Morning Market Brief – March 5, 2025

We’re waking up to some interesting market dynamics today. If you’re following the markets as closely as I am, then you’re no doubt noticing that the selloff on Tuesday wasn’t just another dip – it’s signalling deeper concerns, especially given the broader macro backdrop. Here’s what’s going on and what to keep an eye on as we start the day.

Equities: A Sea of Red

Yesterday was a tough day for equities, and the S&P 500 was no exception. We saw it fall 1.22%, which brings us to a position of increased caution. The sharp losses in tech stocks stand out – the Nasdaq dropped 0.35%, but it was close to testing the correction territory again, sitting about 9.3% below the December highs. If you’ve been keeping an eye on trade-sensitive sectors, you know this is a reaction to ongoing tariff tensions. I’m particularly looking at auto manufacturers like Ford and GM, both of which were hammered on tariff concerns. It’s not just about the headline tariffs either – it’s the fact that we’re now talking about stagflationary risks – inflation is on the rise as the global economy slows.

What’s troubling here is the deeper concern about growth, and that’s what we need to be careful about in the coming days. Financials are also looking fragile, and these stocks are often the first to signal stress in the system. So, keep an eye on the financials index as an early warning signal.

Crypto: A Rocky Road Ahead

Let’s talk about crypto. Over the weekend, Bitcoin had a brief pop to $93,000 on the back of President Trump’s announcement regarding the U.S. government’s strategic crypto reserve. But here’s the thing – that surge didn’t last. By the end of Tuesday, Bitcoin had fallen back to around the $87K mark. What this tells us is simple: crypto remains volatile, and while it’s still getting some love as a hedge against inflation, it’s not immune to broader market sentiment. We saw this recently – crypto sold off alongside equities, which just goes to show that investors aren’t fully seeing it as a “safe haven” just yet.

As we move forward, $80K is a key level to watch. If Bitcoin holds above that, we could see another bounce, but if it drops below that, we may be looking at further downside. Same goes for Ethereum – it had a similar ride and is now consolidating. Short-term traders need to remain nimble here – and as always, stay aware of broader market risk, because that will drive crypto just as much as any of the headlines in the space.

VIX: Fear is Back

The VIX has made a dramatic comeback. If you’re watching the Cboe Volatility Index, you know it closed above 24 on Tuesday. This is well above its historical average of around 20, which suggests that markets are pricing in a lot of fear right now. I’ve been saying for a while that when volatility picks up, we need to pay attention to how the market reacts.

What we’re seeing now isn’t just a normal market pullback – there’s an undercurrent of fear in play. We’re not quite at panic levels, but the fact that the VIX is spiking means we’re in for more volatility. I’ll be looking closely at whether this is just a brief blip or the start of something bigger. If we see the VIX push up toward 30+, that’s a red flag. But if it starts retreating back under 20, we could be looking at a buying opportunity. Volatility is going to be key here.

Tariff Wars: U.S.-Canada-Mexico Fallout

The trade tensions between the U.S., Canada, and Mexico just escalated significantly. With tariffs taking effect on Tuesday, we saw a huge market reaction. The U.S. dollar didn’t really benefit from the usual flight-to-safety move. In fact, the dollar weakened against major currencies like the euro and the yen, which is telling us that the markets aren’t as comfortable with U.S. growth prospects right now. Canada and Mexico immediately began retaliating with their own tariffs, so the risk of a trade war escalating is very real.

The implications of these tariffs are far-reaching. Automakers are facing cost hikes – and as I’ve said before, this will hurt margins. This is a situation we need to keep monitoring. If this trade war intensifies, it’s not just about higher consumer prices – we could see supply chain disruptions, too. Keep an eye on how companies in these sectors are responding – it’ll give us some clarity on whether the market is correctly pricing in the long-term damage.

BlackRock’s Panama Bet: Geopolitical Implications

Now, here’s an interesting development. BlackRock has made a major play – acquiring Panama Ports at both ends of the Panama Canal. For those of you who aren’t aware, this is a huge move. The Panama Canal is the single most important shipping route in the world. BlackRock is effectively taking control of this strategic asset, which comes with geopolitical and economic ramifications. The fact that this is happening at the same time as the trade war heating up isn’t lost on me. This acquisition could be seen as a way to gain leverage over future trade dynamics, particularly between the U.S. and China.

For me, this move highlights just how much of a power play is underway. It’s a smart bet for BlackRock, especially given the size and importance of the Canal. But it’s also an indication of where the future is headed. Watch for other similar strategic acquisitions in global infrastructure – BlackRock has just shown its hand.

Gold: The Safe Haven Shine

Gold is shining right now. It’s back in the spotlight as a safe haven, and we saw it surge over the past couple of days, now sitting comfortably near all-time highs around $2,905 per ounce. The key here is simple: gold reacts to uncertainty. With inflation fears rising and equity markets pulling back, gold is a natural go-to asset. In fact, we’re seeing institutional money flow back into gold, and this could be just the beginning.

If you’re a long-term investor, you should be paying attention here. Gold’s price is being driven by a mix of geopolitical risk and inflation. The key support level right now sits at $2,800 – if gold holds that, we could see $3,000 become a realistic target.

FX: The Dollar’s Weakness

I’ve said it before, and I’ll say it again: watch the U.S. dollar closely. The past few days have been tough for the greenback, and we saw it drop against the euro and yen yesterday. Normally, the dollar benefits from risk-off moves, but this time, the narrative is different. Tariffs, slowing growth, and a more dovish Federal Reserve are all combining to put pressure on the dollar.

What’s interesting is that emerging market currencies are feeling the heat, especially in Canada and Mexico. I wouldn’t be surprised to see further volatility in these currencies if the trade war intensifies. We’re entering a period where global currency shifts could have a major impact on your portfolio, so stay tuned.

What to Watch Today:

Key Events:

• The U.S. ISM Services PMI is due out this morning, and I’ll be watching that closely. The services sector is what’s holding the economy together, so a miss here would be a serious red flag.

• Factory orders for January are also coming in, and this could give us a read on business investment.

• The European Central Bank is meeting tomorrow, so expect some movement in the euro. A rate cut seems likely, and that could provide some tailwinds for the European economy, but it also means the euro could weaken a bit.

What I’m Looking For:

• More volatility – the VIX is still elevated, and I expect this trend to continue for the next few days. If it dips below 20, we might see a reversal in equities, but if it spikes again, we could be looking at more downside.

• Keep an eye on geopolitical developments. Trade tensions are front and center today, but any surprise moves – either from the U.S. or other nations – could send shockwaves through the market.

• Finally, keep an eye on inflation data. If inflation continues to rise, expect gold to remain strong and equities to face headwinds.

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Stay alert today. The markets are moving fast, and there’s a lot of risk to navigate. Focus on the fundamentals, stay nimble, and we’ll see how things shake out by the end of the week.

Samuel Leach

Founder of Capital Circle

www.samuelandcotrading.com