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March 27, 2025 – A couple of weeks ago, NCAA college basketball March Madness was just getting underway. After several surprise upsets and some chaos among millions of brackets, we now know which teams are in the Sweet Sixteen final games. Over the past 40 years, only three men’s teams have had a long streak of winning years making it into the finals. As in the stock market, last year’s darlings may not be this year’s victors, but good companies can reinvent themselves and market volatility can work both ways.

//  by Tower Bridge Advisors

More March Madness

Tariff policy has been dominating headlines and impacting market volatility this year. The Magnificent 7 technology stocks had rebounded the last few days, but fell 3% yesterday on a day in which the Nasdaq declined 2%. This volatility has been mostly due to the potential inflationary effects of new tariffs and concerns regarding retaliatory tariffs. Whether tariffs are threatened or implemented, we are now starting to see corollary impacts on business decisions. Yesterday we found out that U.S. orders for durable goods, items meant to last three years or more, (toasters, cars, aircraft), increased by 0.9% in February from the prior month. Expectations were for durable goods orders to fall by about 1%. This comes after an upwardly revised 3.3% increase in January. The rise in durable goods orders would normally be considered very favorable, but was most likely a result of front-loading purchases ahead of tariffs taking effect.

In the durable goods report, electrical equipment, appliances, and components orders jumped 2.0%.
Orders for machinery climbed 0.2% while those for transportation equipment increased 1.5%. Transportation orders were lifted by a 4.0% rebound in demand for motor vehicles and parts and a 9.3% gain in defense aircraft and parts orders. This was offset by a 5.0% decline in commercial aircraft orders. More telling, however, is that non-defense capital goods orders excluding aircraft, which is a proxy for business spending plans, dropped 0.3% after an upwardly revised 0.9% surge in January. Capital spending outside of data centers has yet to rebound steadily.

New 25% tariffs on auto imports were announced yesterday afternoon, becoming effective April 2nd. Tariffs will not apply to auto parts made in the U.S. Previously, the administration had imposed a 20% duty on all imports from China and 25% on goods from Canada and Mexico that are not compliant with a North American trade agreement. In addition, 25% tariffs on steel and aluminum from Canada, Mexico, the European Union and other countries have been fully restored. No wonder stock and bond markets have been moving in fits and starts.

Finally, the Finals

It took almost a decade, but someone finally won Warren Buffett’s $1 million NCAA Tournament bracket challenge. The winning employee took home the grand prize after picking 31 of the 32 first-round games correctly. Buffett’s bracket challenge is not available to everyone as only employees of Berkshire Hathaway# can enter. Perhaps the winner can purchase one share of Berkshire Hathaway Class A shares which go for about $800,000 per share.

Warren Buffett has been holding onto extra cash looking for better investment opportunities and valuations as the market corrects. 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. The S&P 500 has already recovered from a 10% correction from its peak in mid-March, and is down about 2.9% year to date. While technology stocks dominated returns last year, so far in 2025, Technology stocks are down 8%, while the Energy sector is up 9%, Healthcare is up 6% and Financials are up about 4%.

The yield on the 10-year treasury has fallen from 4.8% early in the year to 4.2%, but has recently risen toward 4.4%. 30-year mortgage rates have remained relatively high at around 6.8%, cramping home buying activity somewhat. Looking ahead, interest-rate futures currently imply that the chances of the Fed resuming rate cuts at its May policy meeting are only 14%, so markets may not get much help from the Fed until later in the year. That will depend upon the path of inflation and unemployment.

This is a different kind of March Madness than we are used to. Markets do not like uncertainty, but have even more trouble with moving targets. April 2nd could mark an intermediate high-water mark for uncertainty as other levies are introduced that may not be as severe as previously telegraphed. Equity futures are somewhat directionless this morning awaiting a report on initial jobless claims and pending home sales. Volatility may work in both directions as the year progresses.

Talented entertainers born this day include Mariah Carey who turns 56, and Fergie who turns 50. It is not fiction that Quentin Tarantino also turns 62.

