Special note: This blog was to be sent out on April 2nd, which coincidentally coincided with a major update from the White House. Instead of rewriting our entire post, we have included an an additional appendix with an update to some of the tariff notes we shared in our original post.
We hope everyone has enjoyed a good start to 2025 thus far! We typically do not send out market updates quarterly, but we wanted to provide a brief update on the current market situation in light of recent market volatility. Thus far, we have not encountered anything particularly unusual for any of the traditional investment classes we monitor. The stock market is susceptible to double-digit declines at any moment in time, which certain pockets of the market experienced in Q1 2025. Recall that the average annual decline in the S&P 500 over the last 45 years is just over 14%. We highlighted the powerful market performance of 2023 and 2024 in our 2024 Year-in-Review letter. Investors entered 2025 with high enthusiasm and aggressive risk-taking, a trend we also noted in our Year-end note to clients. We have since seen tampering with that posture in recent weeks, primarily due to ongoing trade talks and tariff discussions taking place in the U.S.
The chart below highlights the downside volatility of various asset classes in Q1 2025, measured as the decline from their recent peaks. Note: This is not the YTD performance return number, which I will include in the data below as well.
U.S. Bond Index: Light Green | S&P 500 Index: Blue | Nasdaq-100 Index: Purple
Dividend Index: Orange | Int'l Stock Index: Yellow | Small U.S Stock Index: Dark Green
S&P 500 Index | The most commonly quoted benchmark for the U.S. stock market, briefly fell around 10% from its February peak at one point in early March. Fishing the quarter down roughly 5% from year-end 2024. Again, this is after very healthy gains of 26% and 25% in 2023 and 2024, respectively. The declines of Nvidia, Apple, Tesla, Amazon, and Microsoft were the lead detractors on the index. Berkshire Hathaway, Visa, Johnson & Johnson, and AbbVie were among the leading contributors to the index, providing an idea of the companies that performed well in Q1 2025.
Nasdaq-100 Index | The primary tech-stock index in the U.S., the Nasdaq, experienced even steeper declines in the first quarter. It owns the same tech stocks as we noted above, but in even larger allocations, creating more drag on returns for Q1 for U.S. tech stocks.
Schwab Dividend ETF Index | This is a popular dividend index ETF that is held in certain Mirus client portfolios. It focuses on 100 of the highest-quality dividend companies in the U.S. and had a positive total return for Q1. Its top contributors to the positive return were Amgen, AbbVie, Coca-Cola, Chevron, and Verizon.
Fidelity International Stock Index | This is an index fund that owns the largest and most profitable corporations not domiciled in the U.S., primarily providing exposure in Europe and Japan. While international stocks are off to a strong start in 2025, this index returned just 4% in 2024, and global stocks have lagged behind U.S. stocks for many years past. The top contributors to the index for Q1 were Nestlé, Roche, and Shell.
S&P SmallCap 600 Index | This index comprises 600 profitable “small-cap” companies, which have market values ranging from $1 billion to $8 billion. These companies are smaller and often less established than the larger corporations that dominate the S&P 500 index, resulting in greater sensitivity to economic fluctuations. This was the hardest-hit corner of the stock market in Q1, with companies like Alaska Air, Bath & Body Works, and V.F. Corporation (the parent company of The North Face) struggling to perform so far in 2025.
Fidelity Bond Index | This is a U.S. investment-grade bond index comprising government and corporate debt. Bonds have provided a boost to portfolios thus far in 2025, as interest rates have decreased slightly, and investors have flocked to more “safe haven” assets. All of the bond funds we track have reported positive returns so far in 2025, which is the very essence of “green bucket” assets.
As we’ve reviewed, technology stocks, which led the way in 2023 and 2024, have given back some of those gains. Dividend- and value-oriented stocks, international stocks, and bonds have provided good support to client portfolios so far.
Q1 Economic Update from JPMorgan:
This week, we listened to an economic update call from the JPMorgan Asset Management team, which does an excellent job of monitoring and communicating changes in the economic landscape. I’ve highlighted a few updates that they shared during this call:
Economic Growth (GDP) | Following a strong U.S. economy in 2024, trade policy uncertainty is casting a cloud over the economic outlook as we enter 2025. Recent data has shown a significant increase in imports, likely driven by businesses attempting to front-run potential tariffs. This sets the stage for potential disappointing growth in the upcoming quarters. Additionally, weaker vehicle and retail sales through February indicate a slowdown in consumer spending from their booming 4Q pace, as consumer confidence has recently fallen to multi-year lows. Consumer consumption accounts for nearly 70% of U.S. economic activity, so a loss of confidence can quickly translate to soft economic data.
Unemployment/Labor Market | The unemployment rate has stabilized near 4% for the better part of last year. At 4.1% in February, it is above the recent cycle low of 3.4% set in April 2023; however, we remain at a lower unemployment level than it has been in almost 90% of the time over the past 50 years. Layoff counts have remained low for now, but this could change as economic activity picks up.
Inflation Update | The inflation battle continues, with a slight uptick in inflation in recent months as annualized inflation remains above the Fed-desired 2% level. The February Headline CPI came in at 2.8%, a slight uptick from the lows of 2.4% in September 2024. Energy and food inflation have been running hotter recently, as has shelter costs and auto insurance. With tariffs now having been imposed on China, Canada and Mexico – and more likely to come – all these categories could see prices rise meaningfully in the months ahead.
