US durable goods orders excluding defence fell by 1.2% in February. This followed a 0.5% rise in the previous period.<\/p>\n
Looking back, the decline in durable goods orders to -1.2% in February 2025 was an early warning of the economic cooling we experienced for the rest of that year. That data point signaled a pullback in business investment that extended well into the autumn. This trend confirmed that the high-interest-rate environment was finally taking a significant toll on capital expenditures.<\/p>\n
This weakness was validated as the ISM Manufacturing PMI remained in contraction territory, below 50, for the subsequent ten months. For instance, we saw the index hover around 47 for much of late 2025, confirming the manufacturing sector’s persistent softness. This broad-based slowdown showed that the February 2025 number was not an anomaly but the start of a clear trend.<\/p>\n
Throughout the second half of 2025, this economic uncertainty kept implied volatility elevated, making hedging strategies more expensive. We saw the VIX, the market’s fear gauge, average around 19 during that period, with several spikes above 22 during earnings seasons. This environment rewarded traders who were long volatility or had structured defensive positions using options.<\/p>\n
The Federal Reserve was constrained by core inflation that remained stubbornly above 3% for most of 2025, forcing it to maintain a restrictive policy stance. This backdrop suppressed risk appetite and favored trades that benefited from high borrowing costs and low economic growth. Short-dated interest rate futures consistently priced out any significant rate cuts for the near term.<\/p>\n
Now, however, we are seeing signs of a potential shift as the most recent March 2026 ISM manufacturing index just printed at 50.3, the first expansionary reading in over a year. This suggests we should consider gradually rotating out of purely defensive positions that have worked for the past year. It may be time to cautiously sell some of the expensive downside puts and begin building positions in call spreads on cyclical sectors.<\/p>\n
Given this nascent sign of recovery, we should also monitor options on interest rate futures closely. If upcoming data like retail sales and employment confirm this economic bottoming process, the market will have to reprice the path of future Fed policy. This could create an opportunity to position for a steeper yield curve before the recovery narrative is fully embraced by the wider market.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" US durable goods orders excluding defence dropped 1.2% in February, reversing January\u2019s 0.5% increase.<\/p>\n","protected":false},"author":38,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[46],"tags":[],"class_list":["post-44291","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":[],"aioseo_notices":[],"featured_image_src":null,"featured_image_src_square":null,"author_info":{"display_name":"josephine","author_link":"https:\/\/www.vtmarketsglobal.com\/en\/author\/josephine\/"},"_links":{"self":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/44291","targetHints":{"allow":["GET","POST","PUT","PATCH","DELETE"]}}],"collection":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/users\/38"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/comments?post=44291"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/44291\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/media?parent=44291"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/categories?post=44291"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/tags?post=44291"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}