The Davy Digest - 10th March 2025

Equities in the US continued their slide last week, as political uncertainty and falling sentiment weighed on markets. The S&P 500 finished the week down over 3%, while the tech-heavy Nasdaq index fell into correction territory on Friday. In Europe, positive momentum continued and stocks outperformed their US peers again. The European Commission revealed details of a massive €800 billion package to support defence spending, while Friedrich Merz – the newly-elected German chancellor – began moving swiftly to enact new fiscal supports there. On Thursday, the European Central Bank reduced interest rates by a further 25 basis points, as widely expected.

Last week's highlights

	Nonfarm Payrolls (07/03) – 151k jobs were added in February (vs 160k expected) Unemployment Rate (07/03) – Increased to 4.1% (vs 4.0% expected)
	Inflation (HICP) (03/03) – Increased to 2.4% year-on-year (vs 2.3% expected) European Central Bank meeting (06/03) – Reduced policy rates by 25 basis points, as expected
	Government discussion surrounding fiscal ability to bolster defense spending
	China Caixin Manufacturing PMI (03/03) – Improved to 50.8, ahead of consensus China Caixin Services PMI (05/03) – Improved to 51.4, ahead of consensus

This week, inflation data will be released in the US, with investors hoping for confirmation that disinflationary trends remain in place. Additionally, the University of Michigan release their February sentiment survey on Friday. In Europe, further positive sentiment should be seen in Monday’s Sentix Investor Confidence survey, while industrial production data for Europe and the UK will also be out during the week.

What's on the radar

	Consumer Price Index (12/03) Producer Price Index (13/03) University of Michigan Consumer Sentiment Survey (14/03)
	Sentix Investor Confidence (10/03) Industrial Production (13/03)
	January Gross Domestic Product (14/03) Industrial Production (14/03)
	China Consumer Price Index (09/03) Japan Q4 Gross Domestic Product (10/03) Japan wage negotiations release (14/03)

Chart of the moment

Be greedy when others are fearful

Source: Bloomberg as of 04/03/2025. Total return calculated as average return over each time horizon using data beginning in July 1987.

• In February 2025, the AAII Investor Sentiment survey reported that only 19% of participants expect stocks to be higher in one year – lower than 98% of all observations since 1987.
• Low sentiment tends to be a contrarian indicator, with stocks often outperforming following periods of subdued bullishness.
• Not only do stocks tend to be higher, but there is also a higher probability of experiencing a market gain.
• When less than 25% of investors are bullish, over a one year period, stocks finish higher 89% of the time.