved from a risk-on to a risk-off outlook. The change in attitude resulted from concerns about:
- Tariffs. Concerns about tariffs intensified last week when “An unexpected move against car imports this week renewed warnings from economists that tariffs will almost surely raise consumer prices and harm economic growth,” reported Jeran Wittenstein and Ryan Vlastelica of Bloomberg.3
- Sticky inflation. Last week, the personal consumption expenditures (PCE) index, which is one of the Federal Reserve’s preferred inflation gauges, showed that headline inflation remained steady month to month and year to year. However, core inflation, which excludes food and energy prices, rose month to month and year to year.4
- Consumer sentiment. The final reading for consumer sentiment in March did not improve. “This month’s decline reflects a clear consensus across all demographic and political affiliations; Republicans joined independents and Democrats in expressing worsening expectations since February for their personal finances, business conditions, unemployment, and inflation,” wrote University of Michigan Surveys of Consumers Director Joanne Hsu.5
During periods of market volatility, it’s important to keep a long-term perspective. Having an asset allocation strategy that reflects your risk tolerance and financial goals helps insulate your assets from market turbulence. Asset allocation helps manage risk, but it does not prevent losses.
Last week, major U.S. stock indices moved lower.6 Yields on U.S. Treasuries were mixed.7
Data as of 3/28/25 | 1-Week | YTD | 1-Year | 3-Year | 5-Year | 10-Year |
| Standard & Poor’s 500 Index | -1.5% | -5.1% | 6.2% | 6.9% | 16.3% | 10.3% |
| Dow Jones Global ex-U.S. Index | -1.2 | 5.7 | 5.1 | 2.6 | 8.9 | 2.7 |
| 10-year Treasury Note (yield only) | 4.3 | N/A | 4.2 | 2.5 | 0.7 | 2.0 |
| Gold (per ounce) | 1.9 | 17.7 | 38.7 | 16.6 | 13.7 | 10.0 |
| Bloomberg Commodity Index | 0.5 | 7.1 | 6.3 | -5.7 | 11.3 | 0.6 |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
THE SILVER LINING OF MARKET DOWNTURNS. Volatile markets are challenging. Watching the value of your assets bounce higher and lower can be frustrating. In times like these, it can be helpful to focus on the opportunities that can be created by market volatility. One of those opportunities is tax-loss harvesting.
Investors “harvest” tax losses by selling an asset for less than they purchased it. Unfortunately, not every investment delivers stellar returns. Almost every investor has either owned an asset that loses value due to company underperformance or a market downturn. When the asset is sold at a lower value than its purchase price, the investor realizes a capital loss.
From a tax perspective, losses are quite valuable. They can help:
- Minimize capital gains tax. Capital losses can be used to offset capital gains, dollar for dollar. For example, if an investor sells shares of Company A for a gain of $1 and sells shares of Company B for a loss of $1, then the loss offsets the gain.8
- Reduce taxable income today. When tax losses aren’t used to offset gains, the losses can reduce taxable income by up to $3,000. So, if an investor has a capital loss of $6,000 and a capital gain of $3,000, the capital loss could offset the capital gain and the $3,000 loss that is leftover could be used to reduce the investor’s taxable income.8
- Reduce capital gains and taxable income tomorrow. When capital losses are greater than capital gains and income reductions combined, the extra losses can be carried forward and used to offset capital gains and taxable income in the future.8
The key to tax loss harvesting is that the money from the asset sale must be invested in a new opportunity – perhaps capitalizing on the chance to invest in a strong company at an attractive price, which is another benefit of market downturns. In general, the new investment should fill a similar role in the investor’s asset allocation strategy to the investment that was sold.
The silver lining of market downturns is that investment losses can be tax wins.
Weekly Focus – Think About It
“Courage is the price that life exacts for granting peace.”9
– Amelia Earhart, Aviation pioneer
* These views are those of Carson Coaching, not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the 3:00 p.m. (London time) gold price as reported by the London Bullion Market Association and is expressed in U.S. Dollars per fine troy ounce. The source for gold data is Federal Reserve Bank of St. Louis (FRED), https://fred.stlouisfed.org/series/GOLDPMGBD228NLBM.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
Sources:
2 https://www.investopedia.com/terms/r/risk-on-risk-off.asp
3 https://www.bloomberg.com/news/articles/2025-03-28/market-rout-starts-with-big-tech-as-tariff-inflation-fears-hit?srnd=homepage-americas or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/03-31-25-Bloomberg-Market-Rout-Intensifies%20-%203.pdf
4 https://www.bea.gov/sites/default/files/2025-03/pi0225.pdf [Tables 5 and 7]
5 http://www.sca.isr.umich.edu
6 https://www.barrons.com/market-data?mod=BOL_TOPNAV or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/03-31-25-Barrons-DJIA-S&P-Nasdaq%20-%206.pdf
8 https://www.irs.gov/taxtopics/tc409
9 https://www.today.com/life/quotes/strong-women-quotes-rcna66486
The Markets
The market whisperer…
Last week, the Federal Reserve (Fed) left the federal funds rate unchanged, and Fed Chair Jerome Powell soothed markets. He explained that conditions in the labor market were broadly in balance and inflation had eased significantly over the past two years. Overall, the possibility of recession, while rising, remained low.1
Markets rallied following his comments.
