Here's the Deal - March 24, 2025

Economy: In Slowdown

Market Cycle: Under Pressure

_{Week 12 of 52 for 2025: 23.08% of the way through 2025}

Table of Contents

• Weekly Note:

• Fed holds rates steady, but slowing QT (Quantitati …

  • Slowing Down Quantitative Tightening (QT)

    • Starting April 1st, the Fed will reduce QT from it …

  • The Fed’s Balancing Act

  • The Uncertainty Factor: Trade Policies & Economic …

  • Where the Economy Stands Now According to the Fed

  • What’s Next?

• Existing Home Sales continue to hold.

• Google Acquires Wiz – The Second Major M&A Deal in …

• Economic Warning from FedEx?

• This Week in Tariff Talk

• Markets:

• Significant Economic Data from the previous week:

• Economic Data to watch this week:

• Earnings this Week:

• WTF of the Week:

• Quote of the Week:

Weekly Note:

Markets stabilized somewhat this week. Another major acquisition with a huge valuation was announced. Existing homesales continued their new monthly uptrend. The Fed made changes to a strategy but did not change rates. Calls for order to tariff talk now coming from inside the administration. A new economic red flag from a trusted transportation company. And Rising Wedges are everywhere. Let’s dig into it all.

Fed holds rates steady, but slowing QT (Quantitative Tightening).

As expected, the Federal Reserve decided to keep interest rates unchanged at 4.25%–4.5% this week. But the real story lies in their updated outlook on the economy and their next policy moves.

Slowing Down Quantitative Tightening (QT)

One major announcement was the decision to slow the pace of Quantitative Tightening (QT), a process the Fed uses to reduce the amount of money in circulation to combat high rates of inflation. Where Quantitative Easing (QE) is “printing money”, Quantitative Tightening (QT) is the exact opposite and is akin to “burning money” already in circulation.

The Fed achieves QT through balance sheet runoff, which means allowing government bonds (Treasuries) to mature without reinvesting in new ones. Instead of rolling over these assets, they let them expire, effectively pulling liquidity out of the financial system.

Starting April 1st, the Fed will reduce QT from it’s current pace of $25 billion per month to $5 billion per month. The change is partly due to financial markets showing signs of increased tightness, a common signal of an economic slowdown. By reducing the pace of balance sheet shrinkage, the Fed aims to stretch out the process over a longer period while easing short-term pressure on the system.

The Fed’s Balancing Act

• QT started on June 1, 2022, as part of the Fed’s strategy to combat inflation.

• The goal was to shrink the Fed’s balance sheet by $9 trillion.

• As of March 2025, the balance sheet has been reduced to $6.756 trillion, meaning there's still $2.244 trillion left to reach their target.

• The decision to slow QT was nearly unanimous, with only Governor Chris Waller dissenting.

The Uncertainty Factor: Trade Policies & Economic Risks

The Fed also addressed the growing uncertainty in the economy, largely due to shifting policies from the new administration. They pointed to economic surveys showing:

• Uncertainty is unusually high, making it more difficult to predict future conditions.

• Trade policy changes, particularly tariffs, are a key source of concern.

Regarding tariffs, the Fed made several key observations:

• Tariffs tend to slow economic growth while increasing inflation.

• Fed staff forecasts assume full retaliation from trading partners in response to new tariffs.

• Inflation expectations have ticked higher, with tariffs as a major factor.

• It’s difficult to separate how much of inflation is directly caused by tariffs, but they are undoubtedly playing a role.

• The Fed believes tariff-related inflation will likely be “transitory” (temporary), as was the case when the first Trump administration initially instituted new tariffs.

Where the Economy Stands Now According to the Fed

Despite these uncertainties, the Fed remains cautiously optimistic. Saying:

• The economy remains strong overall.

• The labor market remains solid.

• Longer-term inflation expectations consistent with 2% goal

• Given the current conditions, the Fed doesn’t need to rush into policy changes.

What’s Next?

Looking ahead, the Fed has lowered its GDP growth projections compared to December’s forecast. If the labor market weakens significantly, they have the flexibility to ease policy if needed. For now, they prefer to wait and gather more clarity before making major moves. Which is the correct strategy for the economy at this time.

Existing Home Sales continue to hold.

After a January pullback, existing home sales resumed their new monthly uptrend in February. A key factor behind this rebound was the decline in mortgage rates throughout the month, which made home purchases more affordable.

This increase in sales raises the likelihood that the bottom is in for the existing home market. If that’s the case, it could signal the end of the severe downturn that has plagued the existing residential real estate sector. With the exception of homebuilders, who operate on a different cycle.

