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