Navigating Choppy Waters: Tariffs, Tech Tumbles, and Sector Rotations – March 23, 2025

Alright folks, let’s cut through the noise. The market’s been throwing us curveballs, and it’s time to break down what’s really happening. We’re seeing a mixed bag of signals, a tug-of-war between growth hopes and very real economic anxieties. Forget the headlines; let’s dive into the data.

Market Overview: A Sea of Uncertainty

The global picture is murky. The S&P 500 has been clinging to gains, fueled by selective earnings reports, but the Nasdaq and Dow are showing cracks. Gold is acting like gold should – a safe haven in uncertain times. The US Dollar Index is weakening, and Bitcoin… well, Bitcoin is being Bitcoin, with volume spiking.

Index Trends

• S&P 500: Up 1.5%. Driven by strong earnings reports from various companies.
• Nasdaq Composite: Down 2.2%. Tech’s getting hammered. Time to reassess your holdings.
• Dow Jones Industrial Average: Down 1.1%. Economic worries are biting.

Stocks: Winners and Losers

• S&P 500: Up 1.5%. Driven by those strong earnings. Don’t get complacent.
• Nasdaq Composite: Down 2.2%. Tech’s getting hammered. Time to reassess your holdings.
• Dow Jones Industrial Average: Down 1.1%. Economic worries are biting.

Sector Performance: Where’s the Heat?

• Technology: Up 3.2%. Selectively strength. AI hype is still a factor, but be discerning.
• Finance: Down 2.5%. Interest rate jitters are real.
• Energy: Up 1.8%. Oil’s up, energy’s up. Basic stuff.

Inflation and Interest Rates: The Fed’s Tightrope Walk

The US Dollar Index is feeling the pressure. The Fed’s hiking rates, and that’s going to ripple through the S&P 500 and everything else.

Sentiment: Fear and Greed’s Familiar Dance

Fear and uncertainty are calling the tune right now, but there’s still growth bubbling beneath the surface. The question is, can that growth overcome the headwinds?

Trading Signals: Watch These Levels

• S&P 500: A close above 5600.00 might be a buy signal. I’d want to see confirmation.
• Nasdaq Composite: This decline is a warning. Could be a selling opportunity, or a chance to buy the dip – if you’ve done your homework.
• Dow Jones Industrial Average: A continued slide is a sell signal for me.

Deeper Dive: Trends and Analysis

Overall Market Trends

• Economic Sentiment: Weakening dollar could be good for emerging markets, like India. Government spending and regulatory easing are helping there.
• Geopolitics: US-China tensions are always a factor. China’s trying to woo big companies. Smart move on their part.
• Crypto: Bitcoin and Ethereum showing signs of life? Maybe. Government intervention is a wild card. I’m cautiously neutral.
• AI: Data centers in Southeast Asia are booming. AI’s still a growth driver.

Stocks and Indexes: Picking Through the Rubble

• Tech & AI: Nvidia (NVDA) and Microsoft (MSFT) are long-term AI plays. The Nasdaq correction could be a buying opportunity. Could.
• Energy: TKIL Industries is betting big on green hydrogen. Something to watch.
• Financials: Standard Chartered (SCBFF) is targeting “new money” in Hong Kong. Smart.
• Healthcare: Eli Lilly (LLY) and Pfizer (PFE) are being courted by China. Potential upside.
• Real Estate: Hong Kong office market is a mess. Avoid.

Potential Trading Signals

• Crypto: Bitcoin and Ethereum forming a bottom? Keep an eye out for confirmation.
• Tech: Nasdaq dip? Time to load up on Microsoft (MSFT) and Amazon (AMZN)? Maybe. Do your research.
• Emerging Markets: India’s looking good.
• AI: Data center plays in Southeast Asia could be interesting.

Index Performance

• Nasdaq: Correction territory. Opportunity or trap?
• Hong Kong: Sideways. Waiting for a catalyst.

Sentiment Analysis

• Bullish: Amazon (AMZN), Nvidia (NVDA), Standard Chartered (SCBFF).
• Neutral: Microsoft (MSFT), Meta (META).
• Bearish: Rocket Lab (RKLB).

 Caution Ahead

While I believe this last week in March should be positive for the S&P given greater than normal pension fund rebalancing, I believe Q1 earnings season will be rough as estimates get lowered. I doubt corporations in particular will be making major spending decisions with reciprocal tariffs looming on April 2nd. Given weak consumer confidence surveys, consumer spending is also likely biased lower with recent airline industry negative pre-announcements a confirming datapoint.

