Q1 2025 Review

Throughout the first quarter of 2025 we saw extremely volatile equity markets, as anticipated by experts, and a lot of discussion around tariffs. It's great for investors to stay up to date with what's happening in the markets and various contributing factors.

Overview

• S&P 500 ended Q1 near its year-low, including a significant fall in March (approx. -5.75% in March alone and approx. -4.3% throughout Q1)

• A contributing factor of the S&P 500 decline was the Mag 7 stocks, including Tesla, who is down approx. 30% YTD

• Among Mag 7 we saw Meta outperform the S&P 500 for a majority of the quarter, rising approx. 26% between January and February and falling back to pre-January levels after a mid-March sell-off

• Alphabet fell approx. 18% in the quarter, Amazon fell approx. 13% and Apple and Microsoft both lost approx. 11% of their value in Q1

• This was mainly driven by Trump's tariffs and expectation of future tariffs

• Today is President Trump's "Liberation Day" and his plan for reciprocal tariffs are expected to be a major focus for investors

• Chinese AI startup DeepSeek showed advanced AI capabilities built at a fraction of the cost compared to many large U.S. tech companies

• U.S. consumer spending declined for the first time in almost two years in January

• It is expected by experts that we may continue to see volatile equity markets in the next several weeks and possibly even months

Global

• Global equity markets were mixed due to investor sentiment, economic data and policy expectations

• China's high growth stocks outperformed as measured by the Hang Seng Tech Index

• European equities outperformed their U.S. counterparts

• European financials continued delivering strong equity returns, outpacing the U.S. banks

• European equities ended the last week of Q1 lower following Trump's announcement of 25% tariffs on imported vehicles and auto parts

• China equity markets saw modest gains- foreign inflows returned to the technology sector

• Japan lagged with its Nikkei and TOPIX indexes falling sharply to end the quarter, due to concerns regarding trade disruptions with automakers leading the sell-off

• In February U.K. inflation eased to 2.8%, giving hope for a Bank of England interest rate cut in May

Commodities

• Natural gas prices rose due to colder weather and temporary supply shortages

• Gold prices surged to a record high to end Q1 as escalating trade tensions drove investors towards safe-haven assets

Canada

• Canadian equities edged lower in February

• Information technology, energy and health care sectors declined

• Utilities and real estate sectors edged higher throughout February (interest rate sensitive sectors)

• Consumer discretionary and materials sector rose in February

• Ending the quarter we saw sector performance mainly negative, with information technology, health care and consumer discretionary declining while communication services and consumer staples gained

• Equities declined in the final week of March as U.S. President Trump announced 25% tariff on imported vehicles, effective April 3rd 2025

U.S.

• U.S. equities fell in February

• Tariff concerns resulted in U.S. equities feeling pressure as well as weakening consumer confidence

• Inflation concerns persisted due to tariffs and stronger than anticipated inflation data

• U.S. treasury yields fell

• Companies reported strongest earnings growth since 2021

• Forward looking economic indicators were mixed which led investors to look for opportunities in defensive sectors

• Analysts highlighted that they expected growth to slow and inflationary impacts of new tariffs coming into place

• Consumer confidence saw the biggest decline in February since August 2021

• Investors sought opportunities in defensive sectors

• Magnificent 7 came under significant pressure (YTD down approx. 15%) despite strong earnings from Nvidia

• Value stocks generally outperformed growth stocks

• Large-cap outpaced their small- and mid-cap counterparts

• Ending the quarter we saw Information technology, communication services and industrials declining the most

• Consumer staples, energy, financials and real estate saw gains

The value of an advisor is really seen in volatile times like these and to help keep you on track and 'stay the course' by staying invested. The chart below demonstrates how jumping in and out of the markets and trying to 'time the market' can potentially cause you to also miss the best days.

If you have any questions or would like to schedule a call to discuss this further please let me know.

Articles and information provided by  Fidelity Investments, iA Clarington, Dynamic Funds and Interactive Investor

The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This newsletter was prepared by Alison Cannell, for the benefit of Alison Cannell, Financial Advisor with Cannell Wealth Management Inc., a registered trade name with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this blog comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability.

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