Market Outlook
Following an all-time high on February 19, the Russell 3000® has declined in five of the past seven trading days due to rising investor concerns about a weakening macroeconomic backdrop. Notably, last week’s earnings report from NVIDIA Corp. was favorable, but not enough to meet its rich valuations. As such, the Russell 3000 Growth experienced its worst two-week performance since the market pullback of summer 2024.
We believe the business cycle is firmly in a slowing expansion, rather than deterioration, phase as evidenced by last week’s mixed economic data. Last week’s Conference Board Consumer Confidence Index missed consensus estimates and fell to its lowest level since last June, while in contrast, housing price data and core durable goods orders beat estimates and accelerated from the prior month. While the renewed talk of U.S. tariffs adds to the complexity of the market outlook, investors should receive several key economic data points this week to help gauge the path forward.
Chart of the Week
While fourth-quarter earnings results were quite strong, revisions to future quarterly earnings expectations for the S&P 500® have weakened considerably.
In our view, the decline has not been driven by weak corporate guidance, but rather uncertainty about rising inflation and potential tariffs.
Our outlook continues to favor quality stocks with the ability to withstand rising fiscal policy uncertainty, elevated inflation and high interest rates.
