Mana’s Q1 2025 Market Recap: A Quarter of Contrasts
The first quarter of 2025 was marked by sharp contrasts across global markets, driven largely by shifting trade policies and mixed economic signals.
U.S. equities started the year with high expectations but quickly ran into headwinds. As tariff uncertainty grew, so did volatility. The S&P 500 fell roughly 12% year-to-date, a sharp reversal fueled by concerns over trade disruptions and an overheated starting point.
In contrast, international markets delivered strong performance. Stocks in Europe and Asia posted notable gains, buoyed by sectors like technology and renewed fiscal initiatives—such as increased defense spending in Europe—that lifted investor sentiment.
The bond market saw uneven performance. Yields on long-term Treasurys fluctuated as investors reassessed inflation expectations and growth prospects. While overall returns were modest, high-yield bonds outperformed investment-grade ones amid widening credit spreads.
Meanwhile, traditional safe-haven assets saw renewed interest. Gold and copper both rallied, reflecting investor caution and demand for assets less tied to policy risk.
In short, Q1 of this year was a reminder that global diversification matters—and that markets can shift quickly when confidence is shaken.
Q1 Asset Class Returns
Source: JP Morgan Asset Management: The quarter in review, what happened in Q1 2025? Data from Bloomberg, FactSet, MSCI, Russell, Standard & Poor’s, J.P. Morgan Asset Management. Large cap: S&P 500, Small cap: Russell 2000, Growth: Russell 1000 Growth, Value: Russell 1000 Value, EM Equity: MSCI EM Equity (USD), Europe: MSCI Europe Equity (USD), Japan: MSCI Japan Equity (USD), US Agg: Bloomberg US Aggregate, High Yield: Bloomberg US HY Index, Cash: Bloomberg 1-3m Treasury, EM Debt (LCL): Bloomberg EM Local Currency Government, Euro Agg. (LCL): Bloomberg Euro Aggregate Government Treasury, Gold: NYMEX Gold near term, Bitcoin: CoinMarketCap. Data are as of April 1, 2025.
Investment Commentary & Outlook
In an era marked by rapid policy shifts and heightened market volatility, we understand that uncertainty—especially surrounding recent tariff measures—can be unsettling. However, our detailed review of the first quarter of 2025 reveals not only challenges but also opportunities that reinforce the strength of a diversified, long-term investment approach.
Tariffs Then and Now: A Closer Look at Modern Trade Policy
President Trump’s “Liberation Day” tariffs have imposed a 10% baseline on all imports, with significantly higher reciprocal rates on key trading partners. For example, certain goods from China now face rates as high as 34%, while products from the European Union see tariffs around 20%. These measures are designed to address what the administration views as persistent trade imbalances and unfair trade practices.
Scope and Rationale: The tariffs target a broad array of products—from consumer goods to industrial inputs—and are intended to force trading partners to lower their own tariffs or risk higher US duties. While the policy echoes the protectionist measures of the 1930s, particularly the Smoot–Hawley Tariff Act, today's context is different. Modern supply chains, digital trade, and the scale of global integration mean that the impact of such measures will be felt unevenly across sectors and regions.
Source: Statistica
Economic Debate: Critics argue that high tariffs can lead to retaliatory actions and disrupt global supply chains, which may slow economic growth and increase costs for US consumers. Supporters believe that a recalibrated trading environment will ultimately bolster domestic manufacturing and reduce the trade deficit.
If tariffs are not renegotiated, the prices of goods will continue to rise throughout the year. In the short term, we expect to see a surge in prices during March and April as market participants try to “get ahead” of anticipated increases. Over time, higher tariffs could slow economic activity, particularly if inflation exceeds the Federal Reserve’s 2% target. Should inflation rise further, the Fed’s current plan for rate cuts may need to be revised. Depending on future conditions, the Fed could either raise rates in response to rising inflation or, conversely, cut rates sharply if a recession were to materialize—perhaps driven by the combined impact of higher taxes and persistent economic slowdown. Chair Powell spoke on April 4, 2025 and emphasized that it is too early to change policy, reflecting the significant uncertainty surrounding these developments.
Diversification: S&P 500 Performance Isn’t the Whole Story
Headline numbers, such as the S&P 500’s 12% decline YTD capture one aspect of market performance, but they don’t tell the entire story. Not all sectors or companies are created equal.
Technology and consumer discretionary stocks suffered steep declines in response to tariff uncertainty, while other sectors including consumer staples, utilities, and health care exhibited greater resilience. This disparity underscores the importance of diversification even within the same asset class. Even greater risk was found in the “Magnificent 7” stocks. Five of the seven stocks (Meta, Google, Tesla, Nvidia, and Amazon) are trading more than 25% off of their highs in February 2025.
Source: YCharts.
Total Return Level for S&P 500 Consumer Discretionary (Sector) (^SPXCNDS), S&P 500 Consumer Staples (Sector) (^SPXCNSS), S&P 500 Energy (Sector) (^SPXNRGS), S&P 500 Financials (Sector) (^SSPS), S&P 500 Health Care (Sector) (^HCX), S&P 500 Industrials (Sector) (^SPXINS), S&P 500 Information Technology (Sector) (^SPXIFTS), S&P 500 Materials (Sector) (^SPXMS), S&P 500 Real Estate (Sector) (^SPXRES), S&P 500 Utilities (Sector) (^SPXUS).
