Over the weekend, tariff war appearing increasingly targeted and a reminder Trump "put" exists.  Raises probability of a strong rally in the coming weeks

VIDEO: There were positive developments over the weekend and we now see the increased probability of a sharp rally starting possibly this week

Please click below to view our Macro Minute (duration: 5:41).

Markets appear to be setting up for a potential face-ripper rally this week as recent developments have eased several of the major fears that have weighed on equities since December.

• Trade war concerns are easing, brightening market sentiment.
  • Over the weekend, news surfaced that the April 2 tariff deadline will likely result in more targeted trade actions rather than broad tariffs.
    • Bloomberg reported that tariffs are set to be more “focused” instead of “sprawling.”
    • This indicates the administration is preparing a “Liberation Day” scenario, aiming to adjust trade relationships selectively.
      The move suggests that the Trump administration is seeking bilateral deals to correct trade imbalances with specific partners.
  • Global equity markets have already been reflecting this improvement:
  • Since February 18th, markets in China, Europe, Mexico, and Canada have outperformed the U.S., signaling fading fears of a broad trade war.
• Reinforcing this easing of trade fears, key comments from policymakers emphasize targeted measures.
  • Kevin Hassett noted on Fox Business that tariffs would focus on a few countries with significant deficits, not on all U.S. trading partners.
  • The U.S.’s largest trade deficits are concentrated in:
    • China and Europe overall.
    • Within Europe, Ireland (pharmaceuticals) and Germany (machinery and appliances) lead the list.
    • Mexico and Canada round out the top deficit contributors.
• The focus now shifts to macroeconomic data and its implications for the market.
  • Tuesday’s release of the Conference Board’s Consumer Confidence Survey will be closely watched as soft data trends persist.
  • Friday brings key inflation-related data:
    • February Core PCE, the Fed’s preferred inflation gauge.
    • University of Michigan’s 1-year expected inflation, which has been skewed due to political bias in survey responses.
• The Fed put remains active, providing a backstop to market downside.
  • Last week, the Fed’s Summary of Economic Projections highlighted a stark shift in growth concerns:
    • 90% of FOMC participants now see downside risks to GDP growth, up from just 45% in December.
    • This sharp shift is twice the level of concern seen three months ago.
  • Despite this, inflation risks remain skewed to the upside, with no material change from December.
  • Fed Chair Powell reiterated during his press conference that financial conditions are “the main channel to the real economy,” confirming the Fed is monitoring market conditions closely.
    • This reinforces that the Fed put is intact.
• Technical signals suggest room for equities to rally further.
  • Mark Newton notes that a close above 5,703 on the S&P 500 would mark a key bullish breakout confirmation.
  • The market experienced a 10% waterfall decline over 20 days, the fifth fastest since 1950.
    • Historically, similar rapid sell-offs have been linked to market shocks, not fundamental economic downturns.
  • Current fears around a tariff-induced recession and a breakdown of the “Trump put” and “Fed put” appear overstated.
• Volatility signals remain elevated but could fuel a risk-on shift if they normalize.
  • The VIX curve is steeply elevated through September.
    • A collapse in the VIX would likely trigger a re-risking phase as markets regain confidence.
    • This would serve as a catalyst for further equity market recovery.
• Below is a list of the macro this week:
  – 3/24 Mon 8:30 AM ET: Feb Chicago Fed Nat Activity Index    -0.17e
  – 3/24 Mon 9:45 AM ET: Mar P S&P Global Manufacturing PMI    51.8e
  – 3/24 Mon 9:45 AM ET: Mar P S&P Global Services PMI    51.0e
  – 3/25 Tue 9:00 AM ET: Jan S&P CS home price 20-City MoM    0.40%e
  – 3/25 Tue 10:00 AM ET: Mar Conference Board Consumer Confidence    94e
  – 3/25 Tue 10:00 AM ET: Feb New Home Sales    680ke
  – 3/26 Wed 8:30 AM ET: Feb P Durable Goods Orders MoM    -1.0%e
  – 3/27 Thu 8:30 AM ET: 4Q T 2024 GDP QoQ    2.4%e
  – 3/28 Fri 8:30 AM ET: Feb Core PCE MoM   0.31%e
  – 3/28 Fri 10:00 AM ET: Mar F U. Mich. 1yr Inf Exp
• There is also fed speak this week:
  – 3/24 Mon 1:45 PM ET: Bostic on Bloomberg TV
  – 3/24 Mon 3:10 PM ET: Barr Speaks on Small Business Lending
  – 3/25 Tue 8:40 AM ET: Kugler Gives Speech on Economy, Entrepreneurship
  – 3/25 Tue 9:05 AM ET: Williams Gives Opening Remarks
  – 3/26 Wed 10:00 AM ET: Kashkari Hosts Fed Listens, conversation
  – 3/26 Wed 1:10 PM ET: Musalem Speaks on Economy, Monetary Policy
  – 3/27 Thu 4:30 PM ET: Barkin Gives Speech, Q&A – 3/28 Fri 12:15 PM ET: Barr Gives Speech on Banking Policy
  – 3/28 Fri 3:30 PM ET: Bostic Moderates Panel on Housing Finance

Bottom Line: Stocks have room to run as easing trade fears and a supportive Fed restore confidence in equities.

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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 Tame
• 3/19 2:00 PM ET: Mar FOMC Decision Dovish
• 3/19 4:00 PM ET: Jan Net TIC Flows Tame
• 3/20 8:30 AM ET: Mar Philly Fed Business Outlook Tame
• 3/20 10:00 AM ET: Feb Existing Home Sales Tame
• 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:

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Economic Data Performance Tracker 2023: