Quarterly Market Insights | April 2025

U.S. Markets

Stocks fell in the first quarter as investors contended with economic uncertainty, inflationary concerns, and evolving tariff talks.

The Standard & Poor’s 500 Index slid 4.59 percent, while the tech-heavy Nasdaq Composite dropped 10.42 percent. The Dow Jones Industrial Average fared best, sliding only 1.28 percent.1

There are three types of baseball players: those who make it happen, those who watch it happen, and those who wonder what happened. Tommy Lasorda, manager of the Los Angeles Dodgers and two-time World Series champion

January’s Black Swan

Stocks rallied in January on upbeat business and economic messaging from the White House. However, tech stocks pulled markets lower later in the month on news that a Chinese start-up had developed a competitive artificial intelligence (AI) model that performed as well as its Western counterparts at a fraction of the cost.2

As the month came to a close, investors evaluated whether it was indeed a “black swan” event or just another development in the fast-moving world of AI.2

February's New High

Stocks hit new highs following February’s Presidents' Day holiday. But stubborn inflation, mixed economic signals, and an evolving trade policy tempered enthusiasm. As the month came to a close, an upbeat inflation report led to a powerful rally, which helped limit losses.3,4

Ongoing Trade Talks in March

March was a different story, however. Stocks trended lower throughout the month as fast-moving trade policy updates unnerved investors. Things improved slightly by mid-month as a choppy rally attempt tried to take shape. But sellers gained the upper hand in the final full week of trading on a mixed inflation report and souring consumer sentiment.5

Sector Scorecard

During Q1, four of the 11 S&P 500 sectors fell–but those four disproportionately affected the index. Technology, for example, is about 30 percent of the S&P 500.

Consumer Discretionary (-11.99 percent), which is about 11 percent of the S&P 500 index, and Technology (-11.20 percent) were under the most pressure. Industrials (-0.52 percent) and Communication Services (-0.37 percent) also posted losses. Industrials comprise 7 percent of the index, and Communication Services comprise 10 percent.6

Energy (+9.09 percent) was the best-performing sector. Utilities (+4.17 percent), Healthcare (+6.14 percent), Consumer Staples (+3.89 percent), Financials (+3.06 percent), Real Estate (+2.90 percent), and Materials (+2.19 percent) all ended the quarter higher.6

What Investors May Be Talking About in April

In the month ahead, companies will start to release their Q1 corporate reports, which may provide some insights into what will drive the economy in the future.

One of the best ways to understand chief executive officers' thoughts is to analyze the words or terms they use during their conference calls with shareholders.

In Q4 2024, 241 of the S&P 500 companies cited the term “AI” during their calls. By contrast, only 13 mentioned the word “recession,” the lowest level since Q1 2018.7,8

Two-hundred and thirty CEOs cited the term in Q4, which is down from more than 400 in Q1 2022.9

World Markets

The MSCI EAFE Index gained 6.15 percent during Q1, outperforming all three major U.S. market averages.10

European markets had a strong quarter. Spain (+13.29 percent), Italy (+12.79 percent), Germany (+11.32 percent), and France (+5.55 percent) all posted solid gains. The United Kingdom also had a good quarter, picking up 5.65 percent.10

Pacific Rim markets were mixed. Japan’s Nikkei index lost 10.72 percent, and Australia’s ASX 200 fell 3.87 percent. Meanwhile, China’s Hang Seng index rose 15.25 percent, and Korea’s KOSPI added 3.40 percent.10

Indicators

Gross Domestic Product (GDP)

The economy grew at an annualized 2.4 percent in Q4, revised up from the prior estimate of 2.3 percent but just shy of economists’ expectations of 2.5 percent. For the full year, GDP grew 2.5 percent, compared with 3.2 percent growth in 2023. The fourth quarter marked the ninth of the past 10 quarters in which year-over-year GDP growth exceeded 2 percent.11,12

Employment

Employers added 151,000 jobs in February, below the forecast of 170,000 jobs. Unemployment increased to an annualized 4.1 percent in February over the prior month. Wage growth rose 0.3 percent in February, as expected.13

Retail Sales

Consumer spending rose 0.2 percent in February, short of economists’ expectations of a 0.6 percent increase.14

Industrial Production

Industrial output rose 1.4 percent year-over-year in February, following a downwardly revised 1.9 percent rise in January.15

Housing

Housing starts rose 11.2 percent in February over the prior month, driven by solid demand and limited existing inventory. The increase exceeded market expectations and followed January’s 11.5 percent decline, which was driven primarily by weather-related disruptions in construction activity.16

Sales of existing homes rose 4.2 percent in February, beating expectations of a 3.2 percent drop as buyers moved off the sidelines. The median existing home sales price was $398,400, a 3.8 percent rise from a year prior.17

Consumer Price Index (CPI)

Consumer prices rose 0.2 percent in February, cooler than expected and at a slower pace than January’s 0.5 percent rise. Year over year, prices rose 2.8 percent, also less than expected. Core inflation, which excludes volatile food and energy prices, also rose 0.2 percent month over month and 3.1 percent year over year—both less than expected.27

Durable Goods Orders

Orders of manufactured goods designed to last three years or longer rose 0.9 percent in February, beating economists’ expectations for a 1 percent drop.20

The Fed

The Federal Open Market Committee (FOMC) held rates steady at both of its meetings in Q1.

Testifying before the Senate Banking Committee on February 10, Chair Powell told lawmakers the Fed doesn’t “need to be in a hurry” to lower interest rates further, given the economy was currently “strong overall.”21

At its March meeting, Fed Chair Jerome Powell acknowledged that progress toward their 2 percent inflation target is “probably delayed for the time being.” He said that the Fed maintains its wait-and-see stance toward tariffs and their longer-term impact on inflation.22

The FOMC’s next meeting is scheduled for May 6-7.22

By the Numbers: Gardening