AMC Weekly

Welcome to the new issue of the Bocconi Student Asset Management Club newsletter!

Global Economy

U.S.

As growth slows and inflation remains persistent, concerns about stagflation in the United States are getting stronger. The Consumer Sentiment Index released Friday by the University of Michigan showed that consumer sentiment plunged in March as Americans are increasingly worried about their job prospects, inflation and income levels. This worry comes with valid cause as households are forecasting inflation at 4.1% over the long term, the highest since 1993.

In response to the weak data, Goldman Sachs cut its first-quarter GDP forecast by 0.4 percentage points to an annualized growth rate of 0.6 per cent.

Mary Daly, President of the San Francisco Fed, declared that two interest rate cuts this year seem a “reasonable” projection. Daly emphasized that policymakers need more time to closely monitor the economic effects of any upcoming tariffs prior to making any significant decision.

On March 26, President Trump announced a 25% tariff on all imported automobiles and certain automobile parts to bolster domestic manufacturing and address national security concerns. The Trump administration also introduced a tax deduction to finance the purchase of U.S.-made vehicles, allowing customers to deduct interest payments from their income taxes.

These tariff, tax, and policy decisions are forecasted to have significant implications for the automotive industry, consumers, and international trade relations in the coming months, explaining why the Central Bank is waiting to make policy moves.

Canada

Ongoing trade tensions with the United States continue shaping the macroeconomic forecast in Canada, with the housing market particularly showing signs of strain.

Despite significant rate cuts, home prices are projected to increase only by 2% in 2025, lagging the broader inflation expectations of 2.1%. The market has experienced a three-year decline in home sales, reflecting reduced consumer confidence and ongoing trading disputes. Experts warn that this sluggish performance may have broader implications for economic growth if the trend continues.

In the spirit of collaboration, Prime Minister Mark Carney and President Trump engaged in a "productive" call regarding the upcoming imposition of 25% U.S. tariffs on Canadian imports. While Trump expressed optimism about future collaboration, Carney announced plans for retaliatory tariffs to protect Canadian workers and the economy. This development underscores the escalating trade tensions between the two countries.

Europe

As relatively high inflation persists in the European economy, the economy has grown very moderately, leading the ECB to choose an eventual easing monetary policy. While there have been talks about an eventual rate cut, this seems very unlikely as the ECB aims to be more cautious.

There are concerns about the impact of inflationary pressure on the key driver of the European economy: Germany. With declining factory orders and a slowdown of the domestic economy, France and Italy aim to increase domestic spending and thereby output. However, EU fiscal constraints have placed roadblocks in this plan to increase output.

Since China’s automotive sector is gaining strength, the European economy is struggling with trade and exports as they face weaker demand for exports to Asia. The EU is trying to balance a complex geopolitical situation between diplomatic ties to the US and China. In comparison to the rest of the continent, Eastern Europe is showing a more dynamic and prospective situation.

Overall, the EU continues to invest in countries which strengthen their economy based on a strong domestic foothold. However, the political stabilities of countries like Hungary raise doubts regarding their domestic growth potential.

APAC

Since some countries grow persistently and others struggle, APAC continues to paint a mixed picture. Despite government efforts to boost domestic demand, China still struggles with output as Western nations gradually replace their supply chains with other APAC countries like Indonesia and Vietnam. As another viable option, Western countries look to India as it grows steadily with strong government investment in infrastructure and the manufacturing sector.

Looking at Japan, falling prices contribute to strong deflationary pressure. Despite the efforts of the central bank to conduct expansionary monetary policy, there has been little success in trying to reverse the trend. Lastly, Australia faces tough times coming from lower commodity prices, which are the main driver of the nation’s economy.

Equity Highlights

U.S.

The U.S. stock market started the week strong, with the S&P 500 rising 1.8% on Monday, thanks to optimism that new tariffs from the White House might be less harsh than expected. But this optimism didn’t last long. On Thursday, President Trump announced a 25% tariff on all imported cars and light trucks, starting April 3. This news caused markets to fall sharply. General Motors dropped over 7%, Ford fell 3.9%, and parts makers like Aptiv and BorgWarner each lost about 5%.

The S&P 500, which opened at 5,718.08, closed the week at 5,580.94, down 2.39%. It is now about 7% below its record high from February 19.

The Nasdaq Composite had a similar path. It opened Monday at 18,046.19, peaked on Tuesday at 18,281.14 (+1.3%), but ended Friday at 17,322.99, down 4% for the week. Since its high on December 16, the Nasdaq has fallen almost 12%, hit hard by worries over tech and growth stocks.

The Dow Jones also had a bad week, falling 1.41% from 42,180.14 on Monday to 41,583.90 on Friday.