The economic outlook for 2025
The Fed’s current median forecast for economic growth in 2025 is 1.7 percent, a bit lower than it was in December. In addition, the Fed’s current median estimate for inflation is 2.7 percent, a bit higher than in December.1 While he was reassuring, Powell explained there is a lot of uncertainty about the economic outlook in the United States. He stated:
“Looking ahead, the new administration is in the process of implementing significant policy changes in four distinct areas: trade, immigration, fiscal policy and regulation. It is the net effect of these policy changes that will matter for the economy and for the path of all monetary policy. While there have been recent developments in some of these areas, especially trade policy, uncertainty around the changes and their effects on the economic outlook is high. As we parse the incoming information, we are focused on separating the signal from the noise as the outlook evolves.”1
Consumer spending and the wealth effect
Powell also said that it remains to be seen how consumer and business spending and investment will respond to heightened uncertainty about the economic outlook.1 It’s an important point because of the “wealth effect”.
The wealth effect is a theory in behavioral economics. It holds that people spend more when the stock market is rising and the value of their assets is growing. Conversely, people spend less when the stock market is falling and the value of their assets is declining.2 It’s difficult to quantify the effect as Mike Bird of The Economist explained:
“Estimates of the ‘wealth effect’ – the amount that rising or falling stocks can support or hurt consumer activity – vary wildly. One academic study in 2019 suggested that a dollar increase in stock market wealth boosted American spending by about three cents. [A large financial-services firm] suggests that the pass-through has risen significantly in recent years, coming up with an extraordinary figure of 24 cents. Whatever the true number, a declining stock market matters for the broader economy.”3
Last week, major U.S. stock indices finished higher,4 while yields on most maturities ofU.S. Treasuries moved lower.5
Data as of 3/21/25 | 1-Week | YTD | 1-Year | 3-Year | 5-Year | 10-Year |
| Standard & Poor’s 500 Index | 0.5% | -3.6% | 8.1% | 8.3% | 20.4% | 10.4% |
| Dow Jones Global ex-U.S. Index | 0.9 | 7.0 | 5.8 | 3.0 | 12.0 | 2.6 |
| 10-year Treasury Note (yield only) | 4.3 | N/A | 4.3 | 2.3 | 0.8 | 1.9 |
| Gold (per ounce) | 1.2 | 15.4 | 38.9 | 15.9 | 14.6 | 9.8 |
| Bloomberg Commodity Index | 0.4 | 6.6 | 5.9 | -5.7 | 11.2 | 0.5 |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
IF YOU LOSE YOUR WALLET, DO YOU EXPECT IT TO BE RETURNED? Here’s some good news from the2025 World Happiness Report: “People are too pessimistic about the kindness of their communities.”6
As usual, the 2025 World Happiness Report offered insights to the countries where citizens are happiest. Once again, Nordic nations dominated. The United States landed in 24th place.6 The countries where the happiest people live are:
- Finland,
- Denmark,
- Iceland,
- Sweden, and
- Netherlands.
Where are people most benevolent?
The 2025 report also tracked a trend that surprised researchers during the Covid-19 years. In 2020, there was an upsurge in benevolent acts – people doing kind things for one another. Researchers theorized that helping others may have “…offset the negative effects felt by many of those whose lives were changed, endangered, and sometimes harmed during the pandemic.”6
For the 2025 report, researchers asked how often people performed acts of kindness, specifically donating, volunteering, and helping strangers. The most benevolent countries varied, depending on the type of kindness.
- For donations, Indonesia, Myanmar, and Ukraine ranked first, second, and third.
- For volunteering, Indonesia, Liberia, and Kenya took top honors.
- For helping strangers, Jamaica, Liberia, and Trinidad & Tobago were the leaders.
The United States was 12th for donations, 15th for volunteering, and 12th for helping a stranger.6
What about lost wallets?
The study also asked participants how likely it was that a lost wallet would be returned. They compared the data to studies where researchers “lose” wallets to see how often they are returned. Overall, expectations that wallets would be returned were far lower than actual returns.6
For example, the actual return rate for lost wallets was 1.8 times higher – almost double – the average estimated return rate. In addition, wallets were more likely to be returned if they contained money.
