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March 13, 2025 – The NCAA college basketball tournament known as March Madness kicks off this coming weekend. Part of the allure for fans is the unpredictability of the NCAA tournament. Cinderella stories, surprise upsets and general chaos among millions of March Madness brackets nationwide are the norm. As in the stock market, unpredictability and uncertainty are part of the investing process, and last year’s winners may not be this year’s victors.

//  by Tower Bridge Advisors

March Madness
Last year, the University of Connecticut (UConn) Huskies repeated as national men’s college basketball champions, becoming just the eighth program and the ninth team overall to achieve this feat. The first men’s college basketball tournament of what eventually became known as March Madness was held in 1939. The first NCAA women’s basketball tournament was held in 1982. However, the first ever women’s college basketball game was played at Smith College, a historically women’s college in Massachusetts, on March 22, 1893. Since the official 1982 start, three women’s programs have been able to win in consecutive seasons, one being UConn.

Last year, the Magnificent Seven technology stocks won the returns race and accounted for more than half of the gains in the S&P 500. However, these stocks have not been a slam dunk for investors this year. So far in 2025, the “Mag 7” stocks have turned into the “Lag 7”, declining about 13% as a group year to date versus a 4.7% drop in the S&P500 and an 8.6% drop in the Nasdaq. What started with a decline in expensive tech stocks has given way to a broad-based equity sell-off as the looming threat of extended trade wars and softer economic data has fostered fears of a possible recession. Healthcare, Energy and Consumer Staples sectors are still posting positive returns this year while Technology, Financials and Consumer Discretionary sectors are down.

While it seemed investors had largely believed tariffs would be used as a negotiating tool to bring trading partners to the table, recent comments signal that the administration is willing to experience short-term economic pain in the pursuit of longer-term goals. This has rattled investors trying to adjust to this transition period. Elevated stock market valuations have been questioned, while at the same time economic activity is showing signs of softening based on reports this week from Delta Airlines, Kohl’s and Dick’s Sporting Goods.

Inflation Nation
Inflation cooled off a bit last month, but the latest data may offer less comfort than it would have otherwise because tariffs are threatening to raise some prices in the months ahead. Consumer prices increased 2.8% in February versus a year earlier. This was slightly better than the 2.9% that economists had expected and the 3% increase posted in January. Prices excluding food and energy categories, known as core inflation, rose 3.1% over the prior year. That was the lowest year-over-year reading since 2021 and also lower than the 3.2% expected. The cooler-than-expected core reading was due partly to a seasonally adjusted 4% drop in airline fares. Delta Air Lines on Monday said domestic demand had softened, and that in February consumer spending started to stall. Shelter prices, which have been a significant source of inflationary pressure in recent years, continued to ease. Shelter prices were up 4.2% from a year earlier, which was the smallest gain since December 2021, but is reported with a lag.

The U.S. did impose an additional 10% tariff on Chinese-made goods in early February, but many other tariffs have been put on hold or did not take effect in February. Other planned tariffs, including levies on a variety of Mexican and Canadian goods, another 10% on Chinese goods, and a 25% tariff on all steel and aluminum imports are just rolling out. Interest-rate futures currently imply that the chances of the Fed resuming rate cuts at its policy meeting next week are close to zero, but a 77% chance of easing at the June meeting.

Don’t Get Boxed Out
Selection Sunday in the NCAA basketball tournament is focused on revealing which teams will play each other and fill out the bracket schedule. This year will likely include a few Cinderalla runs, surprising upsets and a little bit of chaos. While volatility may persist in the stock market, the Fed and other central banks will likely step in to stabilize growth if the economy fades and labor markets deteriorate more quickly, with inflation possibly taking a backseat. Market corrections are a normal part of investing cycles, and the typical drawdown in any given year has averaged about 15% over the last twenty years on the way to a 10% average annual gain with dividends. In terms of uncertainty, we are facing a government shutdown buzzer-beater again at midnight on Friday if a funding resolution cannot be passed. As a result, in this environment bonds could continue to offer support until policy clarity improves. And hopefully, our brackets won’t get busted too badly.

Actor/rapper Common turns 53, Actor William H. Macy turns 75, and Tennis Star Coco Gauff hits 21.

Christopher Crooks, CFA®, CFP® 610-260-2219

Tower Bridge Advisors manages over $1.3 Billion for individuals, families and select institutions with $1 Million or more of investable assets. We build portfolios of individual securities customized for each client's specific goals and objectives. Contact Nick Filippo (610-260-2222, nfilippo@towerbridgeadvisors.com) to learn more or to set up a complimentary portfolio review.

# – This security is owned by the author of this report or accounts under his management at Tower Bridge Advisors.

Additional information on companies in this report is available on request. This report is not a complete analysis of every material fact representing company, industry or security mentioned herein. This firm or its officers, stockholders, employees and clients, in the normal course of business, may have or acquire a position including options, if any, in the securities mentioned. This communication shall not be deemed to constitute an offer, or solicitation on our part with respect to the sale or purchase of any securities. The information above has been obtained from sources believed reliable, but is not necessarily complete and is not guaranteed. This report is prepared for general information only. It does not have regard to the specific investment objectives, financial situation or the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed in this report and should understand that statements regarding future prospects may not be realized. Opinions are subject to change without notice.

