The volatile ride in U.S. equity markets continued last week as tariff concerns remained front and center on the minds of investors as well as consumers ahead of the White House’s scheduled tariff announcements to be released April 2nd. For the week, the S&P 500 and Dow Jones fell -1.5% and -1.0%, respectively, while the tech-heavy Nasdaq Composite slid further with a -2.6% loss. Stocks remain under pressure in this week’s early trading to close out first quarter with the S&P 500 falling back into correction territory, down over 10% from its highs.

Goldman Sachs is predicting a 15 percentage point increase in the average U.S. tariff rate this year, reflecting a more aggressive approach to "reciprocal" tariffs. This policy shift has heightened concerns about potential stagflation—a combination of slowing economic growth and rising inflation. In particular, there is concern of the growing pressure being placed on the U.S. consumer, the engine of the domestic economy. According to Oxford Economics, a leading global economic advisory firm, the probability of U.S. recession over the next 12 months now stands at 30% compared to almost zero at year end.

Among the factors pushing up recession odds, Oxford cites the growing risk that falling consumer sentiment creates a negative feedback loop of weaker household spending that could lead to a rise in unemployment. Last week’s consumer surveys from the Conference Board and University of Michigan indicated growing pessimism among consumers with the Conference Board’s measure of expectations falling to the lowest level in 12 years. However, despite the depressed sentiment it is important to note that hard economic data generally continues to show strong resilience to this point, including the labor market which has seen a low level of layoffs across the economy. Additionally, consumer balance sheets in aggregate are quite strong to help weather the recent volatility and uncertainty, though the impact of the equity market drawdown will be monitored closely.

In contrast to the equity markets, the bond market exhibited relative stability over the last month. The 10-year Treasury yield remained within a tight range, trading between 4.178% and 4.369% in March. This stability is attributed to investor uncertainty regarding the full impact of the newly announced tariffs and confidence in current economic data, including steady jobless claims and GDP growth. Additionally, Treasury Secretary Scott Bessent's commitment to keeping long-term bond rates low has contributed to this restrained reaction in the bond market.

In the week ahead, while market headlines will be dominated by Wednesday’s tariff announcements, investors will also get the first round of hard economic data for the month of March, including monthly payrolls on Friday. Consensus economist forecasts point to 123k net new payrolls added during the month compared to 151k in February as hiring plans cool further. The economy is slowing, but a lot of the recent data may be more noise than signal, and updates on hard economic data like this week’s labor market reports will help investors sort through the noise.

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