Even among US equities, a portfolio that is spread across different sectors and regions can help smooth out the volatility inherent in any single segment. A diversified approach reduces the risk of being overly concentrated in areas that may underperform in a given economic cycle.
Why we invest beyond the US
While the US market has faced headwinds with a year-to-date decline of roughly 12%, international stock markets have delivered robust performance, illustrating the power of geographic diversification. Top performing countries this year include Spain, Germany, and Brazil, each of which is up over 15% through April 4, 2025, measured by their MSCI Indices in dollars. Developed markets in Europe and Asia, as well as emerging market equities, have outperformed their US counterparts, benefiting from regional economic policies, technological breakthroughs (such as AI advancements in China), and varying monetary stances by central banks.
European stocks have surged on the back of strong fiscal initiatives and a coordinated defense spending boost, while Asian markets have benefited from rapid advancements in technology and improved growth prospects. This divergence shows that not all economies move in tandem; different regions experience distinct cycles that can help balance your overall portfolio risk.
By incorporating international stocks, investors not only gain access to new growth drivers but also mitigate the volatility of being overly concentrated in one market. Our strategic allocation across multiple geographies has proven beneficial, enhancing the risk-adjusted returns of our portfolios and providing a valuable counterbalance during periods when US markets face significant challenges. Our allocation to global stocks is always prevalent, but our targets going into this year were between 38-40% of total stock exposure in our client accounts.
Diversification is not only about mitigating risk; it’s also about ensuring that you capture the upside of different market segments. When one sector or region falters, others may outperform, and the combined effect is a more stable, long-term return.
The Benefits of Staying Invested
It’s natural to feel the urge to exit the market during volatile periods or when others are exiting. The herd often makes bad decisions at inopportune times. Invesco shares some key market examples of the tech bubble, post-2008, and COVID-19 time frames where investors fled stocks and bought bonds. In each of these scenarios, investors would have been better off remaining invested.
Missing the Best Days: Investing in the stock market can be volatile, which may tempt some investors to pull out of the market to avoid the bad days. However, it is impossible to predict when good and bad days will happen, and extensive research has shown that attempting to time the market, by trying to avoid downturns, can be detrimental in the long run.
Studies have repeatedly demonstrated that missing just a few of the market’s best days can drastically reduce overall returns. For example, research by First Trust shows that staying invested, even through downturns, crises and events, staying invested is the key to achieving the S&P 500’s average annual return of around 10.8% since 1980.
The below chart shows the potential effect that pulling out of the stock market could have on a portfolio. An investor does not have to miss many good days to feel the financial impact over time. If an investor put $10,000 into the S&P 500 on December 31, 1979, their investment would be worth $1,635,083 as of March 31, 2025. If that investor had missed the best 5 days over that time period, their investment would be worth $1,013,782 as of March 31, 2025. We believe investors will be rewarded for sticking with their investment plan.
While our commentary often focuses on the risks of selling during volatile periods, it’s just as important to approach new buying decisions with discipline. We’ve seen a growing desire among investors to “buy the dip” or chase beaten-down stocks, assuming that any discount is an opportunity. But as Ron Lieber noted in The New York Times this week, reacting too quickly—whether by selling out of fear or buying impulsively—can lead to unintended consequences.
As always, we believe a well-considered plan should drive your investment choices, not headlines or momentary price swings. We’re here to help you evaluate opportunities, assess risk, and stay grounded in your long-term strategy—whether that means staying the course or making thoughtful additions to your portfolio.
Our Strategy: Discipline, Diversification, and Opportunity
In response to these evolving conditions, our investment approach remains focused on:
Broad Diversification: We continue to maintain a balanced portfolio across US and international equities, fixed income, and alternative assets, ensuring that no single market event disproportionately affects your investments.
Opportunistic Rebalancing: We closely monitor market corrections to identify attractive entry points, allowing us to adjust allocations and capture value when prices are depressed.
Tax-Efficient Management: Through strategic tax-loss harvesting and other techniques, we aim to optimize after-tax returns and further support your long-term growth.
Staying the Course: History has shown that maintaining a long-term perspective, even during turbulent times, is the key to wealth accumulation. Our commitment to disciplined, strategic investing remains unwavering.
We understand that periods of uncertainty can be challenging, but they also create opportunities for those who remain committed to a well-diversified, long-term strategy. We are continuously refining our approach, leveraging insights from trusted sources and historical data, to position your portfolio for sustainable growth over time.
We are here to support you through every market cycle. If you have any questions or would like to discuss these developments in more detail, please don’t hesitate to reach out.
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Stephanie Bucko and Cristina Livadary are fee-only financial planners based in Los Angeles, California. Stephanie is the Chief Investment Officer and Cristina is the Chief Executive Officer at Mana Financial Life Design (FLD). Mana FLD provides comprehensive financial planning and investment management services to help clients grow and protect their wealth throughout life’s journey. Mana FLD specializes in advising ambitious professionals who seek financial knowledge and want to implement creative budgeting, savings, proactive planning and powerful investment strategies. As fee-only fiduciaries and independent financial advisors, Stephanie and Cristina never receive commission of any kind. Stephanie and Cristina are legally bound by their certifications to provide unbiased and trustworthy financial advice.