Please find our most recent market review below. We hope these perspectives are valuable to you.
– The AdvicePeriod Team
Market Update: March 2025 In Review
Key Observations
- The S&P 500 and Nasdaq experienced significant losses in March 2025, with declines of 5.6% and 8.1% respectively, marking their worst monthly performances since late 2022. In stark contrast, international markets have shown remarkable strength, with the MSCI EAFE up nearly 7% year-to-date (YTD).
- President Donald Trump’s tariffs are dramatically reshaping U.S. trade policy, with steel and aluminum tariffs of 25% enacted on March 12 and additional tariffs of around 20% on Chinese goods. Goldman Sachs now forecasts that tariff rates could increase by 15 percentage points, which they expect will elevate inflation to 3.5% by year-end 2025 and reduce annual economic growth to just 0.2%.
- The Atlanta Federal Reserve’s GDP tracker indicated that gross domestic product was on pace to shrink by 2.8% for the first quarter of 2025, a significant downward revision from their earlier projection of 1.8%. The CNBC Rapid Update, which consolidates predictions from 14 economists, anticipates a sluggish growth rate of just 0.3% in the first quarter, a stark contrast to the 2.3% growth observed in the fourth quarter of 2024.
Market Recap
As we close the books on March 2025, we want to provide you with our perspective on recent market developments and economic trends. While this past month presented challenges for U.S. markets, it also reinforced the enduring principles that guide our investment philosophy: disciplined strategy, diversification and a long-term perspective.
Market Performance: A Tale of Two Markets
March proved to be a challenging month for U.S. equities, with the S&P 500 and Nasdaq experiencing their steepest monthly declines since late 2022, falling 5.6% and 8.1%, respectively. The Dow Jones Industrial Average wasn’t spared either, shedding 4.1% during the month. Market volatility spiked considerably, with the VIX index (often called the “fear gauge”) climbing as high as 29 during the market downturn on March 11.
However, one of the most striking developments has been the divergence between U.S. and international markets. While domestic indices struggled, international markets demonstrated remarkable resilience. The MSCI EAFE Index, reflecting the performance of the developed international markets, is up nearly 7% while the MSCI Emerging Markets Index is up nearly 3% YTD.
This divergence underscores a principle we’ve long emphasized: diversification matters. Clients with globally diversified portfolios have benefited from exposure to these international bright spots, helping to cushion the impact of U.S. market volatility.
Economic Headwinds: Trade Policy and Growth Concerns
Two significant economic developments have dominated headlines and influenced market sentiment this month.
First, trade policy uncertainty has emerged as a major concern. The implementation of 25% tariffs on steel and aluminum on March 12, coupled with additional tariffs on various goods, has created ripples throughout the economy. These developments have contributed to market anxiety and raised questions about the trajectory of both inflation and economic growth.
Second, economic growth forecasts have been revised downward. The Atlanta Fed’s GDP tracker now indicates that gross domestic product may have contracted by 1.8% in the first quarter of 2025, a significant downward revision from earlier projections. Similarly, the CNBC Rapid Update, which aggregates forecasts from 14 economists, anticipates growth of just 0.3% in Q1, below the 2.3% growth observed in the fourth quarter of 2024.
Our Perspective: Discipline in Uncertain Times
While these developments may seem concerning, they reinforce the importance of maintaining discipline and perspective in your investment approach.
First, market volatility is normal and expected. Short-term market movements, while sometimes unsettling, rarely signal a fundamental change in long-term market dynamics.
Second, diversification continues to prove its worth. The outperformance of international markets and fixed income during this period of U.S. market weakness demonstrates why we maintain diversified portfolios.
Third, economic data is inherently backward-looking, while markets are forward-looking. The market’s reaction to economic data often reflects adjustments to future expectations rather than responses to current conditions.
Portfolio Implications: Staying the Course
Given these observations, we remain committed to our disciplined investment approach:
- We’re maintaining our strategic asset allocations. Your portfolio is designed to weather various market environments, not just the current one.
- We’re finding value in international diversification. The recent outperformance of international markets validates our commitment to global diversification.
- We’re staying disciplined with rebalancing. Market volatility often creates opportunities to rebalance portfolios at advantageous prices.
