1Q25 Market Overview: Forget the Night Ahead

The first quarter ushered in a change of US political leadership and with it a change in global equity market dynamics.

Key Takeaways

• While hard data released during the quarter continued to show persistent growth and manageable inflation in the US, soft data suggested consumers and businesses had quickly internalized the darkening mood inspired by the new administration’s policy priorities.  
• US corporate earnings have tracked mounting public debt for most of this century. Years of easy fiscal policy beget difficult choices: Do nothing to contain spending and increase the risk of inflation, or take action to curb it and increase the risk of recession.
• While clearly telegraphed by Trump throughout his campaign, the magnitude and scope of his tariff policy appeared to catch markets off guard and has introduced profound instability to the global order.
• With net interest spending biased higher and nondefense discretionary spending too small to matter, meaningful progress on US debt likely will require entitlement reform and/or higher revenue, not to mention political bravery.

The opinions expressed are not necessarily those of the firm. These materials are provided for informational purposes only. These opinions are not intended to be a forecast of future events, a guarantee of future results, or investment advice. Any statistics contained herein have been obtained from sources believed to be reliable, but the accuracy of this information cannot be guaranteed. The views expressed herein may change at any time subsequent to the date of issue hereof. The information provided is not to be construed as a recommendation to buy, hold or sell or the solicitation or an offer to buy or sell any fund or security.

Past performance does not guarantee future results.

Risk Disclosures

All investments involve the risk of loss of principal.

A principal risk of investing in value stocks is that the price of the security may not approach its anticipated value or may decline in value. “Value” investments, as a category, or entire industries or sectors associated with such investments, may lose favor with investors as compared to those that are more “growth” oriented.

There are risks associated with investing in foreign investments (including depositary receipts). Foreign investments, which can be denominated in foreign currencies, are susceptible to less politically, economically and socially stable environments; fluctuations in the value of foreign currency and exchange rates; and adverse changes to government regulations.

Investment in gold and gold-related investments present certain risks, and returns on gold related investments have traditionally been more volatile than investments in broader equity or debt markets.

Diversification does not guarantee investment returns and does not eliminate the risk of loss.
 

Definitions

Federal funds rate is the interest rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight on an uncollateralized basis.

Gross domestic product (GDP) measures the total value of all economic output in goods and services for an economy.

MSCI EAFE Index (Net) measures the performance of large and midcap equities across developed markets countries around the world excluding the US and Canada. A net-return index tracks price changes and reinvestment of distribution income net of withholding taxes.

MSCI World Index (Net) measures the performance of large and midcap equities across developed markets countries. A net-return index tracks price changes and reinvestment of distribution income net of withholding taxes.

NFIB Small Business Optimism Index is a widely recognized economic indicator measuring the sentiment and outlook of US small business owners across a variety of areas critical to their operations.

A purchasing managers’ index (PMI) measures the growth or expansion of certain segments of the economy.

S&P 500 Index (Gross/Total) measures the performance of 500 of the top companies in the leading industries of the US economy and is widely recognized as a proxy for the US market as a whole. A total-return index tracks price changes and reinvestment of distribution income.

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