Topped off
Has the US stock market topped off? As the first quarter of 2025 ends, we have renewed volatility that we have not seen since 2022. The S&P 500 was down almost 5%, with Mega Cap growth stocks down nearly 16%. International markets have fared better, posting positive returns to start the new year.
A new US administration brings new economic policies unfamiliar to the markets. Economic uncertainty is the most common cause of stock market volatility. Whether the economic policies to be put in place are positive or negative in the long term, the short-term unknown has historically shaken markets.
Inflation looks to have cooled down. Consequently, the Fed Funds Interest Rate was unchanged this month and remains between 4.25% and 4.50%. The Federal Reserve will continue to monitor data that will drive their next decision, which points to a greater chance of lower interest rates moving forward. Therefore, fixed rate investments like Money Markets, Certificates of Deposit (CDs), and Bonds continue to provide strong yields in the short-term helping savers and conservative investors get higher yields for their invested money.
Tariffs, although used, have not been discussed in recent history and have made it to the forefront of the US economic policy. These tariffs will be imposed by the US on our trading partners around the world in greater measure with the current administration than they have since the 1950s. What is a Tariff you ask? They are “A tax imposed by one country on the goods and services from another county to influence it, raise revenues, or protect competitive advantages.” Yes, this will be revenue to the bottom line of the US economy. Yes, it is unknown as to how exactly they will impact pricing on goods and services, economic growth and the future growth of the stock market. Yes, in the short term the uncertainty about their impact has caused market volatility to be elevated. The long-term effects wait to be seen. It has given investors a stock market buying opportunity if they are able to add equities to their asset allocation for long term growth.
Overseas markets have outshined the uncertainty of US markets with positive stock market growth in the countries that make up the MSCI EAFE and Emerging Markets. The Morgan Stanley Capital International European, Australasian, and the Far East index fared well the 1st Quarter of 2025, up 8%. The European Central Bank continued to ease interest rates and increase government spending as inflation cooled. Coupled with bolstering its energy independence and increasing military spending in response to the region’s instability caused by the Russian Ukraine conflict aided stock market growth. Asian Markets were strong led by the Chinese stock market that had solid growth. Japan’s markets were weakened by a strong Yen, largely in part to their policy to end its negative interest rate environment. This policy started in January of 2016 to fend off deflation as wage growth and inflation decreased. This year’s wage growth increased, and inflation accelerated to a level not seen in almost a decade. Emerging Markets gained ground posting a 4.5% return to end the quarter.
Have the U.S. markets topped off for this market cycle? Or is the current volatility a temporary consequence of the unknow effect of the economic policies of the new administration? Will tariffs mean a boom or bust for the national and international markets and economies? This waits to be seen. If you are uncertain about how the impact of economic policies will affect your investments, we encourage you to contact us. It is our role to assist you in making sense of economic and market conditions and provide you with peace of mind. At Renew Family Wealth we believe in building long-term trusting relationships by partnering with those we serve in evaluating the conditions affecting their lives and providing solutions for their circumstances. If you are uncertain about your current life or investment plan, we welcome the opportunity to partner with you to determine if you are planning appropriately for your needs and goals. Please contact us to set up a meeting to discuss how we may be useful to you.
Thank you for the opportunity to serve you.
Sincerely,
Scott Miller
