“I really think a champion is defined not by their wins but by how they can recover when they fall.” ― Serena Williams

Good evening, 

The market carnage extended for a fourth straight week, dragged down by investors wrestling with a flip-flopping tariffs policy and intensifying recession fears. 

This week, the S&P 500 tumbled 2.3% and the Nasdaq Composite fell 2.4%. Both sharply rebounded Friday but failed to exit correction territory—defined as a drop of 10% or more from a recent high. 

While there is pain, Fundstrat Head of Technical Strategy Mark Newton reminded investors that the declines are in line with what is historically noted during the first quarter of any new administration. Besides, it was a mere 17 trading days ago that the S&P 500 set a fresh all-time high, he pointed out. 

“The economy arguably is still in very good shape, the earnings picture is good—even as fear levels are higher,” Newton said during the weekly huddle. “I don’t think we can jump to conclusions and talk ‘recession’ just based on these declines.”

Starting on Feb. 19, tariffs went from being just a threat to a reality. In turn, investors have become worried that a trade war would hurt business and consumer spending and ultimately weigh on U.S. economic growth, which for the past two years has surprisingly managed to avoid a slowdown. Even the long-favored tech trade has stopped working. The S&P 500 is down 4.1% this year, while the Nasdaq Composite has declined 8.1%.

Stocks’ “dire” situation is not shared by bonds, Head of Research Tom Lee said. Sure, Treasury Secretary Scott Bessent said that there is no Trump put for stocks, but “there may be one on the economy,” meaning that the White House could be forced to turn around its policies if it sees the economy deteriorate too much, Lee highlighted. 

The bond market is also pricing in odds of 3.4 interest-rate cuts from the Federal Reserve this year, up from 1.5 previously, he said. 

The divergence between stocks and bonds has historically been a “pretty good entry point for stocks,” said Lee, citing data from Renaissance Macro Research. 

Putting the declines into perspective, Lee said that the 10% correction noted in the S&P 500 is the fifth-fastest in the past three quarters of a century, taking 20 days. The median gain from all prior declines was 21% over the next 12 months. The quickest was from the Covid decline, prompting Lee to say, “Is this worse than the global pandemic? I don’t think so.” Our Chart of the Week has more details:

One economic data point that defined this week was the consumer-price index report, which came in softer than expected for both overall and core index. Headline CPI and core both rose 0.2% from a month ago. The report came in “soft for all the right reasons,” Lee said. Head of Data Science “Tireless” Ken Xuan pointed out that shelter is showing signs of gradual slowdown, hotel and airfare prices are becoming more “normalized,” and this “makes the hot CPI January report look kind of like an abnormality.” The headline number edged 2.8% higher from a year ago, while core increased 3.1%. 

On the technical side, Newton has been encouraged to see stocks down to the same levels of oversold territory as the ones that coincided with bottoms seen in August and April of 2024. “People are disgruntled, but we’re certainly not seeing evidence of true fear,” he said. 

He expects that lows to this sell-off could be “achieved within the next two weeks from a timing perspective, and prices are nearing possible support.”

One area of the market he likes currently is precious metals. Gold prices on Thursday hit fresh all-time highs, and on Friday, climbed above $3,000 a troy ounce for the first time. 

“March Madness is here, but I don’t sense that it’s going to be with us all that much longer,” Newton said. “I’m not in the bear camp.”

Elsewhere

The shutdown deadline is tonight at midnight. It seems likely that it will be avoided, but not without a big shock. Senate Democratic Leader Chuck Schumer of New York said he will vote for a Republican-written bill, even if it means betraying his own party for it. The reason: He is worried a shutdown “would give Donald Trump and DOGE the keys to the city, state, and country.” 

Intel is trying to turn over a new leaf. On Wednesday, it named former board member and chip industry veteran Lip-Bu Tan as its chief executive. In recent months, the storied chipmaker’s problems have compounded, as the artificial intelligence boom left behind the company’s central processing chips. Just three months ago, its former chief executive Pat Gelsinger was ousted for failing to turn the company’s fortunes around. The appointment will become effective March 18. 

Another inflation report this week shed light into how the Federal Reserve’s preferred inflation gauge data point could come in on March 28. The producer-price index, considered to be a broad measure of pipeline inflation pressures, came in flat for February from a month ago. Core PPI decreased 0.1%, the first negative reading since July.  

Tariffs became a whole lot more personal this week, after President Donald Trump threatened to put a 200% tariff on alcohol from France and other European nations. The retaliation came after the European Union moved to reinstate an import tax on American whiskey. “If this Tariff is not removed immediately, the U.S. will shortly place a 200% Tariff on all WINES, CHAMPAGNES, & ALCOHOLIC PRODUCTS COMING OUT OF FRANCE AND OTHER E.U. REPRESENTED COUNTRIES. This will be great for the Wine and Champagne businesses in the U.S.,” Trump said on Truth Social.

It’s official, Greenlanders really don’t want to become Americans. In a surprise victory, the country’s pro-business party that favors a slow path to independence, won against the two-left leaning parties that formed the last government. The campaign also focused on issues like healthcare and education, other than geopolitics. The message, however, was lost on Trump, who said Thursday he will annex Greenland. 

And finally: About 2,300 years ago, Greek geometer Archimedes first showed how to rigorously estimate the value of pi. The curious little number, denoted by the Greek letter π, has since become ubiquitous with calculating everything from the area of a circle to the volume of a sphere and paved the way for the invention of calculus 2,000 years later. The world is modern precisely because of it.