Welcome to the Schwab Market Update podcast, where we prepare you for each trading day with a recap of recent news and a look at what's ahead. I'm Keith Lansford, and here is Schwab's early look at the markets for Monday, March 24th. The March S&P Global PMI is expected to be released Monday morning. The last report came in at 51.6, which was higher than the preliminary estimate of 50.4%.
A reading above 50 denotes economic expansion. In January, the PMI was 52.7, which makes the expansion's pace the slowest since April of 2024. Last week, some investors took a run at the bond market, driving yields lower just to see them bounce back.
Overall, the bond market is still being buffeted by the conflicting policy consequences of the administration, according to Kathy Jones, Managing Director and Chief Fixed Income Strategist at the Schwab Center for Financial Research. Some of the proposed policies are expected to slow growth, such as tariffs and limits on immigration, while tax cuts and deregulation could boost growth. Similarly, some policies are likely to raise inflation pressures, while slower growth could reduce them.
With the Fed on hold amid the policy uncertainty, the market is stuck in a range. The Fed was just one of the five central banks that met last week. However, only the Swiss National Bank cut their key rate, while the Bank of Japan was the only one to raise. However, the trend has been to cut. Including last week, the Swiss National Bank has cut its key rate five times over the last year. Of the largest developed countries, the Bank of Canada has cut seven times.
The European Central Bank has cut six times since June. The Reserve Bank of New Zealand has cut four times. The Fed, the Bank of England and the Reserve Bank of Australia have all had at least one rate cut. Some may see cutting rates as a negative economic sign. The Cooper Howard, director of fixed income strategy at the Schwab Center for Financial Research, feels that the recent rate cuts are a sign of post-pandemic normalization more than slowing economic growth.
He also echoed Kathy Jones that the broader risk to global economic growth lies with the trade war. However, that's not to say that global economic growth has been good. The fourth quarter 2024 final gross domestic product comes out on Thursday, but the previous print was 2.3%, which is the highest in the world. The latest updates from China, Japan, and the United Kingdom are 1.6%, 0.6%, and 0.1%, respectively.
The euro area is at 0%, including Germany at negative 0.2%. One commonly used risk-on, risk-off indicator is the ICE B of A U.S. High Yield Index. It calculates the spread between risk-free treasury yields and the riskier below investment-grade bond yields. This year, the index has climbed from 2.6 to as high as 3.4, suggesting that investors are moving out of the risk-on mode to risk-off mode.
But if you zoom out to the last 10 years, the index has been as high as 10 in 2020. While it's a trend to keep an eye on, the index isn't flashing any warning lights yet.
The S&P 500 index rose 4.67 points Friday, or 0.08%, to 5,667.56, finishing the week 0.51% higher. The Dow Jones Industrial Average increased 32.03 points, or 0.08%, to 41,985.35, ending the week 1.2% higher.
Finally, the Nasdaq Composite rose 92.43 points or 0.52% to 17,784.05, which was a 0.17% gain for the week. This has been the Schwab Market Update Podcast.
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