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The first quarter of 2025 is in the rear-view mirror. Without question, investors will not soon forget how the financial markets misbehaved. A new White House Regime, policy shifts, tariff announcements, and signs of a slowing economy- the first quarter was anything but average. And just in case you were not aware, gold has outshined all indexes year-to-date.
Year-to-Date Returns (as of March 31, 2025)
- S&P 500: (-4.6%) Correction
- Nasdaq Composite: (-10.4%) Correction
- Dow Jones Industrial Average: (-1.3%)
- S&P 500 Equally Weighted: (-1.05%)
- Russell 2000 (Small Cap Index): (-9.8%) Correction
- Gold: +19.3%
What Moved the Markets?
1. The “Trump Trade” Lives On
Markets initially responded favourably to the return of President Donald Trump, sworn in January 20. Investors welcomed his pro-business agenda, which includes tax reform, deregulation, and renewed energy investment. Despite tough talk on trade, Trump held off on major tariffs until late March. The announcement of a 25% tariff on automobiles rattled some sectors and reignited inflation concerns.
2. Economic Data Shows Soft Spots
Headline economic growth came in solid for the fourth quarter of 2024, with Gross Domestic Product (GDP) rising 2.4%. However, beneath the surface, signs of weakness began to emerge. Personal spending and retail inventories came in lighter than expected, and inflation, especially the Federal Reserve’s preferred inflation measure, Personal Consumption Expenditures (PCE) continued creeping higher. Healthcare services were responsible for much of the increase.
3. A Mixed Message from Consumers
While personal income rose in February (+0.8%), consumer spending grew just 0.1% on an inflation-adjusted basis. The uptick in spending after January’s weather-driven drop was underwhelming, and real consumer activity appears to be softening.
4. Stocks Lose Momentum in March
After a strong start to the year, stocks ran into resistance. By the end of March, the S&P 500 dipped below its 50, 100, and 200-day moving averages. These are key technical levels that suggest weakening momentum when stock prices are trading below these moving averages. This type of technical behaviour, although not predictive on its own, tends to emerge when economic data begins to deteriorate. Technical analysis is used by most money managers to identify directional shift across all markets.
Gold’s Golden Moment
Gold posted a strong 19.3% return in the first quarter, fuelled by rising inflation expectations and a weakening U.S. dollar. With ongoing global uncertainty and hints that the Federal Reserve may hold off on additional rate cuts, gold has reasserted itself as a hedge against volatility. After a prodigious run in 2024, Gold does not seem to be cooling anytime soon.
Macro View: Storm Clouds on the Horizon?
Our internal economic scoreboard, which tracks a basket of leading indicators, continues to flash caution. The risk of recession remains elevated, despite headline employment data looking solid. Nevertheless, we believe the data may be underreporting the number of non-working Americans, especially those sidelined by severance, early retirement, or frustration.
We’re not trying to sound the alarm—but we are watching closely. This economy was built on a shaky foundation of government stimulus and artificially low interest rates. In fact, low interest rates in addition to never ending money printing created runaway inflation that everyone felt. Yes, the rate of inflation has decreased, but the damage done in recent years can still be felt in higher prices that are unlikely to fall anytime soon.
What We’re Watching Next
- Tariff Impact: If auto tariffs go into effect April 2 as scheduled, expect ripple effects across the manufacturing and retail sectors.
- Consumer Health: Spending and savings trends will be indicators of recession risk.
- Earnings Season: Corporate earnings in April will tell us whether margins can hold up in a higher-inflation environment.
Final Thoughts
Markets don’t move in a straight line. That’s why, in our opinion, active management, flexibility, discipline, and constant re-evaluation, is so vita, especially during times like these. We remain committed to helping you preserve and protect your capital and to grow it over time, regardless of short-term bumps in the road.
As always, thank you for your trust. We’ll continue to stay focused, nimble, and ready to adjust as conditions evolve.
,
Your OmniStar Investment Team
