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VIDEO: The absence of Washington headlines has been positive for stocks on Monday. As we said on Sunday, we expect this week to be positive for stocks, and Wed FOMC will be important.

Please click below to view our Macro Minute (duration: 6:43).

Markets found footing to start the week, supported by the absence of tariff escalation headlines, providing some relief amid broader macro uncertainty. Investors appear to be taking a pause, digesting the recent sharp pullback and assessing upcoming catalysts. The relative calm around trade tensions from Washington has helped stabilize markets, following what has been a challenging few weeks.

• Markets have found footing to start the week, driven by a notable absence of tariff escalation headlines from Washington.
  • This provided some much-needed relief following a sharp recent pullback.
  • The relative calm on the trade front has allowed equities to stabilize into the week.
• The most important day of the week is arguably Wednesday, when the FOMC will announce the March rate decision and chair Powell will host the post-decision press conference
  • The FOMC meeting is expected to heavily influence near-term sentiment as investors gauge the Fed’s stance on inflation and growth.
  • Despite consensus leaning hawkish, Fed Chair Powell has struck a more dovish tone in prior remarks.
  • Powell recently cited the Fed’s decision to cut rates three times in 2019, even amid shrinking job supply and active tariffs, signaling that growth concerns may outweigh inflation worries.
• Recent Fed staff research highlights that tariffs may create inflationary effects for up to three years, but without persistent long-term inflation risk.
  • This analysis appears more hawkish relative to Powell’s public comments
  • Markets have responded by adjusting rate cut expectations, with fed funds futures markets now pricing in 2.5 cuts (down from 3.5).
  • The probability of a May rate cut has dropped sharply from 60% to just 21% over the past week.
• Labor market data continues to signal visible weakening, reinforcing the dovish argument.
  • The University of Michigan’s expected one-year change in employment fell to its lowest level since 2009, a reading typically associated with recessionary conditions.
  • Additionally, the Atlanta Fed’s wage tracker now shows that job stayers have higher wage expectations than job switchers—a notable inversion from the past five years, when job switchers typically commanded a premium.
• The Fed’s internal discussions may also be subject to political dynamics.
  • Data shows that 92% of Fed staff political contributions went to Democrats in 2024, and 97% in 2020.
  • While this may not be a direct market driver, it could influence internal staff research and recommendations.
  • Ultimately, it will fall to Powell to navigate through these internal pressures and ensure the Fed’s independence remains intact.
• Another source of relief for markets has been the absence of recent anti-China or anti-Mexico rhetoric.
  • This has been supportive of equities, particularly in sectors with heavy exposure to China.
  • For example, NVDA -3.73%  gained 16% last week despite a 3% decline in the S&P 500.
  • Historically, in a full-scale tariff war, NVDA -3.73%  would likely face direct pressure given its supply chain exposure, making this rally even more notable.
• Lastly, stocks fell 10% in 20 calendar days. This is the 5th fastest ever in the past 75 years. We think stocks have over-reacted to the downside. This is also evidenced by looking at the 6 precedent cases where stocks fell 10% in less than 20 days since 1950:
  – date # Days Cause
  – 2/27/20 8 COVID
  – 2/8/18 13 Trade War 1.0
  – 10/11/55 18 Eisenhower heart attack
  – 6/29/50 17 Korean War
  – 10/25/79 20 Volcker Shock
  – 10/27/97 20 Asian Financial Crisis
• Each of the above is a “fire ready aim” moment, especially the start of the pandemic. At that time, equities fell 10% in only 8 trading days. As shown below (see table), the stock market is higher 1M, 3M, 6M and 12M later:
  – 5 of 6 times, higher 1M later (except covid)
  – 6 of 6 times, higher 3M later, median gain 9%
  – 6 of 6 times, higher 6M later, median gain 15%
  – 6 of 6 times, higher 12M later, median gain 21%

Bottom Line: Stay on target

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Key incoming data March:

• 3/3 9:45 AM ET: Feb F S&P Global Manufacturing PMI Tame
• 3/3 10:00 AM ET: Feb ISM Manufacturing PMI Tame
• 3/5 9:45 AM ET: Feb F S&P Global Services PMI Tame
• 3/5 10:00 AM ET: Feb ISM Services PMI Tame
• 3/5 10:00 AM ET: Jan F Durable Goods Orders Tame
• 3/5 2:00 PM ET: Mar Fed Releases Beige Book Tame
• 3/6 8:30 AM ET: 4Q F Non-Farm Productivity Tame
• 3/6 8:30 AM ET: Jan Trade Balance Tame
• 3/6 8:30 AM ET: 4Q F Unit Labor Costs Tame
• 3/7 8:30 AM ET: Feb Non-Farm Payrolls Tame
• 3/7 9:00 AM ET: Feb F Manheim Used Vehicle index Tame
• 3/10 11:00 AM ET: Feb NY Fed 1yr Inf Exp Tame
• 3/11 6:00 AM ET: Feb Small Business Optimism Survey Tame
• 3/11 10:00 AM ET: Jan JOLTS Job Openings Tame
• 3/12 8:30 AM ET: Feb CPI Tame
• 3/13 8:30 AM ET: Feb PPI Tame
• 3/14 10:00 AM ET: Mar P U. Mich. Sentiment and Inflation Expectation Hot
• 3/17 8:30 AM ET: Feb Retail Sales Data Tame
• 3/17 8:30 AM ET: Mar Empire Manufacturing Survey Tame
• 3/17 10:00 AM ET: Mar NAHB Housing Market Index Tame
• 3/19 9:00 AM ET: Mar M Manheim Used Vehicle index
• 3/19 2:00 PM ET: Mar FOMC Decision
• 3/19 4:00 PM ET: Jan Net TIC Flows
• 3/20 8:30 AM ET: Mar Philly Fed Business Outlook
• 3/20 10:00 AM ET: Feb Existing Home Sales
• 3/24 8:30 AM ET: Feb Chicago Fed Nat Activity Index
• 3/24 9:45 AM ET: Mar P S&P Global Manufacturing PMI
• 3/24 9:45 AM ET: Mar P S&P Global Services PMI
• 3/25 9:00 AM ET: Jan S&P CoreLogic CS home price
• 3/25 10:00 AM ET: Mar Conference Board Consumer Confidence
• 3/25 10:00 AM ET: Feb New Home Sales
• 3/26 10:00 AM ET: Feb p Durable Goods Orders
• 3/27 8:30 AM ET: 4Q T GDP
• 3/28 8:30 AM ET: Feb PCE Deflator
• 3/28 10:00 AM ET: Mar F U. Mich. Sentiment and Inflation Expectation
• 3/31 10:30 AM ET: Mar Dallas Fed Manuf. Activity Survey

Economic Data Performance Tracker 2025:

Economic Data Performance Tracker 2024:

Economic Data Performance Tracker 2023: