Market Commentary - April 2025
US Equity Markets
After a difficult December, the global markets rallied into January and part of February. Since mid-February, the US Equity markets have experienced a quick, uncomfortable correction. On February 19th, the S&P 500 closed at an all-time high of 6,144. On March 13th, the S&P 500 reached an intra-day 2025 low of 5,504, representing a 10.4% drop during that three-week period.
European Markets
During the same timeframe above, indexed investments for European developed markets rose 1.4%. Although this is a seemingly meager return, the outperformance compared to US markets has been nothing less than shocking. The shift represents an about-face from the past ten years in the global markets. In this market commentary, we will explore why non-US markets have performed so well while US markets struggled, especially with the overabundance of policy rhetoric.
A call to the end of the war in Ukraine is a contributing factor driving the rally in European stocks. On multiple levels, this is seen as a favorable outcome for the European markets. The US has reduced defense spending in this geographical zone, which in turn has driven the European Union (EU) to increase spending on infrastructure and the defense sector. EU corporations have reported improving corporate earnings in recent quarters and GDP growth in the region is gaining traction. These factors alongside anticipated increased EU government spending and earnings projections improvements will continue to drive economic growth in the region.
“How Does This Relate to My Portfolio?”
Taking a step back, the global stock markets combined represent approximately 65% US-domiciled corporations and 35% non-US corporations. As you know, we generally recommend an allocation to non-US domiciled companies in order to remain diversified from a global perspective. The non-US allocation has been an additive to portfolios, despite the negative US market returns so far this year. We expect this trend to continue in the intermediate term as the U.S. dollar weakens and investors shift from a US-centric portfolio to a more diverse global portfolio. We remain positive on the US Equity markets for the longer term, but diversification across markets is a prudent approach.
Market Events Over the Past 10 Years
As we are celebrating our firm’s 10th anniversary this month, let’s look back at the market events that have shaped the past ten years:
2015: Greek Debt Crisis
2016: BREXIT Vote
2017: Bitcoin’s rise
2018: “Trade War” with China ensues; US Government Shutdown
2019: US Manufacturing Recession
2020: COVID-19 Pandemic
2021: Generational Inflation Surge
2022: Russia-Ukraine War
2023: Aggressive interest rate hikes by the US Federal Reserve; Bank Failures; Debt Ceiling Crisis
2024: Emergence of Artificial Intelligence
2025: Looming Fiscal Cliff; Tariffs
We understand times of heightened volatility in the markets can lead to discomfort, especially with the constant flow of news. However, as professional investors focused intently on planning, we have only the past to reference as a guide to the future. Our process of extensive planning around life events and spending projections is incredibly helpful in crafting the appropriate allocation for your portfolios. Many of the above items were the drivers of the volatility in Figure 1 which illustrates the annual returns for the S&P 500 since 1980, while highlighting the intra-year “drawdowns.”
Figure 1 – S&P intra-year declines vs. calendar year returns
Source: JP Morgan Asset Management, Feb 27, 2025
During these times, rest assured that we are looking for opportunities across global markets, while adhering to your specified investment goals. Please let us know if there have been any changes to your specific situation.
We hope to see you soon!
Jason, Micah, Tim, & Victoria