In the beginning of March, we noted how declining consumer sentiment was driving the recent pullback in consumer spending, some disconnect between sentiment data and actual fundamental data, what historically extreme bearish sentiment means for equity markets moving forward, and why key economic fundamentals still suggest a “mid-cycle” environment rather than a late-cycle slowdown.

Since time of publication, we have seen relatively good economic data regarding both the manufacturing and service sectors, labor market data reflecting growing payrolls, job openings, and wages, more clarity that the unusually large trade deficit in January will have less of a drag on GDP than previously expected, and updated inflation data reflecting further cooling of inflation for both consumers and producers compared to last month. That said, we also saw a pickup in the unemployment rate and layoffs, largely led by federal government layoffs, and more aggressive tariff policy implementation than many expected. Despite the current economic fundamentals reflecting healthy economic activity that looks to be slowing from very strong towards more normal economic growth, policy uncertainty continues to be a greater concern for markets. Some of these policy and economic questions are unlikely to be resolved in the near-term, thus we expect market volatility could remain elevated as markets await greater clarity.

This is a summary of our Monthly Market Insights.