Tariff Impact | Trade negotiations and tariff discussions are rapidly evolving by the day, making it increasingly difficult for investors, economists, and business leaders to distinguish fact from conjecture. If some of the more frequently repeated tariff threats are implemented (steel and aluminum imports, a 20% tariff on Chinese imports, and a 25% tariff on certain imports from Mexico and Canada), JPMorgan shared a slide of where those tariff rates will look in comparison to past historic context, all the way back to the 1930’s. As their research shows, the trariff impacts will not be something we have seen since the 1960’s.
For those who want to learn more about Tariffs and how they can impact markets, economies, and investors; Capital Group (American Funds) just sent out a highly informative guide. They provide 5 key insights that are easy to understand and include very interesting data as well. Take a look: GET THE GUIDE
Closing remarks: Financial markets and businesses do not thrive on uncertainty, a factor that has been clearly evident in Q1 2025, with ongoing trade negotiations having a direct impact on the financial situation of both businesses and consumers. We expect this to settle down sooner rather than later, at which point markets and consumers will adjust to the “new normal”. While we don’t make market predictions, we did highlight the increased risk posed by the euphoric investing landscape that large U.S. tech stocks found themselves in—the so-called "Magnificent 7,” which came to fruition in Q1 2025. For our clients who have maintained a diversified investment portfolio comprising a proper level of green, yellow, and red bucket assets, we remain confident that they are well-positioned to navigate whatever markets may present themselves.
April 2nd Update:
On April 2nd, President Trump announced wide-sweeping tariff measures that caught even the most pessimistic forecasters off guard. In our Q1 update, we presented an analysis from JPMorgan on where they expected effective tariff rates to settle, projecting a rate of just over 7% as the average tax on imported goods. They have just updated these projections with the data from the White House announcement yesterday and are now estimating an effective tariff rate closer to 25%. This would be a taxation policy we haven’t seen since the early 1900s.
It is important to highlight that these have been designated as “negotiable rates” and will not take effect until next week. Treasury Secretary Bessent describes the rates as a “ceiling, not a floor”. This remains a rapidly shifting environment where uncertainty remains paramount. Financial markets are not favorable of this uncertainly and have sold off further from the levels we noted above in our Q1 blog.
We are here to discuss portfolios and potential planning considerations with any of our clients who are interested in doing so. Staying diversified, maintaining your long-term perspective, and resisting emotional reactions are critical for successfully navigating these periods of volatility.
Control The Things You Can Control:
Ensure Your Estate Planning Is in Good Order | Mirus Webinar with Jared Adams
We had a great webinar with the highly experienced Jared Adams, an estate attorney in Bothell, who has a fantastic way of communicating complex topics in simple terms. Please watch this video to learn more about estate planning 101. His firm, Condie and Adams in Bothell, does quick estate planning reviews for $500 to see if you are in need of updating legacy estate documents. If this is something you haven’ reviewed in several years, this is a great step in ensuring that you are in good order for your legacy and desires. https://www.mirusplanning.com/blog/fundamentals-of-estate-planning-with-jared-adams
Professional Fiduciary Considerations | WeTrust Blog
For those who are interested in potentially having a professional fiduciary involved in your estate planning, which we are loud advocates of, I want to highlight a quick blog from our friend Amy Egtvet, CEO of WeTrust. WeTrust is a local fiduciary corporation and a great partner to Mirus Planning. The link below will take you to her quick yet highly informative recent blog post: Answering the Call: How a Professional Fiduciary Can Preserve Family Harmony https://www.wetrustco.com/how-a-professional-fiduciary-can-preserve-family-harmony/
Caregiving For Aging Parents Course | Aging Wisdom
I also want to highlight something from another trusted partner of Mirus Planning, Aging Wisdom. Aging Wisdom is launching a new virtual coaching program this May, a 3-session series specifically for adult children who are going to be supporting aging parents in a caregiving capacity. They have a very extensive background on this topic, and I know they will have extremely valuable content to those who enroll in this program. This program starts May 8th and you can learn more via the link below! https://agingwisdom.com/confident-caring/
Exercise Your Mind | Low-cost continuing education classes
One way to get distracted from market volatility other current events is getting immersed in a new and interesting topic. We want to quickly highlight a few continuing education programs our clients have enjoyed. These programs provide an individual with the opportunity to engage in educational programs without the pressure of tests, grades, or assignments. Way more fun that way! They also foster great discussions and communities, further engaging the mind!
The Osher Lifelong Learning Institute (OLLI) at UW | This program offers those 50 and older a wide array of courses on topics such as global events, arts, health sciences, and more, taught by current and retired UW faculty as well as community experts. Courses are offered both in person and via Zoom, with fees ranging from $30 to $75 per course. Membership costs $40 annually and includes benefits such as access to monthly lectures, study groups, and special events like museum tours and field trips! https://www.campusce.net/uwolli/category/category.aspx
Bellevue College TELOS Program | The TELOS Lifelong Learners program at Bellevue College is tailored for adults aged 55+, offering non-credit courses in areas such as art, history, science, and writing. Classes are available online or in-person, providing flexibility and opportunities to connect with other learners. Each TELOS class costs $79 per course. Classes are typically 8 weeks long, meeting for 1.5 hours per week. https://www.bellevuecollege.edu/ce/retiree-programs/
Senior Planet by AARP | Senior Planet empowers older adults to harness technology and engage in lifelong learning across five key areas: financial security, social engagement, creative expression, health and wellness, and civic participation. Beyond digital classes, Senior Planet fosters community through discussion groups, workshops, and events designed to combat isolation and promote active lifestyles. Most programs are free with donations appreciated. https://seniorplanet.org/
These are all fantastic resources that will provide you with much more peace of mind and a positive experience than overtly stressing about economic activity and financial market volatility.