The first quarter of 2025 brought considerable volatility to financial markets. Economic growth began moderating from last year's robust 3% pace, further impacted by the administration's new tariff policies. Consumer spending weakened in both January and February, a trend that may continue as uncertainty affects purchasing decisions.
The quarter's most notable development was the dramatic reversal of market leadership. Previous market frontrunners from 2023 and 2024 significantly underperformed, bringing US equity valuations closer to historical norms and highlighting value in international markets. US stocks lagged global markets by the widest margin in 23 years.
The S&P 500 declined 4.27% while the MSCI fell a more modest 1.22%. Performance varied substantially across sectors. Information Technology dropped 12.65% while Consumer Staples and Healthcare advanced 5.23% and 6.54% respectively. The Nasdaq Composite experienced its steepest quarterly decline since mid-2022, falling 10.26%.
Diversification Benefits
Despite broad US market weakness, several bright spots emerged. Seven of eleven S&P sectors delivered positive returns. US value stocks, international positions, and fixed income investments all contributed positively, reinforcing the importance of diversification. Carnegie’s Moderate Growth and Income taxable portfolio outperformed its benchmark, declining 1.3% versus 1.9%. Dividend-paying equities, bonds, and international allocations all proved beneficial during this period.
Looking Forward
Volatility will likely persist as the policy fog clears. These tariff announcements represent sweeping changes to trade policy, however, we maintain our commitment to factual analysis when making portfolio adjustments, focusing on emerging data rather than reacting to headlines or attempting to time markets.
Our approach emphasizes measured risk management aligned with your long-term financial goals.
Please reach out with any questions or concerns.
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