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: « December 19, 2024 – The Federal Reserve lowered its key interest rate by a quarter percentage point yesterday, but signaled that only two more rate cuts may be coming in 2025 instead of the four cuts widely expected. Fed Chairman Powell said it is like “driving on a foggy night or walking into a dark room full of furniture: you slow down, you go less quickly.” That hawkish and more uncertain tone was not well received by markets. While the stock market is typically volatile on Fed decision days, the 10-year yield backed up to 4.5% and stocks dropped about 3% following the Fed’s remarks. Markets have been strongly positive this year, but a pause on this news provides a chance to focus on better valuations. Stock market futures are indicated positively this morning.
Next Post: 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. »

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  • August 14, 2025 – The market is increasingly divided, with a strong AI-driven rally on one side and a weakening consumer economy on the other. This contradiction creates a significant risk of a sudden economic downturn or stagflation, as soaring tech valuations may be unsustainable without broader economic support.
  • August 11, 2025 – There is an expression that rationality requires separating the wheat from the chaff. In Wall Street, to be a successful investor, it is necessary to separate hype from reality. That is particularly important as speculative fever rises. Some of the hype is real; some is nonsense. Don’t simply follow consensus. As investors you invest in companies, not hype, not single products, hot today but cold as ice tomorrow. Think rationally and you will be a successful investor.
  • August 7, 2025 – Football is considered a game of inches. Consider the “Brotherly Shove,” popularized by the Philadelphia Eagles, which is a play used to gain very short yardage and advance down the field. In order to counter this offense, defensive opponents have employed various tactics, but without much success. Two consumer-focused companies, McDonalds and Disney, recently reported quarterly earnings, and are slugging it out on the field as consumer preferences change and these companies try to adapt.
  • August 4, 2025 – Confusing economic reports on GDP and the labor market can be decoded to show that growth in the first half of 2025 was muted while inflation was well contained before the full impact of tariffs. If those data trends continue, look for one to three 25-basis point rate cuts before the end of 2025. That outlook may change with subsequent data but it is increasingly clear that an economy that has proven so resilient may need a bit more help to offset the impact of tariffs and significantly lower population growth.
  • July 31, 2025 – The U.S. economy demonstrated a strong rebound in Q2 2025 with 3.0% GDP growth. Tech giants Microsoft and Meta significantly exceeded earnings expectations, fueled by the ongoing AI boom and robust cloud and digital advertising performance. While the current AI-driven market rally shows parallels to the dot-com era’s speculative growth, today’s tech giants exhibit stronger financial fundamentals than many during the earlier boom. Investors should balance the allure of high growth with valuation discipline and diversification to mitigate risks in this dynamic market.
  • July 28, 2025 – The world looks pretty healthy but rising speculation elevates our concern. When the amount of corporate money flowing into bitcoin is twice the amount raised in initial public offerings to date, that gets our attention. With that said the focus this week will be on earnings and a slew of economic data on inflation, interest rates, and employment, all of which can be market moving.
  • July 24, 2025 – Like the game of Go in China, or Igo in Japan, the evolving tariff negotiations between the U.S. and our trading partners are creating a constantly changing gameboard and continue to dominate the news cycle. Markets reacted positively yesterday to indications that Japan’s tariffs would be capped at 15%, less than the 25% expected, and a potential deal with the European Union. Tariffs are already having an impact on corporate earnings and outlooks, although equity markets continue to gain ground.
  • July 21, 2025 – Last week was a quiet week for news. The real heart of earnings season starts to kick in this week. Meanwhile the new crypto legislation signed into law last week is likely to change our lives a lot more than what we will learn from a few earnings reports.
  • July 17, 2025 – Stocks rebounded after President Trump clarified his stance on Federal Reserve Chair Jerome Powell. While consumer and producer price indexes suggest some inflation moderation, particularly in services, certain tariff-exposed goods continue to see price increases. Despite these pressures, the U.S. economy shows underlying strength, exemplified by strong bank earnings and robust consumer spending, though the long-term impact of escalating tariffs remains a key uncertainty.
  • July 14, 2025 – Tariffs and earnings will be in the bullseye of investor focus for the next three weeks. Earnings should be good with the weak dollar giving a boost to reported foreign results. As for tariffs, the announcements are likely to be scarier than the coming reality. But even with more muted final outcomes, the likely overall tariff picture will almost certainly be the most severe since the early 1930s. Tariffs will affect different companies in different ways, a factor likely to lead to an increasing dispersion in stock performance in the months ahead.

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