The first three weeks of the quarter were an extension of the previous two years, with U.S. Large Caps leading the market higher. U.S. Stocks peaked on February 19th, before sliding the rest of the quarter. Over the next 6 weeks, pessimism around tariffs, inflation, and consumer sentiment sent U.S. based risk assets markedly lower, with U.S. stocks dropping 10% for the first market correction since 2022.
It wasn’t all bad news for investors. International stocks finally had their day, outperforming U.S. stocks by 12.5% for the quarter. Bonds also fared well as interest rates fell over concerns around an economic slowdown and a flight to safety as traders dumped U.S. stocks.
The Federal Reserve took a wait-and-see approach to the economy, leaving the Federal Funds rate at 4.375%. They did take a small dovish step, slowing the pace of their balance sheet reduction from $60 billion a month to $40 billion. Going forward, Jerome Powell and company may have the difficult task of being accommodating to a slowing economy while also being wary of inflation, which has proved difficult to quell. The Fed’s preferred inflation reading ticked up in March to 2.8% YoY.
Price Action
Those reading headlines may be prepared for the worst when they open their quarterly performance reports, but most will be surprised to see their accounts are close to flat, despite the 10% pullback in U.S. stocks over the last six weeks.
The first quarter was a case study on the benefits of diversification. Some of the most popular names from the last few years struggled with Tesla (-36%), Nvidia (-19%), and Google (-18%), leading the S&P 500 lower. At the same time, stocks from international developed countries (Europe, Japan, Australia) finished the quarter up almost 8%. Bonds also did their job with most holdings gaining 2-3% as they collected interest payments, and a drop in yields led to principal appreciation.
This quarter was a reversal of the last with Bitcoin posting poor returns (-10%) while Gold had its best quarter in 40 years, gaining 19% as traders sought safe haven assets amid the brewing global trade war.
While U.S. Large-Cap stocks struggled, U.S. Small-Cap stocks fared even worse, dropping 10% for the quarter.
Technology and Consumer cyclical stocks were the poorest-performing sectors in Q1, declining 12% each. Energy was the top performer, gaining 9%.
REITs showed their worth as a diversifier, gaining 1% for the quarter, which was 6% better than the broader U.S. market.
Emerging Markets didn’t do as well as International Developed stocks, but still gained 3.4% for the quarter. Chinese stocks were a top performer, gaining 17%.
The belly of the curve saw the sharpest decline in interest rate,s with 5-year treasuries falling 0.42% while the 30-year declined by 0.20% and very short-term treasuries remained unchanged.
High-Yield bonds, which trade in part like a stock and in part like a treasury bond, finished the quarter up 1% as the drop in yields outweighed the fall in stocks.
Housing prices continued their slide, falling 0.2% over the last 3 months we have data.
Rialto Wealth Management is a fee-only, fiduciary, advisory firm based in Syracuse, NY. From financial planning to investment management, we help families across New York and beyond. We can be reached by phone at (315) 992-9129 or via email through our website’s secure and confidential contact page.
Q1 2025 Market Commentary
April 2, 2025 by Ethan Gilbert
The first three weeks of the quarter were an extension of the previous two years, with U.S. Large Caps leading the market higher. U.S. Stocks peaked on February 19th, before sliding the rest of the quarter. Over the next 6 weeks, pessimism around tariffs, inflation, and consumer sentiment sent U.S. based risk assets markedly lower, with U.S. stocks dropping 10% for the first market correction since 2022.
It wasn’t all bad news for investors. International stocks finally had their day, outperforming U.S. stocks by 12.5% for the quarter. Bonds also fared well as interest rates fell over concerns around an economic slowdown and a flight to safety as traders dumped U.S. stocks.
The Federal Reserve took a wait-and-see approach to the economy, leaving the Federal Funds rate at 4.375%. They did take a small dovish step, slowing the pace of their balance sheet reduction from $60 billion a month to $40 billion. Going forward, Jerome Powell and company may have the difficult task of being accommodating to a slowing economy while also being wary of inflation, which has proved difficult to quell. The Fed’s preferred inflation reading ticked up in March to 2.8% YoY.
Price Action
Those reading headlines may be prepared for the worst when they open their quarterly performance reports, but most will be surprised to see their accounts are close to flat, despite the 10% pullback in U.S. stocks over the last six weeks.
The first quarter was a case study on the benefits of diversification. Some of the most popular names from the last few years struggled with Tesla (-36%), Nvidia (-19%), and Google (-18%), leading the S&P 500 lower. At the same time, stocks from international developed countries (Europe, Japan, Australia) finished the quarter up almost 8%. Bonds also did their job with most holdings gaining 2-3% as they collected interest payments, and a drop in yields led to principal appreciation.
This quarter was a reversal of the last with Bitcoin posting poor returns (-10%) while Gold had its best quarter in 40 years, gaining 19% as traders sought safe haven assets amid the brewing global trade war.
Rialto Wealth Management is a fee-only, fiduciary, advisory firm based in Syracuse, NY. From financial planning to investment management, we help families across New York and beyond. We can be reached by phone at (315) 992-9129 or via email through our website’s secure and confidential contact page.