Investors Reach for Safe-Havens to End the Quarter: March 31, 2025

Investor anxiety is mounting over a broad expansion of tariffs scheduled for implementation this Wednesday. Wall Street is worried about the measures and their potential impacts on an economy that is already undergoing some stress. Indeed, consumer spending has pulled back sharply so far this quarter as households hit the brakes hard in light of significant cost pressures and rising uncertainties. Simultaneously, fresh concerns related to trade turbulence, government expenditure reductions and job security are adding to the existing headwinds of high prices and elevated borrowing charges. Meanwhile, capital expenditures and hiring momentum have waned as firms adopt a wait-and-see approach to incoming policies from Washington prior to pursuing additional expansionary activities. Risk-off positioning is dominating markets on a quiet day for the stateside economic calendar as participants sell stocks in favor of Treasurys, gold bars, greenback futures, crude oil barrels, volatility call options, equity index put derivatives and forecast contracts.

Stocks Attempt a Comeback

Despite stocks experiencing heavy selling at the start of the session, the Dow Jones Industrial Average has snuck into the green and other benchmarks have climbed off their lows. Still, the Nasdaq 100, Russell 2000 and S&P 500 gauges are lower by 1.1%, 0.9% and 0.4%. Sectoral breadth is positive, however, with just technology, consumer discretionary and communication services weighing on performance; those segments are down 1.3%, 1.1% and 0.2%. The other eight components are gaining though, with consumer staples, energy and real estate up 1.2%, 1.2% and 0.8%. Treasurys and the greenback are catching bids as well, benefiting from greater safe-haven demand. The 2- and 10-year maturities are changing hands at 3.90% and 4.23%, 1 and 2 basis points (bps) lighter so far. The Dollar Index is up 25 bps as the US currency appreciates against all of its major counterparts, including the euro, pound sterling, franc, yen, yuan, loonie and Aussie tender. In commodities, gold is up to a new all-time high on risk-off positioning and crude oil is jumping due to rising odds that President Trump will tighten energy sanctions on Tehran and Moscow. Gold is up 1.3% while WTI crude is up 3.4% to $71.34 per barrel. Conversely, copper, lumber and silver are down 1.5%, 1.2% and 0.8%. 

Will April 2 Really Be It?

Some on Wall Street are already talking about how “April 2” may very well be lighter-than-feared, producing a snap-back rally in risk assets. But others worry that this economy can’t handle a stress test of this magnitude and point to households increasingly unable to sustain expenditure patterns in light of mounting headwinds. Meanwhile, a stagflationary combination of higher prices and decelerating activity would weigh on the margins and the profitability outlook for corporate America, which is a significant driver of the current selloff. Finally, stock market bulls are hoping for clear skies ahead, as uncertainty itself serves as a drag on animal spirits, consumption and capital expenditures.

International Roundup

China Plans Additional Stimulus

China announced that its four largest banks will raise up to $71.6 billion by selling shares in order to ramp up lending to stimulate the economy and bolster capital. China’s finance ministry expects to be the largest investor of the private equity offering and will issue bonds for the purchases.

Meanwhile, the country’s NBS Manufacturing Purchasing Managers’ Index (PMI) climbed from 50.2 to 50.5 for March, which met the analyst expectation, and its NBS Non-Manufacturing gauge strengthened from 50.4 to 50.8, surpassing the forecast of 50.5.

Japan Home Construction Picks Up

Japan’s housing starts surprisingly reversed a downward trend, posting a 2.4% year over year (y/y) increase last month, according to the country’s Ministry of Land, Infrastructure, Transport, and Tourism. After the metric dropped 4.6% during the preceding month, analysts anticipated a 1.4% decline in February. Groundbreaking for rental properties climbed 3.2% y/y while projects for homebuyers increased 5.1%. On a month over month (m/m) basis, construction orders received by the country’s 50-largest builders fell 3.3% after climbing 12.2% in January.

Industrial production in February was also encouraging, climbing 2.5% m/m and exceeding the analyst consensus estimate of 2.3% following a 1.1% dip during the first month of the year.  Stronger housing starts and growing industrial production, however, didn’t help push up retail sales with cash register activity decelerating from 4.4% y/y in January to 1.4%, which missed the analyst forecast of 2%.

South Korea Retail and Industry Advances

Retail sales and industry production both expanded last month after recently declining. Industrial production climbed 1% and 7% m/m and y/y, exceeding expectations of 0.8% and 2%. In the preceding month, the metrics fell 2.8% and 4.7%. Meanwhile, retail sales climbed 1.5% m/m, up from a 0.7% decline in January.