DC Lite #311

"There is a clear bid to the market in the second half of March, and the 14th sticks out to me as the local low"

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Daily Chartbook
February 28, 2025

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1. China tariffs. "Fed research models the impact of a 20 pp increase in trade costs for all Chinese imports. Inflation rises by 0.5 pp over the first year. The increase in final goods prices is largely unwound after a year, but inflation remains persistently higher after that (by 0.1 pp) because higher costs of intermediate goods."

2. Goods trade balance. "The US merchandise trade deficit widened unexpectedly in January to a record as imports surged ahead of President Donald Trump’s promised tariffs."

3. Rate cut probabilities. "Expectations of June rate cut have climbed back to nearly 75%, after falling as low as 34% two weeks ago."

4. Seasonality. "Since 1928, the first half of March typically chops around but definitely starts the month of strong. There is a clear bid to the market in the second half of March, and the 14th sticks out to me as the local low."

5. Q1 EPS revisions. "During the months of January and February, analysts lowered [Q1] EPS estimates by a larger margin than average ... At the sector level, all eleven sectors have witnessed a decrease in their bottom-up EPS estimate for Q1 2025."

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