Markets Brief: Investors Shouldn’t Take Economic Data Too Seriously

Inflation Data Surprises

The Morningstar US Market Index ended the week down 2.3%, despite a burst of optimism on Friday as investors engaged in some bargain hunting. Meanwhile, 12-month core CPI landed at 3.2% for February, slightly below expectations of 3.3%. As ever, it is important to remember these figures only offer a view into what has already happened. When investing, we’re looking ahead, not backward.

Consumer sentiment for March missed forecasts, and short-term inflation expectations ticked up to 4.9%. These developments likely reflect uncertainty around escalating tariffs, which can push costs higher for both consumers and businesses. Senior Morningstar US economist Preston Caldwell explains how tariffs might affect inflation and growth.

Consumer Stocks Under Pressure

Concerns about a squeeze in consumer spending manifested in the Morningstar Consumer Cyclical Index and Morningstar Consumer Defensive Index both falling 4.1% over the week. The Morningstar Energy Index and Morningstar Utility Index, which contain stocks that are traditional havens when inflation fears creep in, rose 2.7% and 2.5%, respectively.

Investors Need to Focus on Long-Term Goals

While it may seem obvious to set your strategy to address these concerns, there is seldom a direct link between economic data and future returns, as markets usually adjust prices to reflect new expectations. For most people, investing is a marathon and not a sprint. The objective is to meet your financial goals while limiting the risk you incur over the long term and not to win each mile. When you focus too tightly on the short term, it’s easy to miss the longer-term drivers of returns, which primarily come from the quality of your assets and what you pay for them.

High-Yield Bond Yields Rise

Despite rising inflation concerns, US Treasury bonds continued to perform their primary role of providing stability to portfolios, with yields virtually unchanged last week, resulting in a year-to-date gain of 2.2%. In contrast, the Morningstar High Yield Bond Index fell 0.7%. Check out Morningstar’s latest report on flexible bond funds.

China Outperforms Emerging Markets

Most major markets outside the United States also lost ground, but the declines were generally smaller. The Morningstar Developed Ex-US Index fell 1%, while the Morningstar Emerging Markets Index fell 0.9%. Within emerging markets, performance has varied widely over the year to date; China is up 19%, Taiwan is down 5%, and India is 1% lower. This reminds us to be selective when investing in such a diverse group. To find out which markets offer the best opportunities and severest challenges for active managers, check out Morningstar’s latest Active Passive Barometer.

Fed: No Rate Change Expected

All eyes are now on the Federal Reserve meeting on Wednesday. With interest rates expected to stay unchanged, market participants will be scrutinizing the accompanying statement for any hints of what lies ahead. Here’s Morningstar’s take. You can see what else is happening with our calendar.

In an environment shaped by shifting narratives, it’s vital to watch what truly drives long-term investment success: selecting high-quality assets at sensible prices. A level-headed, valuation-conscious approach remains your greatest ally in uncertain times.