Navigating Change - Global Markets Respond to Policy & Trade Developments

This week, U.S. markets were influenced by the Fed's decision, investor pessimism, the recovery of the housing market, trade and geopolitical tensions. The Fed kept interest rates at 4.25% to 4.5%, but lowered its 2025 growth forecast to 1.7% from 2.1% previously, while raising its inflation estimate to 2.7% and unemployment to 4.4%. It also limited the reduction of Treasuries on its balance sheet to $5 billion a month from $25 billion. Fed Chairman Jerome Powell struck a dovish tone, downplaying the importance of tariff-led inflation and assuring that the central bank remains focused on hard data.

Market sentiment turned distinctly bearish, which some see as a possible bullish indicator from a contrarian perspective. According to the Bank of America survey, fund managers significantly reduced their exposure to U.S. equities in March, while cash allocation increased to 4.1%, the highest level since 2020. The American Association of Individual Investors reported that 58% of respondents are bearish and only 21% hold a bullish view for the next six months.

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