Uriel Loredo

Good news: Inflation drops more than expected 

Inflation slowed in March and is moving closer to the Federal Reserve’s target. 

Key highlights from the report: 

The Consumer Price Index (CPI-U) fell 0.1% in March, marking a positive shift compared to the 0.2% increase in February. This decline reinforces the trend toward more controlled inflation amid a still-challenging monetary policy environment. 

  • Annual inflation: 2.4%, down from 2.8% in February and better than the estimated 2.6%. 
  • Energy: -2.4% monthly, driven by a 6.3% drop in gasoline prices. 
  • Food: +0.4%, with increases both at home and away from home. 
  • Core inflation: +0.1% monthly and +2.8% annually, the smallest increase since March 2021. 
  • Shelter: +0.2% monthly, +4% annually, the lowest rise since 2021. 
  • Other categories: Declines in airfare, used cars, insurance, and recreation. 

The report suggests a gradual yet steady slowdown, bringing inflation closer to the 2% target. However, the Fed remains cautious due to persistent pressures in certain sectors and uncertainty surrounding trade policies. 

Market implications: 
The consensus now expects between three and four federal funds rate cuts (currently at 4.25%-4.50%) throughout the year. No changes are anticipated for the upcoming May 7 meeting. 

Year-over-year percentage change in headline and core inflation 

Source: U.S. Bureau of Labor Statistics 

Posted in Weekly Comment

The U.S. imposes higher tariffs, impacting manufacturing and employment expectations.

U.S. Imposes Global Tariffs 

Week of March 31 – April 4 

Here are the key events that influenced market sentiment this week: 

United States 

  • The U.S. announced a new 10% blanket tariff on imports, with reciprocal measures for over 150 countries starting April 9. 
  • Nonfarm payrolls exceeded expectations in March, adding +228,000 jobs, though unemployment rose to 4.2%. 
  • Manufacturing activity contracted for the first time this year, according to the ISM index. 

Europe 

  • Inflation fell to 2.2% year-over-year, in line with expectations. 
  • Markets anticipate a 25-bps rate cut at the ECB’s April 17 meeting. 
  • The European Commission responded to U.S. tariffs and is preparing countermeasures. 

China 

  • The manufacturing PMI reached a 12-month high, driven by a surge in new orders. 
  • The country will face a 54% tariff on its exports to the U.S. and has retaliated with a 34% tariff on U.S. goods. 

Brazil 

  • Industrial production unexpectedly declined by 0.1% month-over-month in February, dragged down by durable goods manufacturing. 

Mexico 

  • February remittances totaled $4.459 billion, down 1% year-over-year. 
  • Mexico and Canada were excluded from the U.S. tariff announcement. 
  • The government introduced an 18-point plan to boost domestic consumption, investment, and social programs. 

In times of volatility, it’s essential not to be swayed by short-term noise—discipline and patience create long-term wealth. 

Important events:

  • April 9: The U.S. Federal Reserve minutes will be released. 
  • April 10: March inflation data will be published in the U.S. 

Monitor

Posted in Weekly Summary

Earnings Season: Resilient Growth Amid Adjustments

S&P 500 earnings rise amid uncertainty.

Key points from Q1 2025 earnings season 

By the end of Q1 2025, analysts have adjusted their earnings expectations. Although the estimated growth has dropped to 7.3% year-over-year from 11.7% at the end of December, the S&P 500 is still on track for its seventh consecutive quarter of expansion. Additionally, revenue growth is expected to reach 4.2%, with net margins at 12.1%. 

The technology, healthcare, and utilities sectors lead earnings growth, while energy and materials decline. Despite current economic uncertainty, corporate performance continues to show positive signs, which could translate into an 11.5% earnings growth for the full year. 

Market implications: 
With the first quarter closing amid volatility due to the potential effects of tariff implementation, investors will turn their attention to the upcoming earnings season. 

S&P 500 year-over-year earnings growth: Q1 2025 

Source: FactSet 

Posted in Weekly Comment

Inflation eases in Mexico and the United Kingdom, while trade tensions with the United States rise. 

Week of March 24 to 28 

Global markets in motion: Uncertainty in the U.S., recovery in Europe, challenges in China, and monetary adjustments in Mexico. 

