Current market environment performance of dynamic, risk-managed investment solutions.
Early optimism gives way to turbulence
The first quarter of 2025 took investors on a roller-coaster ride, marked by sharp reversals and heightened uncertainty.
January began on a positive note, fueled by tempered tariff expectations and hopes for pro-growth policies under the Trump administration. But in February, the announcement of sweeping “Liberation Day” tariffs sent shockwaves through markets, triggering a 10% sell-off from the month’s highs. The decline continued into March, with the S&P falling more than 5% for the month. By quarter’s end, the Index was down 4.27%, its worst quarterly performance since 2022, as concerns over tariffs, inflation, and slowing economic growth took hold.
Growth stocks were hit hardest. The Information Technology and Consumer Discretionary sectors lost over 11%, while investors rotated into defensive sectors like Consumer Staples, Utilities, and Health Care—which ended the quarter in positive territory.
Inflation fears added to the turmoil. Tariffs raised costs across supply chains, pushing consumer prices higher and keeping inflation above the Federal Reserve’s 2% target. Economic data added to the gloom. The Atlanta Fed projected first-quarter GDP at -3.7%, signaling a sharp contraction that stoked recession fears. Meanwhile, international markets outperformed U.S. equities, with European indexes buoyed by fiscal spending initiatives and more attractive valuations.
The Federal Reserve held interest rates steady at 4.25%–4.5% in March but signaled potential cuts later this year to counteract slowing growth. Despite this, Fed Chair Jerome Powell maintained a cautious tone, emphasizing the central bank’s commitment to controlling inflation.
Safe-haven assets thrived amid the uncertainty. Gold surged more than 19% to record highs. Bonds also posted gains, with the Bloomberg U.S. Aggregate Bond Index up 2.78% and long-term Treasurys rising 4.59%, boosted by safe-haven demand and anticipated Fed rate cuts. The U.S. dollar weakened by 3.94% on trade and growth concerns.
For investors, the first quarter underscored the importance of adaptability in navigating volatile markets. Defensive positioning proved prudent, as inflation risks and geopolitical tensions continued to shape the economic landscape heading into the second quarter.
Our investment strategies did a good job of navigating the turbulent quarter. More than half of our strategies delivered positive returns in Q1, and 87% outperformed the S&P 500. Several gained more than 2%, while strategies with access to gold in their universe generated returns exceeding 10% for the quarter.
Our turnkey solutions dynamically managed individual strategy risk, helping most of our turnkey core and explore solutions avoid or underweight underperformers during the quarter.
As expected, strategies taking more risk generally struggled more in Q1. Aggressive approaches, especially those using leverage and focused on equities, were more affected by the February trend reversal. On the other hand, strategies with access to gold, more conservative strategies that benefited from bond market performance, diversified multi-strategy portfolios, and turnkey solutions all did a good job of helping protect client assets during the volatile first quarter.
Looking ahead, we remain committed to our core approach: staying agile, prioritizing risk management, and identifying strategic opportunities that align with our clients’ goals.