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It was another week of uncertainty for the S&P 500 and Nasdaq, although it ended on a positive note. On the evening of March 15, the U.S. Senate passed the short-term spending plan (through September 30, 2025) proposed by the Republicans, thus avoiding a government shutdown.
What’s becoming concerning is that the overall outlook for the U.S. economy is turning more negative. For example, the March surveys from the University of Michigan showed that consumer sentiment dropped nearly 11% to 57.9, marking the third month in a row of decline. This is the lowest level since the fall of 2022.
But perhaps the worst news is that inflation expectations for next year have risen to 4.9%, whereas inflation expectations for the next five years rose 0.4% to 3.9%. If this trend continues, the Fed could maintain a more hawkish stance for longer (which would be positive for the DXY), even despite an economic slowdown.
What is in store for markets this week?
Aside from any unexpected statements from the US President, the focus will be on Wednesday’s Federal Reserve meeting. The regulator is almost guaranteed to keep interest rates unchanged, so what will matter most is what it does going forward and whether it can lift markets’ hopes.
The key here will be whether the Fed revises its dot plot, which shows members’ projections for the future direction of interest rates. Given the uncertainty surrounding Trump’s policies, there are doubts about whether the Fed will satisfy the markets by including three rate cuts in its projections for this year.
Before entering the “quiet period,” Powell stressed that the outlook remains uncertain and there is no rush to lower interest rates. On the other hand, Waller left open the possibility of rate cuts for both positive and negative reasons, while Barkin mentioned the option of a rate cut in June.
The commodities market, on the other hand, will be watching tensions in the Middle East following the large-scale U.S. attack in Yemen against the Houthis, who have been warned that attacks will continue until they end their attacks on maritime trade. This could also be part of a broader plan…