  • United States 
    Analysts expect S&P 500 earnings to grow 7.7% year-over-year in Q1 2025, the slowest pace since Q3 2023. Trump announced a 25% tariff on all cars manufactured outside the country. Consumer confidence fell amid inflation fears. Q4 2024 GDP was revised upward, showing an annualized growth of 2.4%, driven by consumption. 
  • Europe 
    Economic activity advanced at its fastest pace in seven months, led by the manufacturing sector. In the United Kingdom, inflation slowed to 2.8% year-over-year, better than expected. 
  • China 
    In response to rising tariffs, Premier Li Qiang called for opening global markets. Industrial profits fell 0.3% year-over-year as of February. 
  • Brazil 
    The government considers that conditions may arise to begin interest rate cuts in the second half of the year. 
  • Mexico 
    Inflation in the first half of March moderated to 3.67% year-over-year. In line with expectations, the Bank of Mexico cut the benchmark rate by 50 basis points, bringing it to 9%. 

Staying informed will help you better understand the current macroeconomic context. 

Important events in the coming weeks 

  • April 01: In the United States, the ISM Manufacturing Index will be released. 
  • April 04: In the United States, employment figures will be published. 

Monitor

Posted in Weekly Summary

Understanding Market Corrections – What You Need to Know

A straightforward look at how market corrections happen, what causes them, and how to stay on track when they do. 

Making Sense of Market Corrections 

A market correction is a drop of about 10% to 20% from a recent high—and they’re more common than many realize. Historically, the S&P 500 experiences a correction every 18 to 24 months, and in most cases, the market bounces back within four to six months. 

What Do Corrections Look Like? 

  • Mild (10–12%) – Usually triggered by shifts in stock valuations. 
  • Standard (12–17%) – Often tied to interest rate changes or macroeconomic concerns.
  • Deep (17–20%) – Can be caused by financial system stress or major global events. 

What Typically Causes Them? 

  • Fed rate hikes 
  • Rising inflation 
  • Global tensions or conflicts 
  • Lower-than-expected corporate earnings 
  • Market running “too hot” (i.e., overvalued) 

A Few Recent Examples: 

  • 2018 (-19.8%) – Trade war headlines 
  • 2020 (-33.9%) – COVID market shock 
  • 2022 (-25.4%) – Inflation spike and Fed rate hikes 

How to navigate them: 
During these periods, the most important thing is to stick with your investment strategy, stay diversified, and keep focused on your long-term goals. It’s easy to get caught up in dramatic headlines, but making impulsive moves often does more harm than good. 

At the end of the day, getting through a correction is about having a plan, staying disciplined, and remembering that volatility is a normal part of investing. 

Market downturns have occurred every year.

Source: Capital Group

Posted in Weekly Comment

Global perspectives: Central banks in the spotlight.

From the U.S. to Brazil, central banks have taken a cautious and more conservative stance.

Investors remain focused on monetary policy perspectives. 

Week of March 17 to 21 

Investors are closely watching developments in monetary policy. Here are the key events: 

  • U.S.: Retail sales rebounded in February (+0.2%), while the Fed kept rates steady and projected only two rate cuts this year, adopting a more cautious tone. 
  • Europe: The BoE maintained its rate at 4.5% and highlighted global uncertainty. Germany passed a key fiscal package. 
  • China: The People’s Bank kept rates unchanged, but consumption surprised to the upside (+4.0%). 
  • Brazil: The Central Bank raised the rate by 100 bps for the third time, signaling a more moderate approach ahead. 
  • Mexico: The OECD warns that 25% U.S. tariffs could lead to a recession in 2025–2026. Fitch forecasts zero growth this year and only +0.8% in 2026. Private consumption stagnated in the early months of the year. 

Signals remain mixed: while some central banks pause adjustments, trade and consumption continue to face challenges. 

In this challenging environment, adaptability and a long-term perspective will be key. 

KEY UPCOMING EVENTS 

  • March 24: In the U.S., housing sector indicators will be released 
  • March 27: In the U.S., the final estimate for Q4 2024 GDP will be published

Monitor

Posted in Weekly Summary

Rate Cuts in Sight: The Fed Adjusts Economic Forecasts

The Fed keeps rates at 4.25%-4.5% but revises growth and inflation projections.

March Monetary Policy Announcement 

 The Federal Reserve decided to keep its benchmark rate at 4.25%-4.5%, in line with expectations. However, its message was more cautious, as it lowered its growth forecast and raised its inflation estimate for 2025. 

Key Points: 

  • Expectations for two rate cuts this year remain, with rates closing at 3.9%. 
  • The pace of quantitative tightening is slowing, adjusting the reduction of bonds on the balance sheet. 
  • The 2025 growth projection drops to 1.7% (from 2.1%). 
  • Core inflation is estimated at 2.8%, above the previous 2.5% forecast. 
  • Trade tensions are rising due to potential tariffs amid an economic slowdown. 

