US durable goods orders excluding defence rose to -0.3% in March, from -1.2% in the previous month.
This means the monthly rate was still negative, but the fall was smaller than before.
Durable Goods Signal A Possible Bottom
The March durable goods report, showing a smaller-than-expected decline of -0.3%, suggests the manufacturing slowdown may be finding a floor. While not a sign of growth, this improvement from the -1.2% drop in February has eased some of our more pessimistic economic forecasts. We see this as a reason to reduce hedges against a sharp market downturn in the immediate term.
With the next Fed meeting just weeks away, this data complicates the case for an aggressive rate cut. Given that Q1 2026 GDP growth was already a modest 1.5%, the central bank will likely want more evidence before acting. We are therefore trimming positions in interest rate futures that bet on a 50-basis-point cut, instead favoring strategies built around a pause.
This stabilization in business spending should provide a short-term floor for equity indices like the S&P 500. We anticipate a drop in implied volatility, as the worst-case recessionary scenarios are now less likely. Selling out-of-the-money puts on index ETFs could be a viable strategy to collect premium in this environment.
We are reminded of the manufacturing weakness we navigated through much of 2025, which eventually resolved without a deep recession. This current data fits a similar pattern, suggesting resilience in the industrial and technology hardware sectors. We are cautiously exploring buying call options on industrial sector ETFs for the coming months.
