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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 30, 2025 – Amidst a volatile market, significant economic risks such as high interest rates and trade policy are creating a tense environment where stock market gains may be capped. Key sectors, like housing, are already showing signs of strain from elevated rates, while the bond market remains turbulent. Therefore, a diversified and defensive investment strategy is recommended, emphasizing fundamental analysis and valuation discipline for stocks while holding high-quality bonds to navigate the expected volatility.
  • May 27, 2025 – The House has passed Trump’s big beautiful bill and moved it on to the Senate. It’s a budget buster that offers something for all but will expand deficits meaningfully. It’s a bit of a mess that can be fixed if the Senate has the backbone to fix it. Wall Street will be watching, especially bond investors.
  • May 22, 2025 – Memorial Day Weekend is typically the unofficial start of summer for many. However, this year has been anything but typical. Corporate earnings have been holding up based on recent company reports and outlooks. Tariffs have dented a few earnings reports, but the consumer continues to spend. Credit spreads are not indicating a recession yet, although interest rates have been on the rise as Congress works on a spending resolution bill. Markets gave back some of their recent gains yesterday but are still only about 5% from their all-time highs. Not quite bear market territory. Anyone traveling this weekend to a national park should remember to bring their bear spray.
  • May 19, 2025 – Stocks have clawed back all their post-Liberation Day losses as the perceived impact of tariffs have lessened. But now comes the hard part. Whatever tariffs are imposed will have economic consequences that we are only just starting to see. The big tax bill as originally proposed is a budget buster. 10-year Treasury yields are now back above 4.5%. With hindsight equity investors overreacted after Liberation Day. The subsequent rally may have gone too far as well.
  • May 15, 2025 – Following a big rebound, the S&P 500 is flat YTD but trades at a high valuation of 23x forward earnings. Consumer spending faces headwinds from rising student loan defaults and a cooling housing market. While recession fears have eased, the economy is slowing and inflation trends remain uncertain.
  • May 12, 2025 – China and the United States have agreed to reduce tariff rates on each other by 115% leaving our tariff rate on Chinese goods at 30%. Since shortly after the shock of Liberation Day that sent equity investors into panic mode, there has been a gradual retreat from an overbearing tariff framework outlined that day. Today’s suspension of tariffs, pending further negotiations may not be a final step. But it comes right out of the Trump playbook that shoots for the moon first and then settles into a much more compromised reality later. While tariff negotiations continue not only with China but the rest of the world, investors can now focus on the next leg of the Trump agenda, tax cuts.
  • 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.

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