Unfortunately, guidance disappointments have so far been met with continued selling in general despite lowered expectations over the past month. Reaction on Friday (3/21) to results by four very different companies $MU (-8% on Friday), $NKE (-5%), $LEN (-4%) and FDX (-6%) with all but Micron hitting new 52-week lows reconfirmed my fears.

My Portfolio Strategy: Playing Defense

Since mid-2024, revenue estimates for $AMZN, $MSFT, $AAPL, $TSLA have been coming down with $GOOGL barely higher but investors do not care as much about fundamentals or valuation when stock charts look good and the Fed is cutting. As I have brought up since mid-last year as my thesis for an AI digestion phase in 2025, this is also one of the main reasons that $NVDA’s stock is lower than where it was in mid-2024. Their main customers have seen revenue estimates go down despite ramping AI capex.

To start 2025, six of the Magnificent 7 saw forward revenue estimates get cut when CQ4:2024 was reported but the Fed is no longer cutting and valuations are high.

High valuations and estimates coming down is the reason that the S&P has been struggling relative to MSCI All World Country Index excluding the US which is up 8% YTD through 3/21/25. When inflation has been between 2.5-3.0% exiting the year, the trailing S&P multiple has been 19x versus 24x today. All four metrics of core or headline PCE/CPI are between 2.5-3.1% today versus the 2% target for the Fed.

If tariffs were the main reason for the US stock market issues then why is $EWW (Mexico ETF) up 10% YTD and $EWC (Canada ETF) up 1% YTD which are the two countries that have the most to lose in a trade war with the US? Even in the US, if tariffs were the main issue, the S&P industrial, materials, and consumer staples sectors should not be flat to up year-to-date. Tariffs have much less of an impact on S&P informational technology sector given they sell less physical goods but it is down 10% YTD.

In addition, $KWEB (the China internet ETF) is up 22% YTD versus the 13% decline for the Magnificent 7 so this is not hatred for tech stocks in general. The emergence of DeepSeek in China earlier this year, low relative valuations, multi-year avoidance of China internet by investors, and consumption stimulus by China’s government could certainly give this sector room to run further.

Potential Trading or Investing Signals

• Tech and Semiconductors: The crackdown on Nvidia chip flows and the AI boom in Asia suggest potential volatility in tech and semiconductor stocks. Investors should monitor regulatory developments and supply chain dynamics.
• Energy and Commodities: Shenhua Energy’s shift from coal to power and chemicals could impact energy stocks and commodity prices. Investors should watch for changes in energy policies and market demand.
• Insurance and Financial Services: The acquisition of Next Insurance by ERGO for $2.6 billion signals growth and consolidation in the sector. This could lead to increased competition and innovation.
• Retail and E-commerce: Best Buy’s influencer program and Walmart’s metaverse initiatives suggest a strategic focus on digital engagement. Investors should monitor these companies’ performance and the broader e-commerce sector.
• Legal and Regulatory: Amazon’s lawsuit and the potential ousting of T-Mobile’s CEO highlight ongoing regulatory and leadership challenges. Investors should stay informed about legal developments and corporate governance issues.

High-Growth Momentum Stocks (Caveat Emptor!)

• Atour Lifestyle Holdings Ltd ADR (ATAT): Positive, but watch China’s recovery.
• Copa Holdings S.A (CPA): Neutral. Airline sector is always volatile.
• Interdigital Inc (IDCC): Neutral to Slightly Negative. Tech is tough right now.
• Imperial Oil Ltd (IMO): Neutral. Energy is a mixed bag.
• Paycom Software Inc (PAYC): Strong Positive. This one looks good.

Sector Highlights: A Quick Scan

• Automotive (Ford): Tariffs are a problem. Competition is fierce.
• Financials (Banco Bradesco, Itaú Unibanco): Showing some strength.
• Energy (Petrobras): Looking good.
• Airlines (United Airlines): Operational issues. Be careful.
• Pharma (Pfizer): Undervalued, maybe.
• Tech (NVIDIA): Regulatory headwinds.

Key Signals: Watch Out For…

• Tariff Risks: Companies exposed to China are vulnerable.
• Sector Rotation: Energy and Financials are gaining traction.
• Operational Challenges: Operational efficiency is key.
• Undervaluation Opportunities: Petrobras and Pfizer might be undervalued.

Disclaimer

This content is generated automatically using AI and is for informational purposes only. It is not intended to be financial advice. The information provided should not be used as a basis for making investment decisions. Always consult with a financial advisor or professional before making any investment decisions.