Author: jvavra

Review

As of early April 2025, the U.S. stock market has faced notable challenges. The S&P 500 index declined by approximately 4.6% in the first quarter, marking its poorest performance since 2022. In contrast, international markets like Germany and Hong Kong experienced double-digit gains during the same period.

Key Factors Influencing the Market:

1. Tariffs: President Trump’s recent “Liberation Day” announcement introduced significant tariffs, including a 54% tariff on Chinese goods and a 20% tariff on products from the European Union. These measures have heightened fears of a global trade war, potentially leading to increased inflation and a slowdown in economic growth.
2. Federal Reserve Policies: The Federal Reserve has been adjusting interest rates in response to economic conditions. While there were rate cuts in late 2024 to stimulate growth, ongoing inflation concerns may influence the Fed’s decisions throughout 2025.

Outlook

Expectations for the Remainder of 2025:

• Economic Growth: The aggressive tariff implementations may dampen U.S. economic growth, with some economists estimating a better-than-even chance of a global recession within the year.
• Inflation and Interest Rates: Tariffs could lead to higher consumer prices, contributing to persistent inflation. This scenario might compel the Federal Reserve to consider further interest rate adjustments to balance growth and inflation.
• Market Volatility: Given the current geopolitical tensions and economic policies, markets may experience continued volatility.

We will continue to monitor developments closely, but situations like this are why we stress diversifying client portfolios to mitigate potential risks. We also reaffirm maintaining a long-term asset-allocation strategy despite short-term volatility is the most effective way to realize long-term gains.

In summary, while the U.S. stock market has faced early setbacks in 2025, the interplay of trade policies, Federal Reserve actions, and global economic conditions will be crucial in shaping market performance for the rest of the year.

As always, I stress that in this ever-changing political and economic environment, sensible diversification is the key to weathering market uncertainties.

Jason M. Vavra, CPA, PFS

Email: jvavra@vcm-wealth.com Website: www.vcm-wealth.com Twitter: @VavCap

Disclaimer

The information contained herein is not considered an offer to buy or sell any securities referred to herein. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. There is no guarantee that the figures or opinions forecasted in this report will be realized or achieved. Past performance is no guarantee of future results.

Review

In the second quarter of 2024, the US economy exhibited moderate growth, driven by consumer spending and a resilient labor market. Despite inflationary pressures easing slightly, the Federal Reserve maintained a cautious stance, keeping interest rates stable to balance growth and price stability. The housing market showed signs of recovery with increased home sales, while manufacturing remained subdued due to ongoing supply chain challenges. Corporate earnings were generally positive, but some sectors, particularly technology, faced headwinds from regulatory scrutiny and geopolitical tensions. Continue reading “July 2024 Review & Outlook” →

Review

In 2023, the stock market experienced robust performance with major indices reaching record highs fueled by strong corporate earnings, supportive fiscal policies, and optimism surrounding economic recovery from the pandemic. Despite initial concerns over inflation and supply chain disruptions, the economy exhibited resilience, marked by steady job growth, rising consumer spending, and accommodative monetary policies. Geopolitical tensions and sporadic COVID-19 outbreaks posed intermittent challenges, but overall, 2023 showcased a blend of adaptability and cautious optimism in navigating uncertainties, setting the stage for a dynamic economic landscape in the years ahead. Continue reading “January 2024 Review & Outlook” →

Review

Uncertainty over Federal Reserve policy and the potential effects on the economy weighed negatively on the markets during the third quarter of 2023. Although July continued the strength we saw during the second quarter, the S&P 500 ended the third quarter down almost 4%.

There were silver linings as corporate earnings were stronger than expected and inflation was on the decline. However, the rhetoric from Federal Reserve officials was they expected inflation to stay above their 2% target longer than anticipated. Thus, spreading concern to the market rates would remain higher for longer and more interest rate hikes may be warranted.

