Market Movers & Shakers

U.S. stocks edged higher last week, breaking their recent losing streak. The S&P 500 climbed 0.51%, while the Nasdaq eked out a 0.17% gain, marking the first weekly advance for both indices after four consecutive weeks of declines. Energy, Financials, and Health Care were the top performing sectors last week, while Materials, Utilities, and Consumer Staples lagged. Mega-cap technology stocks were also mostly lower on the week, with five out of the seven constituents of the Magnificent Seven posting losses. Apple and Microsoft were the notable standouts.

Treasury yields remained steady to start the week before drifting lower following Wednesday’s Federal Open Market Committee (FOMC) meeting and Fed Chair Jerome Powell’s press conference. The 2-Year U.S. Treasury yield settled at 3.95%, while the benchmark 10-Year U.S. Treasury yield closed at 4.25%. The ICE U.S. Dollar Index consolidated around 104 after dipping to multi-month lows earlier in March. WTI Crude Oil prices stabilized in the mid-$60s before moving higher later in the week amid reignited geopolitical tensions between Israel and Gaza and recent U.S. airstrikes targeting Iranian-backed Houthi rebels in Yemen. Gold continued its rally, notching its 11th gain in the past 12 weeks and crossing $3,000 an ounce for the first time. Elsewhere in the metals complex, copper prices hit fresh highs as global trade disruptions intensified amid growing uncertainty surrounding tariff policies. Volatility, as measured by the VIX, declined throughout the week, settling below 20 for the first time since the start of the month. Looking ahead, seasonality factors begin to shift headwinds to tailwinds as we transition into April, which has historically been one of the strongest months for equities.



Source: FactSet

The Federal Reserve’s March FOMC meeting was a key focus for market participants last week. The Fed held interest rates steady at 4.25-4.50%, as expected. The decision to hold rates steady followed a pause in January after three consecutive interest rate reductions cumulatively lowered the Fed funds rate by 100 basis points since September. The Fed also announced a reduction in the monthly Treasury roll-off cap from $25 billion to $5 billion starting next month, while maintaining the $35 billion monthly cap for mortgage-backed securities (MBS). In other words, the Federal Reserve is slowing the pace of the reduction of its balance sheet, which ballooned during the pandemic when the Fed purchased trillions of dollars of Treasuries and MBS to ease financial conditions and provide liquidity to markets. This slowdown functions as a form of quasi-quantitative easing, or QE, as it drains less liquidity from financial markets and eases upward pressure on Treasury yields. Perhaps more importantly, it signals a shift toward a more accommodative policy stance, which markets may interpret as supportive for risk assets.



Source: The Federal Reserve (www.federalreserve.gov)

The March FOMC meeting also included an updated Summary of Economic Projections (SEP). The new SEP showed that the expected path for the Fed funds rate remains consistent with December’s projections, with the Fed still forecasting two rate cuts this year and two more the next. However, the SEP did reveal notable changes in the Federal Reserve’s forecasts for growth, inflation, and the labor market in 2025. The Fed lowered its 2025 GDP growth forecast from 2.1% to 1.7%, while simultaneously raising its core PCE forecasts from 2.5% to 2.8% and year-end unemployment rate from 4.3% to 4.4%. There was one notable change in the FOMC statement language that caught the attention of markets: “The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance” was removed and replaced with “uncertainty around the economic outlook has increased”. On the surface, the revisions move forecasts toward a more troubling outlook: slower growth, higher inflation—in other words, stagflation. However, Fed Chair Powell remained optimistic about the economy during his press conference and suggested that inflationary effects from tariffs may be transitory.

Outside of the Fed, macroeconomic data released last week painted a mixed picture. Retail sales data showed some softness, with February’s headline figures missing expectations while January’s numbers were revised lower. Data from the Commerce Department showed a decline in receipts at auto dealerships, clothing stores, and restaurants and bars, pointing to a slowdown in discretionary spending. Housing data came in ahead of expectations, showing a rebound in homebuilding activity in February. Housing starts and existing-home sales surprised to the upside, while permits were virtually unchanged month-over-month. Labor market data was relatively stable, as initial jobless claims rose by 2,000 to 223,000 for the week ended March 15th, marginally below economist forecasts of 224,000. Continuing unemployment claims rose by 33,000 to 1.89 million, also in line with expectations. Looking forward, markets are keenly focused on the upcoming April 2nd deadline for reciprocal tariffs and how they might ultimately be implemented.

Updates & News*

Recent market weakness has created more opportunities to deploy cash in new accounts and accounts with recent deposits. As a result, the speed in which we are transitioning new money has accelerated since our last review, particularly at the front-end of the transition. At the start of the month, money that had been under Tandem’s management for two weeks had been just over a third of the way invested into our strategy. Today, that figure is closer to ~50% by the two-week mark. As we move further out in time on the transition curve, speeds remain similar to our last review: roughly 90% of the way transitioned by three months.

In portfolio news, FactSet Research Systems and Accenture reported quarterly results last week. FactSet posted revenue figures mostly in-line with consensus forecasts while delivering an earnings per share beat. The company reaffirmed its full-year earnings per share guidance and raised its revenue forecast to reflect its recent acquisition of LiquidityBook. FactSet’s management anticipates an acceleration in growth in the second half of the year given the strength of its pipeline and constructive dialogue with clients. Accenture delivered earnings and revenue figures that were slightly above consensus estimates as the consulting giant continues to see growth in generative AI bookings. Accenture gave its full-year guidance a slight bump higher, raising the low end of its previous EPS and revenue guidance ranges. On the earnings call, CEO Julie Sweet addressed DOGE spending cuts and how the impacts are showing up in Accenture’s business, stating “the new administration has a clear goal to run the federal government more efficiently. During this process, many new procurement actions have slowed, which is negatively impacting our sales and revenue.” Although Accenture is one of the top 10 highest-paid consulting firms by the U.S. government, federal services made up only about 8% of the company’s global revenue in fiscal 2024, highlighting the diversity of its revenue mix. Outside of earnings, Roper Technologies announced plans to acquire CentralReach, an autism therapy software provider, for $1.65 billion, while O’Reilly Automotive announced that its board of directors approved a 15-for-1 stock split, subject to shareholder approval. O’Reilly Automotive last split its stock in 2005. Since then, its share price has increased by more than 4,400%!

Source: Source of all data is FactSet, unless otherwise noted.

*The transition level activity taken by Tandem is applicable to new accounts and new money, not the composite or firm-wide level. New accounts and new money are not automatically invested on the first day. Rather, they are transitioned into our strategy over a longer time period that is dependent upon market conditions. Strategy level activity is applicable to the composite and action is taken at the firm-wide level.

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Disclaimer: Tandem Investment Advisors, Inc. is an SEC registered investment advisor.

This audio/writing is for informational purposes only and shall not constitute or be considered financial, tax or investment advice, or an offer to sell, or a solicitation of an offer to buy any product, service, or security. Tandem Investment Advisors, Inc. does not represent that the securities, products, or services discussed in this writing are suitable for any particular investor. Indices are unmanaged and not available for direct investment. Please consult your financial advisor before making any investment decisions. Past performance is no guarantee of future results. All past portfolio purchases and sales are available upon request.

All performance figures, data points, charts and graphs contained in this report are derived from publicly available sources believed to be reliable. Tandem makes no representation as to the accuracy of these numbers, nor should they be construed as any representation of past or future performance.