Growth Fears Hit Wall Street: March 10, 2025

Investors are running for the hills today as growth fears rattle Wall Street. First it was Secretary of the Treasury Scott Bessent remarking that the nation is undergoing a detox following decades of being conditioned to significant fiscal deficits. Then it was President Trump stating that the country is in a period of transition, alluding to the short-term pain the Executive Branch is willing to tolerate ahead of the significant progress that the administration envisions. Meanwhile, heightening trade tensions and austerity prospects are narrowing the path for double-digit corporate earnings expansion, causing traders to grab Treasurys across the curve, equity volatility protection and IBKR ForecastTrader Contracts that are immune to traditional market turbulence. Furthermore, IBKR ForecastTraders are adding to the number of Fed rate cuts expected this year in light of the potential for a deterioration in employment conditions.

Investors Dump Stocks, Pump Treasurys

Stocks are getting crushed as economic slowdown worries cloud the outlook for corporate earnings growth. Meanwhile, investors are worried that the Fed and Trump puts appear way out of the money considering that the central bank is remaining relatively neutral on monetary policy messaging while the White House stays on track with its short-term pain, medium-term gain model.

Traders are unloading equities with all major domestic benchmarks taking sharp losses. The Nasdaq 100, S&P 500, Russell 2000 and Dow Jones Industrial gauges are lower by 3.3%, 2.1%, 1.7% and 0.9%. Sectoral breadth is negative, but not as deep as you’d expect with so much red on the screen. Investors are scooping up shares in the defensive consumer staple, utilities and healthcare segments as well as the real estate and energy areas, with those five components gaining on the session. Representing the laggards, however, are technology, communication services and consumer discretionary, which are down 3.8%, 2.2% and 2.1%. Folks are rushing into the Treasury complex with the 2- and 10-year maturities changing hands at 3.92% and 4.21%, 8 and 9 basis points (bps) lighter on the session. The greenback is near its flatline though, as it appreciates against the pound sterling, yuan and loonie but depreciates relative to the euro, franc, yen and Aussie dollar. Commodities are also getting creamed as risk assets sell off with copper, silver, crude oil, lumber and gold losing 0.9%, 0.8%, 0.6%, 0.4% and 0.2% on softer demand prospects across the board.

In Search of Undervalued Opportunities

Bearing in mind the elevated uncertainty and extended valuations in many areas of traditional assets, the IBKR Forecast Contract prediction market is an alternative to quintessential choices in investing. The instruments provide many undervalued opportunities related to economic indicators, Treasury yields, central bank moves, elections, government policies, environmental changes, etc. that could be used to speculate for capital gains or to hedge an equity, fixed-income, real estate or commodity book. Furthermore, the marketplace’s contracts feature an interest-like incentive coupon and offer durations for some settlements that are as long as a decade away. Finally, the economic calendar has plenty of IBKR ForecastContract opportunities this week with big releases coming up related to the labor market, inflation and consumer sentiment. While today has been quiet from a data perspective, the rest of the week won’t be, as job openings, the Consumer and Producer Price indices, initial unemployment claims and consumer sentiment may send markets on a wild ride while ForecastTraders can rely on their rational thinking and investment strategy to optimally time the undervalued “Yes” or “No” choices.

Source: ForecastEx

ForecastEx Pick of The Week

Chief Strategist Steve Sosnick and Senior Economist José Torres like the “Yes” Forecast Contract for a figure above 3% y/y in this Thursday’s Producer Price Index. The “Yes,” currently priced at $0.53, pays out a dollar if correct.

Source: ForecastEx

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International Roundup

Deflation Hits China

China’s efforts to boost domestic consumption just hit a major hurdle—deflation. The country’s Consumer Price Index (CPI) fell 0.7% y/y and 0.2% m/m in February, reversing from increases of 0.5% and 0.7% in the first month of the year, according to China’s National Bureau of Statistics (NBS). The declines were significantly worse than the consensus estimates for declines of 0.5% and 0.1% y/y and m/m, respectively. Deflation can be a disincentive for shoppers because it can cause consumers to wait for additional price declines before heading to cash registers.

An earlier than normal Lunar New Year contributed to the decline as demand associated because the holiday occurred entirely in January rather than being split between the first and second months of the year. China’s economy continues to suffer from underutilized manufacturing capacity, employment uncertainty, weak consumer spending and fears about trade tensions with the US.

Meanwhile, the country’s Producer Price Index sank 2.2% y/y, rising slightly from the -2.3% in January but coming in worse than forecast for a 2.1% fall. The gauge of factory gate prices has dropped every month since October 2022.