Market Insights

Quarterly Market Insights: April 2025

U.S. Markets

Stocks fell in the first quarter as investors contended with economic uncertainty, inflationary concerns and evolving tariff talks. The Standard & Poor’s 500 Index slid 4.59%, while the tech-heavy Nasdaq Composite dropped 10.42%. The Dow Jones Industrial Average fared best, sliding only 1.28%.

January's Black Swan

Stocks rallied in January on upbeat business and economic messaging from the White House. However, tech stocks pulled markets lower later in the month on news that a Chinese start-up had developed a competitive artificial intelligence (AI) model that performed as well as its Western counterparts, at a fraction of the cost.

As the month came to a close, investors evaluated whether it was indeed a “black swan” event or just another development in the fast-moving world of AI.

February's New High

Stocks hit new highs following February’s Presidents' Day holiday. But stubborn inflation, mixed economic signals and an evolving trade policy tempered enthusiasm. As the month came to a close, an upbeat inflation report led to a powerful rally, which helped limit losses.

Ongoing Trade Talks in March

March was a different story, however. Stocks trended lower throughout the month as fast-moving trade policy updates unnerved investors. Things improved slightly by mid-month as a choppy rally attempt tried to take shape. But sellers gained the upper hand in the final full week of trading on a mixed inflation report and souring consumer sentiment.

Sector Scorecard

During Q1, four of the 11 S&P 500 sectors fell–but those four disproportionately affected the index. Technology, for example, is about 30% of the S&P 500.

Consumer Discretionary (-11.99%), which is about 11% of the S&P 500 index and Technology (-11.20%) were under the most pressure. Industrials (-0.52%) and Communication Services (-0.37%) also posted losses. Industrials comprise 7% of the index and Communication Services comprise 10%.

Energy (+9.09%) was the best-performing sector. Utilities (+4.17%), Healthcare (+6.14%), Consumer Staples (+3.89%), Financials (+3.06%), Real Estate (+2.90%) and Materials (+2.19%) all ended the quarter higher.

U.S. Market Recap

The Markets

The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance doesn't guarantee future results. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid.

World Markets

The MSCI EAFE Index gained 6.15% during Q1, outperforming all three major U.S. market averages. European markets had a strong quarter. Spain (+13.29%), Italy (+12.79%), Germany (+11.32%) and France (+5.55%) all posted solid gains. The United Kingdom also had a good quarter, picking up 5.65%.

Pacific Rim markets were mixed. Japan’s Nikkei index lost 10.72% and Australia’s ASX 200 fell 3.87%. Meanwhile, China’s Hang Seng index rose 15.25% and Korea’s KOSPI added 3.40%.

World Market Recap

The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance doesn't guarantee future results. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.

Indicators

• Gross Domestic Product (GDP). The economy grew at an annualized 2.4% in Q4, revised up from the prior estimate of 2.3% but just shy of economists’ expectations of 2.5%. For the full year, GDP grew 2.5%, compared with 3.2% growth in 2023. The fourth quarter marked the ninth of the past 10 quarters in which year-over-year GDP growth exceeded 2%.
• Employment. Employers added 151,000 jobs in February, below the forecast of 170,000 jobs. Unemployment increased to an annualized 4.1% in February over the prior month. Wage growth rose 0.3% in February, as expected.

• Retail Sales. Consumer spending rose 0.2% in February, short of economists’ expectations of a 0.6% increase.
• Industrial Production. Industrial output rose 1.4% year-over-year in February, following a downwardly revised 1.9% rise in January.
• Housing. In February, housing starts rose 11.2% over the prior month, driven by solid demand and limited existing inventory. The increase exceeded market expectations and followed January’s 11.5% decline, which was driven primarily by weather-related disruptions in construction activity.

Sales of existing homes rose 4.2% in February, beating expectations of a 3.2% drop as buyers moved off the sidelines. The median existing home sales price was $398,400, a 3.8% rise from a year prior.

New home sales rose 1.8% in February. Year over year, new home sales rose by 5.1%. There were 500,000 unsold new homes on the market in February, the highest inventory level since November 2007 and equal to 8.9 months of supply at the current sales pace.

• Consumer Price Index (CPI). Consumer prices rose 0.2% in February, less than expected and at a slower pace than January’s 0.5% rise. Year over year, prices rose 2.8%, also less than expected. Core inflation, which excludes volatile food and energy prices, also rose 0.2% month over month and 3.1% year over year—both less than expected.
• Durable Goods Orders. Orders of manufactured goods designed to last three years or longer rose 0.9% in February, beating economists’ expectations for a 1% drop.

The Fed

The Federal Open Market Committee (FOMC) held rates steady at both of its meetings in Q1. Testifying before the Senate Banking Committee on February 10, Chair Powell told lawmakers the Fed doesn’t “need to be in a hurry” to lower interest rates further, given the economy was currently “strong overall.”

At its March meeting, Fed Chair Jerome Powell acknowledged that progress toward their 2% inflation target is “probably delayed for the time being.” He said that the Fed maintains its wait-and-see stance toward tariffs and their longer-term impact on inflation.

The FOMC’s next meeting is scheduled for May 6-7.

By the Numbers: Gardening