Market Update | Unpredictable Trade Policy Rattles Markets

Markets experienced their worst month since 2022 in March as investors reacted to an onslaught of tariffs, elevated inflation, and economic uncertainty. The Dow Jones Industrial Average sank 4.1% during the month, while the S&P 500 fell 5.6% and the tech-heavy NASDAQ plummeted 8.2%. Meanwhile, foreign stocks were mixed with the MSCI EAFE Index losing 0.4% and the MSCI Emerging Market Index rising 0.6%. Bond yields ended the month relatively flat as investors grappled with elevated inflation readings conflicting with a weakening economic outlook, which resulted in no change in the Bloomberg U.S. Aggregate.  

March’s volatility was largely driven by the unpredictable trade policy that continued to unfold throughout the month. The Trump administration released a frenzy of tariffs including increasing the standing tariffs on China to 20%, implementing the originally delayed 25% tariffs on Mexico and Canada, (which was shortly followed with a temporary exclusion of all USMCA-compliant goods), and a 25% tariff on global steel and aluminum imports. At the end of the month, Trump announced a 25% tariff on imported automobiles effective at the end of the day on April 2^nd, a date that he has deemed “Liberation Day” which will likely come with a slew of retaliatory tariffs against a wide variety of U.S. trading partners. The anxiety of both investors and businesses was also heightened by the additional tariffs threatened on automobile parts, semiconductors, pharmaceuticals, oil and gas, lumber, copper, and agricultural products. The whirlwind of changing trade policies kept markets unsettled during the month, as investors adjusted to the new reality that these aggressive policies may no longer just be a global negotiating tactic by the U.S. but may yield significant impacts on the economy and inflation.

The market volatility and economic uncertainty weighed on the minds of consumers, as The Conference Board’s Consumer Confidence Survey revealed that the Consumer Confidence Index declined for a fourth consecutive month in March, falling below the relatively narrow range that had prevailed since 2022. Meanwhile, the Expectations Index, which is based on consumers’ short-term outlook for income, business, and labor market conditions, dropped to 65.2, the lowest level in 12 years and well below the threshold of 80 that usually signals a recession ahead. In their responses, consumers frequently cited concerns regarding the stock market outlook, the potential impacts of tariffs on already elevated inflation readings, and labor market fears. Consumers noted that they are responding by holding off on purchasing plans for big ticket items such as homes and cars, which has negative implications for overall economic growth.  

Consumers’ inflation fears were further fueled during the month with the release of February’s readings. The Consumer Price Index (CPI) reading for February was slightly below expectations, with an increase of 0.2% for the month compared to 0.5% in January, and a rise of 2.8% on an annual basis compared to 3.0% in January. Core CPI, which excludes volatile food and energy costs, rose 0.2% for the month, matching the January increase, and increased 3.1% in February compared to 3.3% in January on an annualized basis, also below economist expectations. While shelter costs continue to be one of the main driving factors of the monthly readings, February’s data also included a large decrease in airline fares to help cool the overall reading. Despite the cooler-than-expected inflation readings, markets remained weary as the current inflation data does not fully incorporate the impact of the recently implemented tariffs. Inflation fears steepened at the end of the month with the release of the Personal Consumption Expenditure (PCE) Price Index, the Fed’s preferred inflation gauge, which increased 0.3% in February, and 2.5% from one year ago. Core PCE, excluding food and energy, increased 0.4% in February, and 2.8% from one year ago. The markets reacted extremely negatively to the release as both readings came in higher than expected, fueling the concerns that the Fed still has not been able to tame inflation before consumers are exposed to the potential price pressures of tariffs.    

The Fed shared in the concerns about the volatile trade policies and their potential impact on consumer prices. In their second meeting of the year, Fed members unanimously voted to hold interest rates steady at 4.50% for a second straight meeting, following three consecutive rate cuts that began last September, citing slower projected economic growth and higher inflation by the end of the year. In the Fed’s updated Summary of Economic Projections (SEP), members lowered their forecast for 2025 gross domestic product (GDP) growth from 2.1% recorded in their December projections to 1.7%, while increasing their expectations for core inflation to 2.8% from 2.5%. The unemployment rate forecast was also revised slightly upward from 4.3% to 4.4%. During the Fed’s press conference, Fed Chair Jerome Powell acknowledged that tariffs drove “a good part” of the Fed’s elevated inflation forecast and have increased the uncertainty of their economic outlook. He also stated that the Fed will need to work on the difficult task to “separate nontariff inflation from tariff inflation.” Despite their elevated inflation projections, the Fed still expects to enact two more rate cuts by the end of the year, noting that weaker economic growth may offset higher inflation.  

Markets have an aversion to uncertainty, and unfortunately that is all that they received throughout the month. Markets will look to stabilize around a clearer path of trade policy from the Trump administration, as all eyes will be on the announcements made during the looming “Liberation Day”. Investors will also continue to observe incoming inflation data in order to anticipate the Fed’s course for the remainder of the year, while all parties will be closely watching for trends in consumer spending and the subsequent impacts on economic growth. 

Legal Update | Best Practices to Find Missing Plan Participants

Finding missing retirement plan participants is an ongoing — and necessary — challenge for employers. Whether your organization offers a defined contribution (DC) or a defined benefit (DB) pension plan, you have a fiduciary duty to find missing participants under the Employee Retirement Income Security Act of 1974 (ERISA).

The Pension Benefit Guaranty Corporation (PBGC) was the first federal agency to administer a program to hold retirement benefits for missing participants and beneficiaries in terminated retirement plans. The PBGC Missing Participants Program aims to help these participants and beneficiaries find and receive their benefits.

Follow Updated Guidance From the DOL and EBSA

The Department of Labor (DOL) has focused on the issue of missing participants for years, and works in conjunction with the Employee Benefits Security Administration (EBSA) to audit retirement plans and reinforce actions employers must take to locate lost participants and pay their benefits.

The DOL and EBSA have issued detailed guidance, including steps employers should take to locate missing participants: