17/03/25: US market sell-off, tariff concerns & inflation trends

In this week's episode of the Monday Espresso podcast, Edward Kennedy and Rory Dowie discuss recent events and look to the week ahead.

Sheldon MacDonald is the Chief Investment Officer of Marlborough and Nathan Sweeney is the Chief Investment Officer of the Marlborough Multi-Asset funds.

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What is Marlborough Monday Espresso Podcast?

Sheldon Macdonald and Nathan Sweeney talk about the topics driving the markets in their weekly Monday update.

Monday Espresso Podcast - 17 March 2025

[00:00:00] Edward Kennedy: It is Monday, March the 17th. It's Eddie Kennedy in here, filling in for the irreplaceable Nathan Sweeney. With me today I've got Rory Dowie. Rory covers our global equities. Good to see you, Rory.

[00:00:14] Rory Dowie: Hey, morning, Eddie.

[00:00:15] Edward Kennedy: Now, markets seemed a little bit repetitive from last week. Is there any more colour you can give our clients to let them know what happened?

[00:00:23] Rory Dowie: Aw, sadly I wish it was a different story to what we've seen over the last couple of weeks on the pod. But really last week it was very much a continuation of what we've seen so far this year. And again it was pretty painful across the board with again, the US being at the epicentre of that market pain.

[00:00:37] Rory Dowie: The S&P was down over 3% for the week. And again it was really that uncertainty caused by Trump's tariffs and the potential inflationary impact they could have which continues to reverberate across the US market. Year to date, the US is now down about 6%. And again, the NASDAQ, that tech heavy part of the US market down over 10%.

[00:00:57] Rory Dowie: Europe was also down over the week, but by not as much, and whilst Asia had fed relatively better over the week. I think what was quite interesting was actually really kind of the pain that we felt last week. Really, all of that came on Monday. Well, we basically had the entire weekly loss in one day. The S&P was down 2.7% on Monday, and that was its worst day of the year. And the NASDAQ was down over 4%. That was actually the NASDAQ's worst day since back in September 2022, when we started seeing interest rates rising. And on the back of that, we saw a slew of the investment banks downgrading some of their year end forecasts on the S&P as well.

[00:01:30] Rory Dowie: Not necessarily something to be hugely concerned about. They typically are more, you know, reactionary posts. Some of this news, again, not helping market sentiment. Maybe also to mention, I mean, we spoke on the pod last couple of weeks, and we talked about some of the earnings prints around what's going on with the consumer.

[00:01:45] Rory Dowie: And again, we had Delta Airlines reports on Tuesday. And again, they were kind of worrying and talking about weaker US demand. Again, the consumer perhaps pulling back on some of that travel related spend something which has been very very strong the last few years and as a result we saw some of those other travel related stocks sell off in sympathy names like Disney and Airbnb. So yeah, really not much to change in terms of what's been going on this year. Really still again the US being kind of the epicenter of the pain.

[00:02:11] Edward Kennedy: Yeah. Thanks for that Rory very interesting stuff. Does seem that this tariff uncertainty is pushing through into a little bit of the consumer uncertainty, but it's not really driving fundamental data? I mean if we do look at some of the fundamental data, inflation is something we talked about last week.

[00:02:28] Edward Kennedy: What else can you tell us about the inflation print?

[00:02:31] Rory Dowie: Yeah, so we had US inflation numbers on Wednesday and that was the inflation numbers for February and actually, the good news is that actually came in a little bit lighter than expected. So the headline CPI came in at 2.8% versus expectations of 2.9%. Was core CPI was 3.1% compared with the anticipated 3.2%. So that was received relatively well by markets. What was kind of causing that under the hoods. Really, it was kind of airline fares, which are typically pretty volatile. They're not necessarily the best barometer, but really they were down 4%.

[00:03:04] Rory Dowie: And again, I mentioned the kind of weaker air travel with the Delta Airlines ironings print. So that was kind of one of the main kind of causes for that. Look at that miss at the headline level, the probabilities for a rate cuts in March is now at 2%. So market's not really expecting a rate till kind of later on in the year. But again, you know, it is definitely a kind of step in the right direction with that inflation coming down.

[00:03:25] Rory Dowie: I think if there were kind of slightly hotter expectations, if that headline had come in at 3% above expectations, I think markets would have really got quite scared. I think one thing to really highlight here is obviously this inflation is not yet impacted by the tariffs and really kind of the expectation is that the tariffs will be leading to some inflationary pressure over the sort of the second half of the year as they start to flow through. So again, we'll be continuing to watch the CPI and the other economic data, as we always do to make sure we see him and are on the front foot around, you know, the impact of these tariffs and on inflation.

[00:03:57] Edward Kennedy: Yeah, thanks Rory. I think the interesting point there is really, tariffs aside, the direction of travel inflation does seem to be coming lower, still above central banks target rates, but definitely softening, which is good news. Now we just need to keep an eye on what happens with tariffs and inflation.

[00:04:16] Edward Kennedy: Now, looking into the week, is there anything else happening?

[00:04:19] Rory Dowie: Yeah, I mean, I mean, who knows what's going to happen week by week at the moment with the Trump administration. But yeah, look, I think on the economic data front, it's certainly, you know, less busy than last week. This week, we have retail sales and housing starts.

[00:04:32] Rory Dowie: They're probably the main ones that will be watching. And then again, obviously, we'll be watching very carefully some of the comments, you know, from the Trump administration on tariffs. There were threats on more EU tariffs. I think last week around, you know, alcoholic beverages, if the EU didn't remove the tariff on whiskey, American whiskey.

[00:04:47] Rory Dowie: So again, we'll be watching any new noise that comes out of the US administration. But other than that, not too much. We're pretty much there with earnings season. So yeah, really retail and housing starts and then what's going on with the tariffs.

[00:04:58] Edward Kennedy: Yeah, thanks. Really, really insightful. I mean, markets are always going to experience speed bumps at some times, and it's normal for markets to have these sort of pullbacks.

[00:05:09] Edward Kennedy: What we'll be looking into is more into the devil in the detail to see if we think this is something more sinister. At this stage, we're just keeping a close eye on it. Now, thanks for joining us and if you have any questions, please do send them in to the Marlborough team. Thank you very much.