As we complete the first two months of 2025, it’s time to take a look at how the markets have performed. February proved to be a challenging month for US equities, contributing to a mixed start to the year. Let’s dive into the details.
Major Market Drivers
Several factors have likely contributed to market performance in the first two months of the year. Inflation remained stubbornly high, leading to concerns that the Federal Reserve would not continue to lower interest rates. Uncertainty in the economy was also a concern.
Market Performance
Here’s a look at how various asset classes performed year-to-date through February:
- US Equities: Large-cap stocks, as represented by an S&P 500 ETF, were down 0.4% for the year. Small-cap stocks, as represented by a Russell 2000 ETF, fared even worse, declining 3.9%. Value oriented ETFs performed very well – up about 4% year to date.
- International Equities: International equities outperformed US equities, gaining 6.7% year-to-date. Emerging market equities also posted positive returns with the index ETF up 3.3% year-to-date.
- Fixed Income: Bonds have performed well year to date with a broad bond market ETF up 2.8%. Even short term bonds outperformed the S&P500 with a return of 1.3% year to date.
- Real Assets: Real estate and commodities have also performed well year to date, up 5.4% and 2.9% respectively.
Investment Strategy
Diversification, diversification, diversification. The results year to date show how important diversification is – not all investment assets move together. In this environment, it’s important to maintain a diversified portfolio and to be patient. Don’t panic sell in response to market downturns. Instead, focus on the long term and stick to your investment plan.
It’s also important to remember that past performance is not indicative of future results. The market can always surprise us, so it’s important to be prepared for anything.
Disclaimer: This market update is for informational purposes only and should not be construed as investment advice. Please consult with a financial advisor before making any investment decisions.
Note: The data used in this market update is through February 28, 2025.