SFO Quarterly Review: Q1 2025

“The trick to successful investing is surviving the short-term chaos so you can get the long-term reward.” – Morgan Housel, author, The Psychology of Money

A Rough Start to 2025: Tariff Fears Weigh but Diversification Paying Off

• The S&P 500 declined almost 5% in Q1, its first quarterly drop since Q3 2023

• Losses were sharpest among high-growth tech stocks; the Mag 7 hit bear-market territory by the end of March

• While there are cracks in the economic foundation, especially if tariff policy lingers, we also see reasons for optimism over the balance of the year

Stocks stumbled to begin 2025. The S&P 500 fell 4.6%, its worst quarterly performance since Q3 2022. Enthusiasm at the start of the year quickly shifted to fear over fiscal policy and what President Trump’s tariffs may bring. Losses were steepest among some of recent years’ biggest winners, namely the Magnificent Seven stocks. The group, led by the likes of Apple (AAPL), NVIDIA (NVDA), and Tesla (TSLA), were down an even 20% from their December all-time high, technically notching “bear market territory.”

The Nasdaq Composite was off 10.4% over the January through March period, and losses were about the same for long-embattled small caps. The Russell 2000 Index of smaller companies shed 9.8%–it remains below levels from four years ago. It wasn’t all red, however. International stocks jumped to kick-start 2025. The All-Country World Ex-US Index gained more than 6%, dividends included, in the first quarter. According to Bloomberg, an index of European equities—the Stoxx 600—had its best quarterly performance relative to the S&P 500 ever. Balanced portfolio’s diversified amongst US Stocks, International Stocks, and Bonds were essentially flat for the quarter. As Nobel Prize winning economist Harry Markowitz famously stated, “Diversification is the only free lunch in finance.”

Uncertainty and volatility remain high amid ongoing tariff talks. President Trump has deferred focus on deregulation and tax cuts, opting to address global trade early in his second term. The Cboe Volatility Index (VIX)–Wall Street’s fear gauge—increased from the mid-teens to almost 30 in March before settling in the low 20s by Q1’s finish. In the coming weeks, we’ll get key updates on the employment situation, inflation, consumer spending, Federal Reserve policy, corporate earnings, and, of course, fiscal matters.

Click here to read our full Q1 2025 Update

Stokes Family Office is 100% Family Owned, and has been continually operating in the New Orleans Area for over 35 years.  As a family office, we are focused on family wealth, financial planning, and tax planning. We are your local experts for Gulf South wealth management. Want to hear more from our team? Check out the Lagniappe Podcast.