While no one can predict with certainty how markets will evolve in the coming months, we remain confident in the resilience of well-diversified, quality-focused portfolios over the long term. Economic cycles come and go, but disciplined investment approaches have historically rewarded patient investors.
Disclosures:
This market commentary is meant for informational and educational purposes only and does not consider any individual personal considerations. As such, the information contained herein is not intended to be personal investment advice or recommendation. References to specific asset classes and securities are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell any securities or assets classes.
The commentary represents an assessment of the market environment through March 2025. The views and opinions expressed may change based on the market or other conditions. The forward-looking statements are based on certain assumptions, but there can be no assurance that forward-looking statements will materialize. Diversification is an investment strategy designed to help manage risk, but it cannot ensure a profit or protect against loss in a declining market.
Equity securities are subject to price fluctuation and investments made in small and mid-cap companies generally involve a higher degree of risk and volatility than investments in large-cap companies. International securities are generally subject to increased risks, including currency fluctuations and social, economic, and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.
Fixed-income securities are subject to loss of principal during periods of rising interest rates and are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors before investing. Interest rates and bond prices tend to move in opposite directions. When interest rates fall, bond prices typically rise, and conversely, when interest rates rise, bond prices typically fall.
There is no assurance that any investment, plan, or strategy will be successful. Investing involves risk, including the possible loss of principal. Past performance does not guarantee future results, and nothing herein should be interpreted as an indication of future performance. Please consult your financial professional before making any investment or financial decisions.
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Indexes are unmanaged and cannot be directly invested into. Index Definitions: The S&P 500 is a capitalization-weighted index designed to measure the performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Russell 2000 consists of the 2,000 smallest U.S. companies in the Russell 3000 index. MSCI EAFE is an equity index which captures large and mid-cap representation across Developed Markets countries around the world, excluding the U.S. and Canada. The index covers approximately 85% of the free float-adjusted market capitalization in each country. MSCI Emerging Markets captures large and mid-cap representation across Emerging Markets countries. The index covers approximately 85% of the free-float adjusted market capitalization in each country. Bloomberg U.S. Aggregate Index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. Bloomberg U.S. Corporate High Yield Index covers the universe of fixed rate, non-investment grade debt. Eurobonds and debt issues from countries designated as emerging markets (sovereign rating of Baa1/BBB+/BBB+ and below using the middle of Moody’s, S&P, and Fitch) are excluded, but Canadian and global bonds (SEC registered) of issuers in non-EMG countries are included. FTSE NAREIT Equity REITs Index contains all Equity REITs not designed as Timber REITs or Infrastructure REITs. Bloomberg Commodity Index is calculated on an excess return basis and reflects commodity futures price movements. The index rebalances annually weighted 2/3 by trading volume, and 1/3 by world production and weight-caps are applied at the commodity, sector, and group level for diversification. The Nasdaq Composite is a stock market index that includes almost all stocks listed on the Nasdaq stock exchange. The Dow Jones Industrial Average is a stock market index of 30 prominent companies listed on stock exchanges in the United States. VIX is a popular name for the Chicago Board Options Exchange’s CBOE Volatility Index, a measure of the stock market’s expectation of volatility based on S&P 500 index options.
Does past performance matter?
Major Market Index Returns
Period Ending 4/1/2025
Multi-year returns are annualized.
Mix Index Returns
Global Equity / US Taxable Bonds
Indexes are unmanaged and cannot be directly invested into. Past performance is no indication of future results. Investing involves risk and the potential to lose principal.
The Russell 3000 Index is a United States market index that tracks the 3000 largest companies. MSCI Emerging Markets Index is a broad market cap-weighted Index showing the performance of equities across 23 emerging market countries defined as emerging markets by MSCI. MSCI ACWI ex-U.S. Index is a free-float adjusted market capitalization-weighted index that is designed to measure the equity market performance of developed and emerging markets excluding companies based in the United States. Bloomberg U.S. Aggregate Bond Index represents the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, as well as mortgage and asset-backed securities. Bloomberg Municipal Index is the US Municipal Index that covers the US dollar-denominated long-term tax-exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and prerefunded bonds.
March 2025 Market Commentary