What Happened?
By Dan Moskowitz, CFP® President and Chief Investment Officer
CWM Shutterstock
The first quarter of 2025 marked the worst performance for U.S. stocks since 2022, with the S&P 500 and Nasdaq Composite experiencing significant declines. The S&P 500 fell over 5% year-to-date, its poorest showing since a 17% drop in the second quarter of 2022. The Nasdaq Composite also faced its steepest quarterly decline in nearly three years, dropping 8.3% amid concerns over slowing growth. These downturns were largely driven by escalating trade tensions and the anticipation of increased tariffs.
The market’s decline was further exacerbated by slowing consumer spending and downward revisions of corporate earnings estimates. Goldman Sachs team headed by David Kostin just reduced their S&P 500 forecast for the second time in a month, citing concerns over stagflation and the negative impact of higher tariffs on economic growth. On March 31st, they now expect the index to be at 5900 twelve months from now (+5.1% higher than today). Bloomberg News March 31, 2025
Chatham Wealth’s Chief Market Strategist, John Lui, has been highlighting valuation concerns among some of the largest technology and specifically artificial intelligence stocks for almost a year now. These are great companies, but John has done a good job of explaining how valuations have become too high based on realistic future growth. John has also written about how dividend stocks should outperform as the market broadens out “A Bird In Hand” March 2025. https://www.chathamwealth.com/blog/mvtjmswh88gidg1lyenmi4c0m76ma2-8trrd-r2d3l This has certainly been the case and we expect this to continue.
The continued tariff talk and enactment makes short-term forecasting more cloudy than usual. Our base case for the rest of 2025 is slower growth but not a recession. Longer term we are always bullish. We have faith in capitalism and the entrepreneurial spirit that is still alive and well in our country.
This is Normal
Source: Calamos Investments
Thanks to Calamos Investments for the chart above. It highlights just how frequently we see market pullbacks. Twenty-two times over the past forty two years, we had a double digit drawdown (52% of the time). The median decline was -13%. In the years when we experienced a double digit drawdown, 14 times out of the 22, the market ended the year with a positive return (64% of the time)!
As We Approach Tax Day
As the April 15 tax deadline approaches, so does the deadline for 2024 contributions to all types of IRA’s. If you had earned income last year you should consider doing this.
FYI - The IRS does not initiate contact via email, text, or social media, so be cautious of unsolicited messages claiming to be from the IRS. This is one of the many scams people are using to try and access your money. Chatham Wealth has put together a ten minute video highlighting how you can protect your assets from cyber crime. Look for an announcement on the timing soon.
Please reach out to us should you have any questions.
Dan Moskowitz
Disclosure
Chatham Wealth Management is registered as an investment adviser with the SEC. SEC registration does not constitute an endorsement of the firm by the Commission, nor does it indicate that the adviser has attained a particular level of skill or ability.
Past performance may not be indicative of future results. All investment strategies have the potential for profit or loss. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be profitable for a client's portfolio.