Economic data added more pressure. The core PCE index (the inflation gauge preferred by the Federal Reserve) rose 0.4% in February, bringing annual inflation to 2.8%, above the Fed’s 2% goal. At the same time, real consumer spending rose just 0.1%, below the expected 0.3%. These numbers suggest that interest rates may stay high longer, which could slow the economy and hurt sectors sensitive to rates.

Europe

Europe followed a similar pattern to the U.S. The week started well, helped by good economic news and signs of easing geopolitical tensions. But things changed midweek after Trump’s tariff announcement. Since Europe relies heavily on car exports, the news hit the markets hard.

The STOXX Europe 600 opened Monday at 551.13 and closed Friday at 542.10, down 1.63%, just like the U.S. indexes. The situation worsened after Trump said more tariffs could come if the EU retaliates.

Most European markets dropped. France’s CAC 40 went from a high of 8,142.51 on Tuesday to 7,916.08 on Friday (down 2.33%). Italy’s FTSE MIB fell 1.33%. Germany’s DAX was hit hardest, down 2.66%, despite good domestic data. In fact, Germany’s IFO Business Climate Index rose to its highest level since July 2024, helped by government plans to boost defence and infrastructure spending.

The UK’s FTSE 100 was the exception, rising slightly by 0.14%, from 8,646.79 to 8,658.85.

Still, the Office for Budget Responsibility (OBR) lowered the UK’s 2025 growth forecast to 1% and predicted higher unemployment and inflation this year.

However, growth forecasts from 2026 to 2029 were revised upward, suggesting a more positive long-term outlook.

Also, UK inflation dropped to 2.8% in February from 3% in January, raising hopes that the Bank of England might cut interest rates as early as May.

Fixed Income Focus

U.S. Treasuries

This week, the benchmark ten-year yield rose 2 basis points to 4.27%, while the two-year yield dropped 5 basis points to 3.89%. February's inflation came in higher than expected, with core PCE rising to 2.8%, making it more likely the Fed will delay interest rate cuts. “Today’s higher-than-expected inflation reading wasn’t exceptionally hot, but it isn’t going to speed up the Fed’s timeline for cutting interest rates,” said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management. Uncertainty over the inflationary impact of Trump's upcoming tariffs also adds to concerns that price pressures could be more persistent than initially expected.

Relative to last week, treasury yields, specifically mid-term, decreased. The latest weekly curve shows increases in very short-term and very long-term bonds.

Reports that Trump’s upcoming tariffs may be narrower in scope, however, boosted optimism that yields will eventually bounce back. Strong economic data and expectations that the real impact of tariffs will emerge in April added to market movement.

Europe

After a relatively calm period earlier this month, Europe’s fixed income market saw renewed volatility this week. Headline inflation readings came in slightly above expectations in certain Eurozone economies, prompting bond traders to reassess the trajectory of central bank actions. Government yields in core markets ticked higher as comments from the European Central Bank signaled a continued commitment to tightening. Meanwhile, peripheral bond spreads widened modestly, though not dramatically, indicating selective caution among investors.

In the corporate space, investment-grade issues remained relatively stable, benefiting from ongoing demand for higher-quality credits. However, high-yield bonds experienced a mild sell-off, reflecting concerns over broader economic headwinds. According to recent data, investors appear to be positioning more defensively, focusing on shorter maturities and higher-rated segments. This shift is partly a response to persistent inflation signals and a cautious economic outlook.

Overall, compared to a few weeks ago, when sentiment was bolstered by signs of moderating inflation, the tone now is more guarded. Yet the consensus from many market analysts remains that Europe’s economy could avoid a sharp downturn if inflation moderates over the coming quarters. Short-term volatility in bond yields, however, is likely to continue as the ECB weighs further rate hikes.

Wrap up for the AM Division

Global economic uncertainty intensified with persistent inflation and increasing trade tensions, particularly in the U.S., where consumer sentiment decreased, and fears of a potential stagflation grew. Equity markets took a hit by President Trump’s announcement of new auto tariffs, with significant declines across U.S. and European indices, especially in auto-related sectors. Bond markets reflected the cautious sentiment, with U.S. and Eurozone yields showing mixed movements as inflation data and central bank signals added to investor doubts. In APAC, distinct trends were observed, with India and Southeast Asia driving growth while China and Japan struggled with deflationary pressures and weaker demand.

Credits:

Pablo Ruiz (Team Leader) 

Mahek Dodani (Team Leader) 

Luca Busetti (Global Economy Analyst) 

Lorenzo Pignataro (Global Economy Analyst) 

Angelo Elpidio De Matteo (Equity Analyst) 

Qasim Sultan (Equity Analyst) 

Stella Bellini (Fixed Income Analyst) 

Vladimir Pashov (Fixed Income Analyst) 

AMC Weekly

Global Economy

U.S.

Canada

Europe

APAC

Equity Highlights

U.S.

Europe

Fixed Income Focus

U.S. Treasuries

Europe

Wrap up for the AM Division

Credits:

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