March 2025 Market Review & Commentary

Sitting here crafting this summary late in the evening, when the house is silent except for the snoring bulldog in the living room, I genuinely feel a strong sense of déjà vu. If you're new to this practice, you might not share this feeling, so I'll definitely explain further.

On April 7th, 2020, nearly five years ago to the day, I found myself at the same computer around the same time at night, grappling with the immense challenge of writing a review about the discomfort felt by the Markets and the entire Nation. At that time, we were at the height of the coronavirus outbreak in the country. In March, the markets had plummeted over -13% and had dropped more than -37% in about 30 days. During that period, there was no sense of calm, and everyone was deeply concerned about their finances and the health of their families.

   Fast forward to today, and I notice the same financial anxiety we all experienced back then.  The only positives are that we aren't facing a health crisis, and the economy's fundamentals remain strong. Our current financial and global market concerns stem from policy uncertainties in Washington. This lack of clarity has shifted optimism to caution, with markets being influenced by worries about tariffs, slower economic growth, and the uncertainty of policy effects. As I will explain below, market corrections are a normal part of the cycle and a fundamental aspect of investing, just as I did 5 years ago today.

Market Update:     

In March, similar to what we saw in January and February, the markets were highly volatile and adopted a very cautious approach. The shift in March occurred as Washington took the spotlight with the Trump administration beginning to implement its policy agenda. These policies (trade policy, tariffs, and reducing the overall size of government) garnered attention from investors and businesses due to their uncertain potential effects on the broader economy. With the impacts still unknown, the markets adjusted to account for the potential risks of economic impact and possible slowdown. The uncertainty about the future economic outlook led to a decline in the S&P 500

-5.75% for the month, while the technology-heavy Nasdaq fell -8.21%.   Due to the uncertainty surrounding the impact, timeline, duration, or permanence of these policies, we anticipate that market fluctuations and volatility will remain high.  

  As we face these uncertainties, the strength of our economy offers reassurance that the repricing isn't due to something being "broken," but rather because policy uncertainty is affecting sentiment. We are monitoring economic indicators such as consumer spending, consumer and CEO confidence indexes, credit spreads, and unemployment. In addition to these economic signals, we are also looking for some clarity from Washington.

  As I mentioned 5 years ago, navigating through challenging times has historical examples that make enduring this period easier. By examining instances where markets fell by more than -20% in a single 3-month span, such as in 1962, 1974, 1987, 2008, and 2020, we find that the average 1-year return was +24%, and the average cumulative 3-year return was nearly +50%.