Market Review
Well that was a great way to kick off 2025!
It’s safe to say that the peace and quiet is over for a bit and we’ve got some volatile markets in store for us. Regardless of who is or isn’t in office, let me remind you that markets remain unpredictable. Let’s not make the mistake of thinking that just because the political climate or policies have changed that we now know what’s in store.
Case in point: we just set off a trade war with the globe and international stocks increased in value. You can’t make this stuff up.
In the first quarter of 2025, U.S. stocks declined 5% while developed international stocks (+6%) and emerging market stocks (+2%) performed well. Bonds (+3%) and REITs (+1%) also held up well and were helped by interest rates declining with the 10-year U.S. treasury rate falling from 4.57% to 4.25% during the quarter.
Note that 5-year performance data is a bit skewed by the fact that March 2020 was near the depths of the stock market decline driven by the COVID pandemic. But it does highlight the point that future returns are much more tantalizing.
Index performance is provided as a benchmark. It is not illustrative of any particular investment. An investment cannot be made in an index. Past performance is not an indication of future results. Russell 3000 Index, MSCI World ex USA Index, MSCI EM Index, S&P Global REIT Index, US Aggregate Bond Index. Returns as of 3/31/2025.
Economic Review
[Keep in mind: the economic data usually lags a bit]
Real (inflation adjusted) GDP growth remained strong at 2.4% (annualized) in the 4th quarter.
Inflation has remained around the 3% level since June 2023, with February ticking down slightly to 2.8%.
The Fed has held the Federal Funds rate steady since December, when they lowered their target to the current 4.25-4.50% range. At the March meeting, Fed officials reiterated their expectation of two more 25bp rate cuts in 2025, implying a range of 3.75-4.00% at year-end based on their economic projections.
30-year mortgage rates have remained close to 7% so far this year, which is roughly where they’ve been since late 2022.
Home values continue to show resilience (despite elevated mortgage rates) with January home prices coming in 5% higher than last year.
The unemployment rate has remained around 4% with recent months bouncing between 4.0% and 4.2%.
Tax, Legal, & Legislative Updates
- Tariff rates on U.S. imports remain volatile (and uncertain) but generally appear to be heading higher, which could potentially raise prices on goods for consumers.
- No updates yet, but Congress is currently in the process of negotiating on several elements of the Tax Cut and Jobs Act which are set to expire at the end of 2025. These include reduced individual tax rates, standard deduction amounts, state and local tax (SALT) deductions, and estate & gift tax exemptions.