Outlook

By the fourth quarter of the year, we had expected inflation to be lower and Federal Reserve policy to begin shifting towards an easing cycle. That has not happened as interest rates have continued to rise in all areas and the yield curve is still inverted. With interest rates still higher, there is concern the economic data will begin to weaken and the hope of a “soft landing” has been put into some doubt.

The consumer has remained resilient, but there is uncertainty as to whether higher interest rates will begin to crack consumer spending and increase the odds of a recession. October is historically one of the worst months of the year and has held true to that pattern.

We believe the Fed is done raising rates and any confirmation of their guidance to that regard would likely lead to a drop in US treasury bond and mortgage rates. If that scenario holds true, investors will begin to add to their bond allocations as an alternative to the large amounts of money sitting in money market and short-term fixed income investments.

Although the likelihood of new all-time highs for the equity markets in 2023 seems unlikely, we feel as though the markets are in an over-sold condition and expect to see positive returns heading into year-end.

As always, I stress that in this ever-changing political and economic environment, sensible diversification is the key to weathering market uncertainties.

Jason M. Vavra, CPA, PFS

Email: jvavra@vcm-wealth.com Website: www.vcm-wealth.com Twitter: @VavCap

Disclaimer

The information contained herein is not considered an offer to buy or sell any securities referred to herein. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. There is no guarantee that the figures or opinions forecasted in this report will be realized or achieved. Past performance is no guarantee of future results.

Review

Looking back to our beginning of the year outlook, we commented that only four times in the almost 100-year existence of the S&P 500 has the index been down two or more years in a row. Thus, it is no surprise to us that the S&P rose 16% to end the first half of 2023. A combination of a resilient US economy and foreseen ending of the Federal Reserve interest rate hikes was enough for the market to take a more “risk on” approach as well as a dramatic shift from value to growth stocks. The shift to growth from value is easily demonstrated with the NASDAQ, a more tech heavy index, rising 32% for the first half, while the Dow Jones Industrial Average, a more value-oriented index, up only 4% in the same timeframe. Continue reading “July 2023 Review & Outlook” →

Review

In our January 2022 newsletter, we anticipated inflation, and the Federal Reserve would dominate the headlines. How true that turned out to be. 2022 saw inflation hitting 40-year highs and the Federal Reserve raising interest rates by 4.25%. For only the third time since 1990, both stock and bond markets declined the same year (2015 & 2018). There was nowhere to hide with the Dow Jones, S&P 500 and Nasdaq down roughly 7%, 18% and 32% respectively and bond indexes putting in their worst year in history. Continue reading “January 2023 Review & Outlook” →

Review

The second quarter ended with the worst first half of the year performance since 1970 with the S&P 500 down over 20%. Continuing concerns over inflation, Federal Reserve rate hikes and the war in Ukraine increased the probability of a recession.

As the investment community searches for signs the market has bottomed, it is good to note historical similarities. There have been 12 bear markets (20% or more decline in the S&P 500) since World War II. The average length of those has been 10 months, with an average decline of around 30%. Within half of those bear markets, the bottom was put in within two months of piercing the 20% decline and the average gain for the 6 month and 12 month periods after was 7% and 18%, respectively. So, from a historical perspective, large declines are typically short-lived, and recoveries tend to be just as sharp. Continue reading “July 2022 Review & Outlook” →

Review

The first quarter was one of the most volatile quarters we have seen since the pandemic started in 2020 and resulted in the worst quarter for equities in 2 years. Concerns over inflation and the war in Ukraine weighed heavily on the investment community. Despite the rapid inflation, the US economy continued to look strong.

Due to inflation concerns, the US Federal Reserve raised interest rates for the first time since 2018. With spiking inflation, a growing economy and record low unemployment, the Fed guidance suggested significant rate increases until inflation is under control. Continue reading “April 2022 Review & Outlook” →

Review

During the 3^rd quarter, we continued to see equity markets rise and hit new highs. Accommodative monetary rhetoric from world policymakers created a backstop for the market and provided assurance that interest rates will remain low for years to come. Continue reading “October 2020 Review & Outlook” →