By the way, the best place to lose your wallet is in a Nordic nation. These countries had both the highest expected and the highest actual rate of return for lost wallets.6
Weekly Focus – Think About It
“No act of kindness, no matter how small, is ever wasted.”7
–Aesop, Storyteller
* These views are those of Carson Coaching, not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the 3:00 p.m. (London time) gold price as reported by the London Bullion Market Association and is expressed in U.S. Dollars per fine troy ounce. The source for gold data is Federal Reserve Bank of St. Louis (FRED), https://fred.stlouisfed.org/series/GOLDPMGBD228NLBM.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
Sources:
[1] https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20250319.pdf
2 https://www.investopedia.com/terms/w/wealtheffect.asp
3https://view.e.economist.com/?qs=19beffd3464f1dd09fba957b12c5818662249363c585eda4bedfa64662a9b3e454aaddd41e7f458116614f3d71fb1b071e1efe0136fab2ef3b2f2969be574b2afa90d647ebdb8bfc00b3853f4606d9c7 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/03-24-25-The-Economist-Money-Talks%20-%203.pdf
4 https://www.barrons.com/market-data?mod=BOL_TOPNAV or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/03-24-25-Barrons-DJIA-S&P-Nasdaq%20-%204.pdf
6 https://worldhappiness.report/ed/2025/caring-and-sharing-global-analysis-of-happiness-and-kindness/
The Markets
A correction and a bounce.
Last week, the Standard & Poor’s (S&P) 500 Index moved into correction territory. The Nasdaq Composite Index (Nasdaq) was already in a correction, and the Dow Jones Industrial Average (Dow) was close, reported Paul R. LaMonica of Barron’s.1
A correction occurs when the value of an index drops 10 percent below its most recent peak. The S&P 500 correction occurred remarkably quickly. Just three weeks ago, the index was at a record high1 amid easing inflation pressures2 and solid earnings growth.3
In fact, from December 15 through March 6, the number of companies mentioning the word “recession” on earnings calls was the lowest it had been in more than five years, reported John Butters of FactSet.4 There is another word that was mentioned frequently on earnings calls though: tariffs.5
Tariffs on tariffs on tariffs
The tariff war escalated last week as the European Union (EU) and Canada introduced retaliatory tariffs in response to those of the United States, reported Joe Light of Barron’s.6 Brendan Murray and Alex Newman of Bloomberg have been tracking the tariffs. Through the end of last week, the United States government has imposed the following tariffs:7
- 10% on all goods imported from China (February 4)
- An additional 10% on all goods imported from China (March 4)
- 25% on some Canadian imports (March 4)
- 25% on some Mexican imports. (March 4)
- 10% on Canadian energy and potash (March 4)
- 25% on steel and aluminum from major exporting countries (March 12)
“As Americans debate the wisdom of the administration’s on-again, off-again trade barriers…a few broad points are worth bearing in mind,” wrote The Editorial Board at Bloomberg. “One is that these measures are a tax on Americans. Foreign countries don’t simply pay up; US companies do when they import a product. This means that the costs are ultimately borne by consumers and by companies that use imported inputs. The effect of those higher prices is to eat into household budgets, push down real wages and reduce economic growth.”8
Consumers are feeling salty
The trade war has raised questions about the path of the U.S. economy, and some economists have lowered their forecasts for economic growth in 2025, reported Brian Swint of Barron’s.9
The primary driver of U.S. economic growth is consumer spending and consumers – anyone and everyone who buys things – are feeling less optimistic. Last week, the University of Michigan Survey of Consumers reported that sentiment fell 10.5 percent from February to March.10 Surveys of Consumers Director Joanne Hsu wrote:
“Sentiment has now fallen for three consecutive months and is currently down 22 [percent] from December 2024. While current economic conditions were little changed, expectations for the future deteriorated across multiple facets of the economy, including personal finances, labor markets, inflation, business conditions, and stock markets. Many consumers cited the high level of uncertainty around policy and other economic factors; frequent gyrations in economic policies make it very difficult for consumers to plan for the future.”10
Major U.S. stock indices fell over much of last week before recovering some losses on Friday. The S&P 500, Nasdaq and Dow all finished the week more than two percent lower.11 U.S. Treasury yields bobbed lower before finishing the week close to where they were the previous Friday.12
Data as of 3/14/25 | 1-Week | YTD | 1-Year | 3-Year | 5-Year | 10-Year |
