Tee it up

Market index returns

Week to date since March 12, 2025 as of March 19, 2025

Index definitions: Global Real Estate = FTSE EPRA/NAREIT Developed Index; Global Infrastructure = Dow Jones Brookfield Global Infrastructure Index; Natural Resource Equities = S&P Global Natural Resources Index; Commodity Futures = Bloomberg Commodity Index; TIPS = Barclays US TIPS Index; Global Equities = MSCI World Index; Real Assets Index = 30% FTSE EPRA/NAREIT Developed Index, 30% Dow Jones Brookfield Global Infrastructure Index; 15% S&P Global Natural Resources Index; 15% Bloomberg Commodity Index, 10% Barclays TIPS Index. Source: Bloomberg, DWS. Past performance is not indicative of future results. It is not possible to invest directly in an index.

From President Trump’s trade tariff-induced “transition” to Fed Chair Powell’s “transitory,” investors and decision-makers have had a lot of “T” to drink. These concerns continued to dominate discussions and capital allocation decisions as U.S. reciprocal tariffs are slated to be enacted on April 2nd. The U.S. might have one of the loudest voices on the trade issue but it isn’t the only one. A chorus of nations have been pushing back against the manufacturing might of China and the dumping of its goods in their domestic markets. China’s government isn’t deaf to the concerns raised by trading partners and has worked to soothe relations by sharing, or promising to share, the “development benefits with its neighbors,” and has kept its tariffs low on less well-off countries. Geopolitical events also reignited during the period as the ceasefire between Israel and Hamas expired, after which Israeli forces launched air strikes and ground incursions in Gaza once again. The U.S. struck Houthi targets in Yemen, another of Iran’s proxies in the region. In Eastern Europe, a move facilitated by U.S. President Trump, Ukraine and Russia took initial steps towards a ceasefire by mutually agreeing to halt attacks on energy infrastructure.

Global equity markets climbed off the year-to-date low touched on March 13th, after declining nearly 8%. U.S. equities went through a full correction with the S&P 500 falling 10% in March. It remains to be seen whether this was just a temporary correction or if equities will take another step lower. Energy companies led the rebound in global equities, followed by Financials and Materials. Conversely, the Communications, Consumer Discretionary, and Consumer Staples sectors lagged the broader market despite posting positive returns. In this environment the Real Asset Index outpaced Global Equities, with leadership from Natural Resource Equities and Global Infrastructure Securities. Conversely, U.S. Treasury Inflation-Protected Securities (TIPS), Global Real Estate securities, and Commodity Futures trailed the Real Asset Index, despite positive performance. Among other indicators we track, the VIX, an index of expected S&P volatility, fell 18% to 19.9. This move occurred ahead of the March 21st “triple-witching” day when trillions of dollars in equity-related contracts expire. The nominal yield curve flattened, especially in the long-end, 10- & 30-year segment. Inflation break-evens fell slightly, down 2 basis points (bps) for the 5-year and 1 bp for the 10-year segment. Credit spreads, the yield premium over sovereign base rates, widened 9 bps for below-investment grade credits (high yield) and tightened 4 bps for investment-grade (IG) spreads. For the period, the dollar was slightly weaker, ending at 103.43 as measured by the DXY index. Oil prices weakened to $67.16 per barrel, and gold prices continued to rise, hitting $3,048 per ounce.^[1]

Why it matters: Facing disruption in financial markets, trade flows, and corporate revenues, investors need to stay on their toes to factor in new information and potential outcomes. We continue to monitor the hard data, but also investor expectations and sentiment, as views and beliefs can translate into actual price activity, which can become actionable and is eventually revealed in the hard data.

Macro Dive: We will review central bank decisions and metrics to watch in the U.S.

• Central banks:  The U.S. Federal Reserve’s FOMC (Federal Open Market Committee) held rates steady at their last meeting on March 19th. In his comments following the decision, Fed Chair Powell noted that uncertainty influenced the outlook and the decision to wait and see. He also noted the potential inflation impulse from tariffs is expected to be transitory as businesses and consumers adjust to the new higher price level. The Bank of England had similar concerns when justifying its decision to hold rates and drop the bias to cut. Sweden’s Riksbank ended its easing cycle citing the uncertainty, which was also cited by many other central banks in Asia, which kept rates unchanged. The Swiss National Bank stood out as it cut rates to reduce its currency’s strength. The potential global trade fallout could trigger a difficult combination of higher inflation and weaker growth for central banks to confront.^[1]

