Think the markets have been wild in 2025?
1st Quarter 2025
We suspected 2025 was going to be a year for the books- the amount of activity and volatility the markets experienced in the first quarter was intense! Keep in mind, however, the S&P finished the 1st quarter down only 4.28%. Of course, 2024 was a great year for the investments, with the stock market increasing significantly.
There are many topics to keep track of this year: Policy changes in Washington, looming tariffs, inflation, and a potentially more cautious U.S. consumer. Consumers are often referred to as the most powerful economic force. It is their spending decisions that directly or indirectly inform businesses about the goods and services to produce. With uncertainty, consumers may be more cautious. Cautious doesn’t mean “frozen or paralyzed” and we all know Americans like to spend.
Policy changes in Washington, D.C. are complicated. Some believe the agenda may hurt a little now but will yield great results in the future. Much of the discussion in Washington focuses on increasing efficiency and bringing more sectors of manufacturing back to the U.S. Tariffs are set to go into effect in April 2025, and there is no consensus on how those will be enacted or how the tariff costs may get transferred to the consumer. It will take a few years to see how this plays out.
Regarding inflation, the Federal Reserve held rates steady at their meeting in March. They downgraded their forecast of real GDP growth from 2.1% to 1.7%, reflecting their belief that there could be slower growth. The Federal Reserve reviews the Personal Consumption Expenditures Price Index (PCE) when deciding on interest rate policy, among many other metrics. The PCE is a measure of the spending on goods and services by people in the U.S. This index rose only slightly recently. Usually, slower growth would be an indicator of a faster pace of rate cuts, but the potential higher inflation numbers would normally cause the Fed to wait longer to act. The balance between inflation and economic growth led the Fed to make no changes to their forecast of two rate cuts in 2025. It will take a few months to see how this plays out.
Financial and political news has been a bit abnormal in 2025 but on the other hand, it usually is, or it would not be news! Slow down and look back at each March since 2020 and what the market returns have been since the pandemic low:
March 2020: Because of the COVID-19 pandemic, the global stock market crashed. The lowest point for the S&P 500 that year was on March 23, 2020, when it closed at 2,237.40.
March 2021: The Suez Canal blockage caused global trade disruption, an oil price increase of 4%, a container shortage, manufacturing delays, and an estimated $54 billion in trade losses and increased freight prices. It lasted for six days. On March 23, 2021, the S&P 500 closed at 3,910.52. This represents a recovery of 74% in one year.
March 2022: Rising fuel and energy costs were driving inflation concerns globally. The main causes of the rise were the Russian invasion of Ukraine, post-pandemic recovery, and ongoing issues with supply chain disruptions. The S&P 500 closed at 4,456.24 on March 23, 2022. That is a 99% increase over March 23, 2020.
March 2023: There were concerns over the stability of the banking systems, and central banks quickly boosted liquidity to stabilize the markets. On March 23, 2023, the S&P closed at 3,948.72. While down from exactly one year before, the return is still 76% over the COVID low.
March 2024: Economists were able to acknowledge the soft landing of the U.S. economy after the pandemic. The landing was measured by easing inflation and declining interest rates. The S&P 500 closed at 4,567.56 on March 23, 2024. This was only one year ago. It is an increase of 104% since March 2020.
March 2025: The S&P 500 closed at 5,675.29 on March 23rd, a 153% increase since the COVID-19 pandemic.
Find comfort in accepting that: change is constant, things are always different, and, over the short or long term, your team at HBCM is here to help!