While this is a positive sign, it’s important to keep perspective as monthly existing home sales remain below the ~5 million average seen over the past 10–15 years. This suggests that while the market may be recovering, it hasn’t yet returned to typical levels.

It is something to keep an eye on as it will more than likely offer a glance into severity and length of a possible recession, as housing is earlier than most sectors during a credit cycle.

Google Acquires Wiz – The Second Major M&A Deal in a Week

Google’s acquisition of cloud security firm Wiz this week marks the second massive acquisition in the last two weeks. These kinds of mega-mergers are often a hallmark of an economic slowdown.

Historically, during periods of slowing growth, mergers and acquisitions (M&A) tend to surge as companies look for strategic advantages.

However, this current wave of M&A may be only focused on deal size rather than an unusually high volume of transactions across the credit cycle. This suggests that while large deals are making headlines, we may not be seeing the broad-based surge in activity that typically accompanies past economic downturns.

This stems from the Biden administration's FTC, led by Lina Khan, cracking down on mergers in an effort to curb alleged monopolistic practices. Interestingly, the current Trump administration has not shown much urgency in reversing this approach. At least not yet.

Economic Warning from FedEx?

FedEx $FDX ( ▲ 2.2% ) missed earnings expectations and issued weaker-than-expected guidance, leading to a sharp selloff in its stock.

This is particularly significant because the Transportation sector is a key economic indicator. Historically, it tends to lead the broader economy, signaling both slowdowns and recoveries before they show up in other industries.

While the stock opened down 11% on the news, buyers did step in at the lower levels showing demand for the stock. However, despite the intraday recovery, shares still closed about 6.5% lower than before the earnings report.

FedEx’s weak guidance may be a warning sign of broader economic softness. Given transportation’s role as a leading indicator, this sector is another one to watch closely for signs of what’s ahead.

This Week in Tariff Talk

This past week, tariff discussions were notably more subdued compared to the heated rhetoric of previous weeks.

Instead, the focus shifted to the increasing pushback against the recent tariff rollout. Even one of Trump’s own trade negotiators is reportedly now calling for more order and stability after what has been a rocky and unpredictable introduction of new tariffs.

Adding to the debate, fellow Republican and free-market advocate Senator Rand Paul also weighed in, highlighting the economic risks of a trade war. His remarks accurately pointed out that tariffs can hurt key U.S. industries and threaten American jobs. A concern that continues to gain traction as more voices join the discussion.

While the intensity of tariff talk may have cooled, opposition is growing. Calls for a more measured approach suggest that policymakers are beginning to grapple with the real economic consequences of escalating trade tensions.

Markets:

Last week, markets remained relatively subdued, continuing to set up for either a move lower or a resumption of the longer-term uptrend after the formal correction. However, the overall market action was weaker than expected, especially considering the strength seen over the past 2½ years. While this could turn out to be insignificant, it’s something worth monitoring closely.

Beyond the chart developments covered in Navigating the Turning Point, there’s now a potential Rising Wedge formation for the indices. This is a bearish continuation pattern that often appears when markets rally within a broader downtrend. That said, false breakdowns of bearish patterns also often emerge frequently within long-term uptrends, which is where markets still currently stand.

$SPY ( ▲ 2.11% ) S&P 500

If the short-term bottom is in, look for a move to $582 -$589.

$DIA ( ▲ 1.28% ) Dow Jones Industrial Average

If short-term bottom is in, look for a move to $428.50 - $434.

$QQQ ( ▲ 2.81% ) Nasdaq

If short-term bottom is in, look for a move to $503 - $513.

$IWM ( ▲ 2.0% ) Russell 2000 (Small Caps)

Has now formally experienced a Death Cross with the 50day crossing below the 200day.

How the Rising Wedge patterns resolve may offer early clues about the market’s next move, but its resolution is still uncertain. Staying alert to how it plays out could help give investors and traders an early signal as to how the market will perform in the coming weeks and possibly months.

Significant Economic Data from the previous week:

Economic Data to watch this week:

Earnings this Week:

WTF of the Week:

The real WTF here is the growing traction of Moon landing deniers.

The reason? Public trust has been shattered. After years of provable, blatant lies on major issues (the last few years especially), skepticism has become the default setting for many. And with just cause. When people feel like they’ve been deceived over and over, everything starts to seem like a lie. Even events as well-documented as the Moon landing where 400,000 people were involved in the last moon landing mission alone.

This isn’t just about conspiracy theories. It’s a reflection of a much deeper problem of justified widespread institutional distrust.

Quote of the Week:

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