The S&P 500 and Nasdaq 100 returned 0.53% and 0.27%, respectively, last week.
Major market movers: Nvidia (-3.3%), Meta (-1.9%), Amazon (-0.9%), Broadcom (-1.7%), Micron (-6%), Lockheed Martin (-5.7%), Boeing (+10%), Uber (+6%), Apple (+2.2%), JPMorgan (+4%), and Eli Lilly (+3%).
Key economic events this week:
Monday: Manufacturing & Services PMI
Thursday: GDP & Unemployment Claims
Friday: University of Michigan Consumer Sentiment
What You Should Know Before Starting Your Week
1) Post-Election Year Seasonality Suggests the Sell-Off May Be Nearing Its End
Historical data since 1960 shows that in the first year of a presidential term, the S&P 500 typically experiences two corrections: mid-February to late March and early August to late September.
So far, the S&P 500 has closely followed this pattern, with a 10% drawdown occurring between February 19 and March 13.
History suggests that after these corrections, stocks tend to rise from April to August and again from October through year-end in post-election years.
2) U.S. Recession Risk Are Likely Overblown
Recent economic data does not indicate a high probability of recession:
Unemployment claims remain low at 223K, rising only slightly from the expected 224K.
Philly Fed Manufacturing Index fell to 12.5 in March (from 18.1 in February) but still exceeded market expectations of 8.5. Meanwhile, the Philadelphia Fed Manufacturing Employment Index surged to 19.7 in March (from 5.3 in February), with 22% of firms reporting increased staffing levels—a positive sign for labor demand.
Fed Chair Powell acknowledged recession risks have increased but emphasized that the probability remains low.
3) Fear Has Substantially Subsided
VIX closed at 19.28 last Friday, down from 27.86 on March 10, and is now near its year-to-date average of 18.42.
VIX term structure has uninverted, signaling a decline in market fear.
Google Trends data shows a significant drop in searches for “recession” in the U.S., suggesting reduced investor concerns.
Conclusion:
U.S. stocks remain vulnerable this week due to risks related to tariffs, recession, geopolitics, inflation, and growth.
While volatility is expected to persist, I reckon the AI-driven bull run has legs, as AI is poised to boost U.S. productivity and improve corporate earnings. Investors should focus on AI stocks with strong fundamentals and attractive valuations after the sell-off, including the Magnificent 7, Broadcom $Broadcom(AVGO)$ , Palantir $Palantir Technologies Inc.(PLTR)$ , Arm $ARM Holdings(ARM)$ , Oracle $Oracle(ORCL)$ , TSMC $Taiwan Semiconductor Manufacturing(TSM)$ , and the SMH ETF.
If a recessionary scenario is widely expected, once recession fears subside, stocks are likely to resume their upward trend.
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