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Good Harbor Advisors |

News

The first quarter of 2025 did not quite turn out as investors thought it would, with US President Trump’s trade wars upending the outlook for the economy. After the stock market hit record highs to start the year, tariff threats dimmed the rosy outlook. A previously solid outlook for the US economy has been hit by a high degree of uncertainty, thanks to swings in trade policy and federal government layoffs. 

Market corrections are defined by a drop of at least 10%. This is quite common. There have been 27 years with a correction over the last 50 calendar years. When stocks drop by this degree, there is always a reason. Right now, it is about policy uncertainty, but in other years, it was some other issue driving markets lower.

The news is concerning, and one would think that all markets, investments, and portfolios are dropping precipitously. This is not the case. Diversified, balanced portfolios have worked, providing stability and downside protection.

Index

Q1 Returns

One Year

Three Year

U.S. Large Cap

-4.30%

8.30%

9.10%

U.S. Small Cap

-9.50%

-4.00%

0.50%

Developed Non-US

7.00%

5.40%

6.60%

Emerging Markets

3.00%

8.60%

1.90%

U.S. Aggregate Bonds

2.80%

4.90%

0.50%

U.S. Treasuries

2.90%

4.50%

0.00%

 

Source — Bloomberg, Morningstar, treasury.gov, S&P Dow Jones Indices. You cannot invest directly in an index. Their performance does not reflect the expenses associated with the management of an actual portfolio. Returns over one year are annualized

Investors who were too concentrated in Growth and technology have been hit hardest with double-digit market losses. This is a strong reminder that diversification across markets, both in the US and globally, can serve investors quite well. We have had two-plus years of very high returns in US growth stocks, and that trend reversed quickly. Typically, no single sector or country or region can lead performance indefinitely, and it’s impossible to predict what might cause a change.

We have no way of knowing what will happen in 2025. Will it be one of those years where stocks keep dropping or whether there will be a rebound. Economic uncertainty continues with new trade policies, despite strong employment numbers. Many underlying fundamentals remain positive, but waning consumer confidence and rising inflation expectations present headwinds for investors. Markets do not like uncertainty. 

Companies will start reporting on their financials for this past quarter starting in mid-April. These reports are important indicators for stocks. We will be listening to how companies are managing the uncertain policy environment. Are they spending? Are consumers buying? 

For all the uncertain turmoil in the news lately, investors sticking with the tried-and-true strategy of holding diversified portfolios have come out of the first quarter of 2025 in very good shape and as, always we look to history for guidance.

We continue to monitor policy and market changes for client portfolio allocations. Your investments must align with your long-term goals and what you need your money to do for you, regardless of economics, fear, and politics in the short term. That is our goal in managing your portfolios.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Morningstar Article -  Q1's Biggest Lesson for Investors: Diversification Works

 

 

 

“Uncertainty is the only certainty there is, and knowing how to live with insecurity is the only security.”

John Allen Paulos