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Top Market Takeaways

Learning from early 2025: Diversifying your investment strategy still key

PublishedApr 1, 2025

Global Investment Strategist

    Top Market Takeaways

      One of our key themes heading into 2025 was building resilient portfolios. We often write about how having a diversified mix of equities and fixed income could help keep portfolios on track to meet longer-term goals during periods of volatility. The first quarter of 2025 has borne out this key investment principle.

       

      While recent volatility has been uncomfortable, diversification has been working. During the quarter, gold was the top performing asset (that we track) as heightened market volatility and uncertainty remained, and investors flocked to the safe-haven asset. European equities also experienced strong positive performance over the quarter, boosted by higher expectations of European growth following a significant 500-billion-euro infrastructure package in Germany.


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      Building a championship team requires more than just playing offense (equities); it also needs a strong defense. For investors, bonds have served as those defensive assets this quarter. U.S. treasuries, in particular, delivered positive returns amid ongoing U.S. growth concerns. The classic 60/40 portfolio (60% equities and 40% fixed income) remained roughly flat throughout the quarter, highlighting the potential stabilizing role of a fixed income allocation as a buffer against equity market volatility.

       

      The S&P 500 was the notable negative performer during the quarter, as tariff uncertainty and concerns about the future dominance of large U.S. tech companies weighed on investor sentiment. Looking ahead, we still see positive, high-single digit upside in U.S. equities from current levels based on our view that the U.S. economy will avoid a significant growth slowdown.

       

      For investors, the first quarter was a good reminder to double-check that existing portfolios still align with longer-term goals or to rebalance to a more diversified approach as needed. Making portfolios more resilient will remain a key consideration for the remainder of 2025 and beyond.


      Volatility feels uncomfortable, but diversification is working


      Sources: FactSet. Sectors shown are represented by: EM Equities: MSCI EM Index; Europe: MSCI Europe ex UK Index; Asia ex-Japan: MSCI Asia ex-Japan index; EAFE: MSCI EAFE Index; World: MSCI World Index; Gold: SPDR Gold Shares Class USD ($/ozt); U.S.: S&P 500 Index; Japan: MSCI Japan; U.S. High Yield: Bloomberg U.S. High Yield Index; U.S. Agg. Bonds: Bloomberg U.S. Aggregate Bond Index; Municipal Bonds: Bloomberg Municipal Bonds 1–17 years Index; EM Debt: Bloomberg EM Aggregate Bond USD Index; U.S. Treasury: Bloomberg U.S. Treasury Index; and Commodities: Bloomberg Commodity Index. 60/40 represented by 60% MSCI World Index for equities (gross total return), and 40% Bloomberg Global Aggregate Bond Index for bonds. U.S. Cash represented by the Bloomberg U.S. 1-3 Month Treasury Bills Index. Data as of March 28, 2025.
      The chart illustrates the 2025 year-to-date performance of various global assets in USD, measured by total return percentage.



      All market and economic data as of 03/31/25 are sourced from Bloomberg Finance L.P. and FactSet unless otherwise stated.


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      Vinny Amaru

      Global Investment Strategist

      Vinny Amaru is a Global Investment Strategist, where he collaborates closely with Asset Class Leaders in shaping and communicating the firm's economic and market perspectives. Vinny began his career at J.P. Morgan Private Bank, where he was a memb...

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      Disclosures

      Our Top Market Takeaways for April 1st, 2025.

       

      The information presented is not intended to be making value judgments on the preferred outcome of any government decision or political election.

       

      Diversification does not ensure a profit or protect against loss.

       

      Commodities: Changes in economic and market conditions, interest rate risk, and lack of liquidity may affect equity performance. Investments in equity structures entail certain risk factors and investments in commodities may have greater volatility than investments in traditional securities. The value of commodities may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. Investing in commodities creates an opportunity for increased return but, at the same time, creates the possibility for greater loss.

       

      Index definitions:

       

      Bloomberg 10-year Municipal Bond Index (BCM10): An unmanaged index that includes investment grade tax-exempt bonds with maturities between 8 and 12 years.

       

      The Russell 2000 Index is a small-cap U.S. stock market index that makes up the smallest 2,000 stocks in the Russell 3000 Index. The index is maintained by FTSE Russell, a subsidiary of the London Stock Exchange Group.

       

      The Standard and Poor's Midcap 400, or simply the S&P Midcap 400, is a capitalization-weighted index which measures the performance of the mid-range sector of the U.S. stock market.

       

      The S&P 500 Equal Weight Index is the equal-weight version of the widely-used S&P 500. The index includes the same constituents as the capitalization weighted S&P 500, but each company is allocated a fixed weight - or 0.2% of the index total at each quarterly rebalance.

       

      Small capitalization companies typically carry more risk than well-established "blue-chip" companies since smaller companies can carry a higher degree of market volatility than most large cap and/or blue-chip companies.

       

      Standard and Poor’s 500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The index was developed with a base level of 10 for the 1941–43 base period.

       

      The S&P 500 Total Return Index is an unmanaged broad-based index that is used as a representation of the U.S stock market. It includes 500 widely held common stocks chosen for market size, liquidity, and industry group representation.

       

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