| Standard & Poor’s 500 Index | -2.3% | -4.1% | 9.5% | 10.6% | 18.8% | 10.5% |
| Dow Jones Global ex-U.S. Index | -1.0 | 6.0 | 5.7 | 4.4 | 10.2 | 2.9 |
| 10-year Treasury Note (yield only) | 4.3 | N/A | 4.3 | 2.1 | 0.7 | 2.1 |
| Gold (per ounce) | 1.6 | 14.1 | 37.8 | 15.1 | 14.9 | 10.0 |
| Bloomberg Commodity Index | 0.1 | 6.2 | 5.9 | -5.4 | 10.9 | 0.8 |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
KEEP YOUR EYES ON YOUR FINANCIALS GOALS. While it is never comfortable to watch the value of savings and investments fall, as they do during a market correction, it’s important to remember that the decisions you make today can have a significant effect on the value of your portfolio over the long-term. During market downturns, investors generally have three choices. They can:
- Sell and take a loss. The thinking behind selling is usually something like this: If I sell, I will cut my losses and preserve what I have. Investors who do this realize a loss of principal. “A lesson many investors have learned is that if they sit tight and wait for the upturn to come, they won’t realize a loss. In fact, they may even see their portfolios gain more value than they had before the downturn,” wrote Richard Bet of Investopedia.13
- Sit tight. Investors who stay invested recognize that a market decline is not the same as a loss of principal. These investors understand that staying invested through market ups and downs can help them reach their long-term financial goals. The odds of a positive return increase with the amount of time an investor holds a stock or stock portfolio, explained Trevor Jennewine via Nasdaq. Historically, the chance of the S&P 500 Index delivering a positive return were:14
- 59 percent over a month period.
- 69 percent over a year.
- 79 percent over five years.
- 88 percent over 10 years.
- 100 percent over 20 years.
- Look for opportunities. A lot of investors recognize that market downturns create opportunities to purchase shares of attractive companies at lower prices. These investors work with their advisors to identify opportunities that may benefit their portfolios should the market recover. The goal of investing, after all, is to buy low and sell high.
If you’re feeling fearful, remember that corrections are a normal part of investing. The S&P 500 Index has experienced 56 corrections since 1929, reported Saqib Iqbal Ahmed of Reuters.15 Corrections tend to occur when share prices become overvalued. They wring out the excess and often create opportunities for investors.
Weekly Focus – Think About It
“The dark does not destroy the light; it defines it. It’s our fear of the dark that casts our joy into the shadows.” 16
–Brené Brown, Author
* These views are those of Carson Coaching, not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the 3:00 p.m. (London time) gold price as reported by the London Bullion Market Association and is expressed in U.S. Dollars per fine troy ounce. The source for gold data is Federal Reserve Bank of St. Louis (FRED), https://fred.stlouisfed.org/series/GOLDPMGBD228NLBM.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
Sources:
[1] https://www.barrons.com/articles/s-p-500-correction-what-next-03225182 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/03-17-25-Barrons-S&P-in-a-Correction%20-%201.pdf
3 https://insight.factset.com/earnings-insight-infographic-q4-2024-by-the-numbers
6 https://www.barrons.com/articles/canada-eu-tariffs-retaliation-60d1890d or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/03-17-25-Barrons-Canada-and-EU-Retaliate%20-%206.pdf
7 https://www.bloomberg.com/news/articles/2025-03-12/trump-tariff-list-here-s-a-running-tally-of-what-s-been-hit-so-far?srnd=homepage-americas or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/03-17-25-Bloomberg-Running-Tally-Tariff-Threats%20-%207.pdf
8 https://www.bloomberg.com/opinion/articles/2025-03-12/trump-s-tariffs-can-anyone-say-what-the-goal-is?srnd=phx-opinion or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/03-17-25-Bloomberg-Tariffs-are-Terrible-Idea%20-%208.pdf
9 https://www.barrons.com/livecoverage/stock-market-today-031025/card/goldman-sachs-jpmorgan-raise-europe-growth-forecasts-while-cutting-those-for-the-u-s–jeU7Q3yD2QHUzBd6ilCI or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/03-17-25-Barrons-Raise-Europe-Growth-Forecasts%20-%209.pdf
10 http://www.sca.isr.umich.edu
[1]1 https://www.barrons.com/market-data?mod=BOL_TOPNAV or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/03-17-25-Barrons-DJIA-S&P-Nasdaq%20-%20%2011.pdf
13 https://www.investopedia.com/articles/investing/021116/3-reasons-not-sell-after-market-downturn.asp
14 https://www.nasdaq.com/articles/heres-the-average-stock-market-return-in-every-month-of-the-year
[1]5 https://www.reuters.com/markets/wealth/sp-500-correction-six-charts-2025-03-13
[1]6 https://www.goodreads.com/author/quotes/162578.Bren_Brown