Markets will closely watch the Fed’s next moves and the evolution of trade tensions. 

Market Implications: 

 Markets will remain attentive to the Fed’s upcoming decisions and the development of trade tensions. 

Fed Indicator Update (March vs. December) 

Source: Federal Reserve

Posted in Weekly Comment

Market Outlook and Strategy 

March 2025 

The beginning of 2025 has been marked by market volatility, driven by expectations of smaller benchmark rate cuts and the economic impact of the trade war under President Trump’s new administration. 

We share a summary of the key movements: 

Market performance 

In the U.S., the S&P 500 and Nasdaq are down 4% and 9% year-to-date (YTD), respectively, affected by monetary and tariff uncertainty. In contrast, the Euro Stoxx 50 has risen 12% amid the potential for a peace agreement in Europe, while China has rebounded by 24% due to stimulus measures and improved outlooks. 

Monetary policy and valuation 

In terms of monetary policy, U.S. inflation remains above the Fed’s target, prompting the market to adjust expectations, with between one and two 25 basis point (bps) rate cuts anticipated in 2025. Additionally, the S&P 500 valuation remains high, with a forward P/E of approximately 20.7x. 

Strategy and positioning 

We maintain our positive tactical stance on large-cap equities, although we anticipate episodes of volatility due to market sensitivity to tariffs and high valuations. 

Key events to watch: 

  • Tariff policies under Donald Trump’s new administration. 
  • Inflation trends and potential benchmark rate cuts ahead. 
Posted in Uncategorized

New economic outlook: Inflation, tariffs, and key market changes 

Inflation, tariffs, and leadership changes have shaped the global economic agenda in recent weeks. 

Policy shifts, inflation, and trade regulations remain in the market spotlight. 

Week of March 10–14 

Markets continue to monitor changes in economic policy, inflation, and trade restrictions across various countries. Here are the key events: 

  • United States | President Trump stated that the country is undergoing an “economic transition” aimed at building a strong economy. Additionally, 25% tariffs on steel and aluminum imports took effect. Inflation showed signs of slowing, with a 0.2% monthly increase in February, bringing the annual rate to 2.8%. 
  • Europe | The European Union announced retaliatory tariffs on U.S. products totaling $28.3 billion, set to take effect in April. Meanwhile, Ukraine agreed to a 30-day ceasefire brokered by the U.S. 
  • Japan | Q4 2024 GDP was revised downward, showing annualized growth of 2.2%, lower than the initial 2.8% estimate. 
  • China | Consumer inflation fell by 0.7% in February, turning negative for the first time in over a year, reflecting deflationary pressures. 
  • Brazil | The Minister of Planning warned that the government will need fiscal adjustments by 2027, creating a “window of opportunity” for short-term reforms. 
  • Mexico | Following the resignation of Rogelio Ramírez de la O, Edgar Amador Zamora was appointed as the new Finance Secretary, tasked with strengthening the economy and investment. Additionally, Moody’s downgraded the outlook for the Mexican banking sector from positive to negative due to the economic slowdown and trade tensions with the U.S. 

Market volatility continues to shape financial trends. We will remain vigilant in monitoring these changes and their impact on investments. 

Key Events in the Coming Weeks 

  • March 17: Retail sales data release in the U.S. 
  • March 19: Federal Reserve Monetary Policy announcement in the U.S. 

Monitor 

Posted in Weekly Summary

Inflation eases in February

U.S. inflation slowed in February as markets await the Fed’s next move. 

In February, U.S. inflation showed signs of slowing. The Consumer Price Index (CPI) rose 0.2%, bringing the annual rate down to 2.8%, lower than January’s 0.5% increase. 

  • Core CPI (excluding food and energy) grew 0.2% month-over-month and 3.1% year-over-year. 
  • Shelter, which accounts for one-third of the CPI, increased 0.3% monthly and 4.2% annually. 
  • Food and energy prices rose 0.2%, used vehicle prices increased 0.9%, and apparel climbed 0.6%. 
  • Egg prices surged 10.4% in February, accumulating a 58.8% increase over the past year. 

Market implications: 

The Federal Reserve is closely monitoring inflation and the new 25% tariffs on aluminum and steel. Markets expect the Fed to begin rate cuts in May, with a cumulative 0.75 percentage point adjustment by the end of 2025. However, in its next meeting, the Fed is expected to keep rates steady between 4.25% and 4.5%. 

Consumer Price Index (CPI) and core CPI (excluding food and energy). 
Annual percentage change. Jan. 2021–Feb. 2025.

Source: CNBC

Posted in Comentario Semanal
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