Quarterly Market Overview - Q1 2025

The first quarter of 2025 showed the importance of proper diversification

Asset Class Returns

Major Asset Class Returns for the Three Months Ending March 31, 2025

• Domestic equities declined while other major asset classes were positive.

• International Developed equities had the best performance. U.S. equity markets sold off as tariff risks came into greater focus and higher growth stocks lost steam.

• Emerging Market equities also fared better, relative to domestic stocks.

• Fixed Income rose as rates declined (see below). Commodities were broadly higher.

• U.S. Small Cap stocks posted the largest drop among major asset classes. Despite being less affected by tariffs compared to larger cap stocks, U.S. Small Cap stocks are more sensitive to overall economic conditions, thus sold off due to greater economic uncertainty.

  
  

The table below depicts the same information as above and shows which representative security is used for each asset class.

Source: Jackson Creek Investment Advisors; S&P Global

Major Asset Class Returns for the Twelve (12) Months Ending March 31, 2025

• With the first quarter decline, all asset classes have trailing twelve-month returns below 8%. The best performing asset class over the past year is Real Estate (+7.66%). Real Estate is less affected by trade wars and faced a declining interest rate environment, which has a positive effect on borrowing costs.

• U.S. Large Cap stocks (+7.29%) narrowly beat out Emerging Markets (+7.11%.

• With a -9.72% decline in Q1, U.S. Small Cap stocks have a -4.88% 12-month return and the only asset class with a negative return over the past year. U.S. Mid Cap stocks were the second-worst performing group, with a +1.43% 12-month return.

U.S. Index Returns with Growth & Value Styles

• Value outperformed Growth along the capitalization spectrum. This was a reversal from last quarter. Large Cap Value was the only style with a positive return in Q1.

• The Large Cap universe had the largest dispersion between Growth and Value, with a 12 percentage point difference between the two styles.

• Small Growth had the largest decline as investors leaned more cautious in the quarter.

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Interest Rates

U.S. Treasury Yield Curves

• The yield curve shifted lower, particularly along the medium-term maturities.

• The 2YR had its lowest month-end yield in six months.

• Yields on the front end of the curve (1YR or less) are over one percentage point below March of last year.

• The 2Y/10Y spread is only one basis point greater than last quarter, due to the 10YR yield falling by 35 basis points (-0.35%) and the 2YR yield declining by 36 basis points (-0.36%).

• The 2Y/10Y spread is 73 basis points wider than the negative spread from one year ago.

Disclaimer - this is not to be construed as investment advice or a recommendation to buy or sell any security. This is not meant to be indicative of any specific portfolio returns. Please see full disclosure on main blog page.