• Data watch:  Initial jobless claims for the period ending March 15th were relatively flat at 223k, versus a prior reading of 220k. Continuing claims for the period ending March 8th rose slightly to 1892k, up from 1870k. A pair of regional Fed surveys showed weakening confidence. The U.S. Empire State Manufacturing Survey of General Business Conditions, conducted by the Federal Reserve Bank of New York, fell to -20.0, well below the prior reading of 5.7. In addition, the Philadelphia Fed Business Outlook survey was also softer, coming in at 12.5, down from 18.1. The Import Price Index saw an increase of 0.4% month-over-month (MoM), which matched the prior month’s revised reading and was ahead of flat expectations. Year-over-year (YoY) the pace accelerated to 2.0%, up from the prior revised figure of 1.8% Higher import prices could portend higher inflation for consumers, which could hinder the Fed’s ability to cut rates. The market is currently pricing in 1-3 Fed cuts of 25 bps each by the end of this year.

• Nothing else metals:  The European Commission announced the "Action Plan on Steel and Metals," which aims to strengthen the sector's competitiveness and expand industrial capacity. Steel remains a critical component for Europe’s industry and priorities such as clean tech and defense. The latter could gain tailwinds under the announced "ReArm Europe Plan/Readiness 2030," plan, which sets a €800 billion investment objective for defense. One key goal of the Action Plan is to ensure secure and affordable energy supplies for the sector given its energy intensity. This will require physical infrastructure improvements and changes to legal and tax regimes to speed development. Policymakers also outlined support for industry to incentivize decarbonization and enhance global competitiveness.^[2]

Real Assets, Real Insights: This week we will look at retailers’ impact on REITs, the need for infrastructure equipment, and copper dynamics in anticipation of trade tariffs.

• Pelted by online sales (Real Estate):  Canada’s oldest company, the Hudson Bay Company, worked to avoid liquidation for the retailer founded in 1670. The company went to court to allow for an orderly liquidation of the company as it has not found a solution to its cash flow issues. The company owes C$1.1 billion in secured debt and is trying to preserve jobs through a partial liquidation of its 104 stores and 9300 employees. Brick-and-mortar stores have struggled to adapt to the shifting consumer shopping habits, especially the use of e-commerce. HBC has been in court to obtain debtor-in-possession financing to cover the cost of operating during liquidation, as well as to obtain a ruling to suspend rent payments to a joint venture with RioCan REIT. This type of ruling highlights the ongoing need to monitor consumer spending and the health of retailers with large physical footprints.^[1]

• High voltage (Infrastructure):  Ofgem, the UK energy regulator, approved plans to provide £4 billion of spending on grid improvements. The plan also supports the UK’s zero-carbon goal for 2030. Part of the plan enables grid owners to get a jump on ordering essential equipment faster than originally allowed. This was done to help avoid delays due to supply constraints. Britain will have to compete with the E.U. and individual member states which are also working to upgrade and expand electric grids, as highlighted by Germany’s upcoming infrastructure fund. To illustrate the need for infrastructure components, Hitachi Energy committed an additional $250 million to help alleviate a shortage in the transformer market. The surge in demand, in part from data centers, exceeded the company’s initial projections. The company announced that 40% of the investment will focus on the U.S, where Hitachi Energy produces transformers in Virginia, Missouri, and Mississippi. This announcement expands on the already announced plans of $6 billion in investments to expand production, with $1.5 billion specifically dedicated to transformers.^[3]

• Malleable shipments (Commodities):  Copper shipments to the U.S. are expected to surpass the record reached in January 2022. Traders have redirected shipments to the U.S. in anticipation of potential tariffs and to take advantage of a price premium in the U.S. versus other markets. The expected monthly total is between 100-150k metric tons. To put that in perspective, 150k metric tons roughly equates to the weight of 600 Boeing 787 planes, which weigh about 253 tonnes each. Tariff expectations drove a 12% premium for NY Comex copper versus LME (London Metal Exchange) copper; however, the LME remains the primary market for copper pricing and China remains the primary consumer of the metal. The U.S. consumes twice the amount of copper that it produces, which requires imports to fill the gap, regardless of the tariff level. The top exporters to the U.S. were Chile, Canada, Peru, and Mexico, according to the U.S. Census Bureau.^[4]