“Correction” Territory — Evening Brief – 03.14.25
U.S. equities rallied on Friday but couldn’t avert a fourth straight losing week for Wall Street—the longest skid since August. Tariff uncertainties, a third consecutive monthly drop in consumer sentiment (University of Michigan Index fell to 57.9 in March’s preliminary reading, missing the 63.1 consensus and down from February’s 64.7), and a narrowly avoided government shutdown shaped the uneven recovery.
The market closed just over 10% below its prior peak, entering a ‘correction’—a drop of 10% to 20%, as commonly defined. In Wall Street terms, a ‘bear market’ kicks in when the decline surpasses 20%. A bear market looms at around 4,860 (-20%) for the S&P 500, still roughly 600 points off. While a bear market doesn’t yet apply, but stocks are clearly on the defensive.
“Corrections do not come in all shapes and sizes, as they are bounded by declines of 10% to 20%. They also tend to be short-lived and generally give way to robust recoveries (the meager rebound in the S&P 500 after the 2018 correction was the first non-double-digit annual gain after such a downturn in nearly three decades),” Bryan Jordan, chief strategist at Cycle Framework Insights, Inc shared with Connect.
While U.S. equities falter, some global market segments are proving resilient or even thriving. Gold stands out, surging to an intraday record high on Friday. Short-term U.S. Treasuries also remain steady, with the iShares 1-3 Year Treasury Bond ETF (SHY) gaining on Thursday and trading near its all-time peak. Select portfolio strategies are likewise showing strength in 2025.
Merger arbitrage shines as a bullish standout in 2025 as well, with the IQ Merger Arbitrage ETF (MNA) riding an uptrend that’s offered refuge amid market turbulence. Meanwhile, certain broadly diversified commodity portfolios are showing resilience, with the WisdomTree Enhanced Commodity Strategy Fund (GCC) gaining 2.7% year-to-date.
From a U.S. investor’s perspective, foreign government bond prices have climbed recently, boosted partly by a weakening U.S. dollar in 2025. A softer dollar typically lifts foreign-currency-denominated assets, a trend evident in developed markets ex-U.S. government bonds (BWX), with even stronger gains in emerging market government bonds (EMLC) this year.
“The question, of course, is whether the ongoing retrenchment will prove to be the early stages of a bear market rather than the later stages of a correction, the answer to which will largely rest upon the trajectory of the economy in the months ahead,” added Jordan.
“The continued low level of jobless claims is an encouraging sign that a recession is still not close at hand, but the pullback in asset prices itself will add to the risks that have been slowly building for some time and had already intensified in recent weeks.”