Filed Under: Market Commentary

Previous Post: « March 10, 2025 – At least on Wall Street, the Trump honeymoon is over. While all the shock and awe of the daily pronouncements from Washington makes some nervous, investors focus on the data. Virtually every data point of the last few weeks points to a slowing economy while inflation expectations remain elevated. That’s a bad combination. Trump’s game plan of lower taxes, higher tariffs, and a smaller government may evolve but the impact of all the steps taken or proposed will take time. Traders aren’t patient. They shoot first and ask questions later. Reality is that the impact of tariffs will be felt quickly while steps to streamline the government take longer. Until a fuller picture develops, markets are likely to stay volatile.
Next Post: March 17, 2025 – Friday’s rally was a relief but, unless there is significant follow through today, it should be viewed simply as a relief rally. Since the start of the 21st century there have been three shock and awe moments that have frozen consumers and businesses in place leading to economic contractions of various lengths, 9/11, the Great Recession, and Covid-19. We may be at a fourth as both consumers and businesses face so many rapid fire events that they freeze in place. For equities to move higher, confidence needs to be restored and investors need to see a pathway to a better life promised by less government, increased productivity and reduced deficits. »

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  • May 8, 2025 – The Federal Reserve on Wednesday held its key interest rate unchanged in a range between 4.25%-4.5% as it awaits better clarity on trade policy and the direction of the economy. While uncertainty about the economic outlook has increased further, the Fed is taking a wait and see stance toward future monetary policy. Meanwhile, the S&P 500 Index has just about fully recovered its losses following the April 2nd “Liberation Day” when major tariffs were announced on U.S. trading partners. The bounce in risk assets is welcome, but we are still looking for white smoke signals showing that progress on inflation and tariffs is being made.
  • May 5, 2025 – Investors overreacted to Trump’s early tariff overreach but may have gotten a bit too complacent that everything is now back on a growth path. While there are few signs of pending recession, the impact of tariffs already imposed are just starting to be felt. So far, no trade deals have been announced although the White House claims at least a few are imminent. The devil is always in the details. Congress will start to focus on taxes. Conservatives may balk but there is little indication to suggest they won’t acquiesce to White House pressure once again.
  • May 1, 2025 – U.S. GDP unexpectedly contracted by 0.3% in the first quarter, the first decline since 2022, largely due to a surge in imports ahead of anticipated tariffs. Despite this GDP contraction, major tech companies like Alphabet, Microsoft, and Meta reported quarterly earnings, indicating continued strength in areas like advertising and cloud computing. However, concerns remain about the broader economic outlook due to uncertainty surrounding tariffs, potentially leading to higher prices, weaker employment, and a challenging environment for the Federal Reserve regarding inflation and interest rate policy.
  • April 28, 2025 – Markets rallied as the Trump Administration suggested tariffs might be reduced against China and that ongoing negotiations with almost 100 countries are progressing, although no deals have yet to be announced. But even with tariff reductions, the headwind will still likely be the greatest in a century. So far, the impact is hard to measure as few tariffed goods have reached our shores. Early Q1 earnings reports show little impact through March, although managements have been loath to predict their ultimate impact. Stocks are likely to stay within a trading range until there is greater clarity regarding the impact of tariffs.
  • April 24, 2025 – “Headache” is the official Journal of the American Headache Society. Europe and Asia have their own publications and consortia devoted to the study of headaches and pain. The incidence of headaches may have increased for those following the stock market gyrations over the past few months, though resolution of tariff issues would go a long way toward calming markets down. Eventually. Near-term impacts on inflation and the economy may create some pain points and additional volatility if consumers and businesses retrench.
  • April 21, 2025 – Tariffs raise barriers that make imports less desirable. They serve to reduce the balance of payments. But by protecting local producers of higher cost goods, they are inflationary. The attendant decline in the value of the dollar chases investment capital away, capital necessary if reshoring of manufacturing is going to be achieved. The goal of the Trump administration should be to find the balance that favors U.S. manufacturers but retains investment capital within our borders. So far, markets suggest that dilemma hasn’t been resolved.
  • April 17, 2025 – The Trump administration’s trade and tariff plans aim to improve trade for American businesses, primarily through the use of tariffs. However, initial market reactions have been contrary to expectations, with a weaker dollar and rising interest rates creating economic uncertainty. Investors should brace for potential recession and stagflation risks with balanced portfolios and a patient approach to future investment opportunities.
  • April 14, 2025 – The tariff roller coaster ride continues as Trump exempts some tech products made in China from tariffs but warns that secular tariffs on semiconductors are likely soon. While bond yields this morning are slightly lower, the dollar continues to weaken as the world continues to adjust to economic chaos in this country. While the tariff extremes of Liberation Day may be reduced over the next several months, they still appear likely to be the highest in close to a century, a clear tax on the U.S. economy. Wall Street’s mood can change daily depending on the tariff announcement du jour but until markets can determine a rational logic behind the Trump economic game plan, volatility will remain elevated.
  • April 9, 2025 – In a storm, the best advice is to hunker down and stay as safe as you can. Markets are screaming and all the news at the moment is bad. Despite Trump’s efforts to draw capital to the U.S., it is leaving. No one likes uncertainty. What’s happening today will force changes to a hastily implemented policy. But until we know what the changes are, hunker down, stay liquid and don’t overreact.
  • April 7, 2025 – What a week! Judging from markets overseas, the rough ride will continue when markets open today. While some reaction or rationalization of tariffs announced last week is likely to be forthcoming, investors fear the worst right now and are seeking safety until clarity improves. While it may be tempting to bargain hunt, perhaps in hopes that Trump will moderate the level of tariffs as countries offer appeasement, stock markets don’t rise simply on hope and dreams. Valuations, despite last week’s carnage, still aren’t low historically although there are bargains and more will appear if the decline continues at last week’s pace for much longer.

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