Market Commentary

On January 20th, Donald Trump was sworn in as the 47th president of the United States. From this day on, the first quarter was dominated by changes to fiscal policy through a parade of executive orders. The unprecedented pace at which the new administration is enacting policy changes has created an uncertain business operating environment which has resulted in dramatic capital market responses.

Still, in the wake of this uncertainty, the S&P 500 hit highs on February 19th. However, by quarter end, US equities slid into negative territory with the S&P 500 and Dow Jones Industrial Average off -4.3% and -10.3% year-to-date respectively. International equities gained with the MSCI:EAFE posting a 6.9% return for the quarter. Bonds held up well, with the Bloomberg Aggregate Bond Index returning 2.8%. Many diversified portfolios were flat for the quarter. 

This was short-lived. On April 2nd, sweeping tariffs were announced that sent many equity markets into freefall. On April 3rd, the S&P 500 fell by 4.8%. The subsequent day saw a further decline of 6%. In two days, the index lost approximately 10% of its value, erasing over $3 trillion in market capitalization. Trump’s aggressive trade policies led to heightened uncertainty, volatility, and widespread predictions of a 2025 recession. On April 9th, a 90-day pause was announced on certain tariffs. The pause excluded China. The market reacted by surging 9.5%, the largest one-day gain since 2008. 

While the 90-day pause helped the markets find footing, the elevated level of unpredictability has been immobilizing businesses and the capital markets they support. In the face of low certainty, do businesses want to make that large capital expenditure? Likewise, does an investor invest in a stock that may be hurt by fiscal policies? They may opt for a more insulated stock, or another asset class altogether, like cash.

For fully invested market participants, now is unlikely the time to make big portfolio changes. Markets tend to find stability and equilibrium. Though, getting to that point may be uncomfortable. Historically, large market declines have led to subsequent periods of favorable returns. The severe declines below likely felt insurmountable at times, yet disciplined investors came away better off. We urge you to remain invested.

Convincing oneself of a single-path outcome is the enemy of sound investment decision-making. We live in a multivariate, complex world where problems and solutions are constantly colliding and ever evolving. There is no “easy button”. Sound processes are what we rely on, and a sound decision-making process is what our clients will continue to receive. We thank you for your continued confidence and trust.