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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 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. »

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  • February 18, 2026 – As the Winter Olympics wind down over the next week, several medals have been won by merely staying on course. Sometimes just finishing the race, even backwards, can advance an Olympic contender to the next level of competition. Staying on course, keeping an eye on risk, and making adjustments along the way are just as important in an investment strategy.
  • February 11, 2026 – Much like Sunday’s snoozefest of a Super Bowl, the market is trapped in a defensive struggle characterized by flat retail sales and deepening fears of AI disruption in software. As the Fed signals a continued pause on rate cuts, it is time to take a page from the consumer’s playbook and use this volatility to scoop up high-quality companies at discount prices.
  • February 4, 2026 – Punxsutawney Phil saw his shadow on Groundhog Day this week, forecasting 6 more weeks of winter. Phil’s accuracy is only about 30% over the past decade and about 39% dating back to 1887, but it rivals more sophisticated models. This week the technology sector caught a chill, although other sectors of the stock market are starting to thaw out.
  • January 28, 2026 – Supported by the upcoming “One Big Beautiful Bill Act” (OBBBA) fiscal stimulus and broadening earnings growth, the first half of 2026 offers a favorable market backdrop even as Big Tech faces intense scrutiny regarding tangible AI returns. However, we anticipate conditions will become more challenging later in the year, as the accumulation of lofty consensus earnings expectations and potential macroeconomic friction creates a riskier environment for investors.
  • January 21, 2026 – The “Sea of Tranquility” on Earth’s Moon was the site of the historic Apollo 11 landing in July of 1969, marking humanity’s first steps on another celestial body. The area was named for its seemingly calm, dark plains and potentially smooth landing potential. We started out the new year in a relatively tranquil phase for markets, but that has faded for now as new tariff threats have emerged. Hopefully, this is resolvable and short-lived, but bond yields around the world are backing up leading to a pullback in equity markets.
  • January 14, 2026 – Following a strong, three-year bull market, we view the start of 2026 as a pivotal shift where sticky inflation, mixed earnings, and rising geopolitical tensions are replacing the era of easy, momentum-driven gains. While the near-term economy remains resilient, the market will need to see confirmation in upcoming earnings releases to continue its march higher.
  • January 7, 2026 – 2025 ended up as the third year in a row of strong stock market returns. The new year has also seen a solid start for equity markets worldwide after markets drifted lower toward the tail end of 2025. 2026 will be a convergence year. It marks the 250th anniversary of the founding of the United States, the 100th anniversary of the founding of Route 66, and a Chinese New Year cycle that has not been seen in 60 years. If inflation, interest rates and corporate earnings converge on a favorable path, we could see solid market returns for the full year, although there are also several potential potholes to navigate.
  • December 29, 2025 – It is customary at the end of every year to look ahead. As I say all the time, the critical factors influencing stock prices are earnings, interest rates and the pace of inflation. Overall, consensus expectations are for earnings to increase close to 14%, inflation either slightly lower or slightly higher than we have experienced this year, and lower Fed Funds rates given that Trump is not likely to appoint anyone to be the next Federal Reserve chairman who won’t pursue a steady downward path. The combination of lower rates, modest inflation and higher earnings should be a favorable backdrop for stocks. With that said, I want to make some specific observations that may texture how the economy and the stock market act next year.
  • December 22, 2025 – All the hype suggests artificial intelligence is going to be a game changer as far as productivity is concerned. But history suggests that may not be correct. While technology has been the driver of 2-3% productivity gains over the last 75 years, inventions like mainframe computers, PCs, smartphones, networking and the Internet barely moved the productivity needle. What they all did was reduce the costs of doing business. Thus, technology drives both productivity and deflation. But where AI is set to accelerate, either trend is open to debate.
  • December 18, 2025 – The AI bubble hasn’t burst; it has matured, violently purging speculative “tourist” capital to make room for battle-tested business models that actually generate cash. While the job market falters and the Federal Reserve retreats, the real opportunity lies in ignoring the short-term carnage to focus on companies with the competitive moats necessary to dominate this new industrial order.

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