Taking Stock: Executive Summary March 31, 2025

Q1 In Review:

Washington has a new administration since our last Executive Summary, along with a plethora of rapid and economically significant executive orders and policy changes – most notably the pending rollout of tariffs and the overhaul of government agencies for enhanced efficiency and federal spending cuts.  After hitting market highs at the outset, the first quarter of 2025 saw stocks tumble as weaker-than-expected economic data and uncertainty surrounding tariff rollouts spooked investors. 

It was a volatile quarter for the market, and Q2 is likely to follow suit.  While that’s uncomfortable, it’s not unexpected, and during turbulent times it’s even more important for investors to maintain their long-term view and not let the noise take them off track.  Peter Lynch once said, “In the stock market, the most important organ is the stomach. It’s not the brain.”  

Recent Economic Data:

Gross Domestic Product (GDP).  The GDPNow model estimate for real GDP growth in Q1 2025 is -2.8% (seasonally adjusted annual rate; estimate released April 3, 2025), after increasing at an annual rate of 2.4% in Q4 2024.  (A growth rate between 2% and 3% is commonly considered “normal.”)  

Unemployment.  Total non-farm payroll employment rose by 228,000 in March, and the unemployment rate remains at a healthy 4.2%, indicating that most U.S. workers continue to enjoy high job security.  

Consumer Confidence.  The Conference Board Consumer Confidence Index, an indication of consumer attitudes and buying intentions, tumbled 7.2 points in March to 92.9, a four-year low.  (1985 benchmark: 100)   “Consumers’ optimism about future income … largely vanished, suggesting worries about the economy and labor market have started to spread into consumers’ assessments of their personal situations,” said Stephanie Guichard, senior economist, global indicators at The Conference Board. 

Consumer Price Index (CPI).   The CPI for All Urban Consumers (CPI-U), a measure of inflation which shows “cost of living” fluctuations, increased 0.2 % in February on a seasonally adjusted basis.   Over the last 12 months, the all-items index increased 2.8% before seasonal adjustment.  It’s likely that the implementation of expected tariffs will aggravate inflation, slowing down the Fed’s progress toward its 2% target. 

Earnings.  For Q1, the estimated (year-over-year) earnings growth rate for the S&P 500 is 7.0%  (as of April 4, 2025), down from initial Q1 estimates of 10.4% at the beginning of January.  If this is the actual growth rate for the quarter, it will mark the seventh straight quarter of (year-over-year) earnings growth reported by the index.

Housing.  Housing demand remains stifled by interest rates and record-high home values.   We expect mortgage rates to decrease only slightly, if at all, by year-end, and we don’t see home values decreasing during the year.  The national median home price increased year-over-year once again in the first quarter of 2025.  February privately-owned housing starts were at a seasonally adjusted annual rate of 1,501,000, 2.9% below the February 2024 rate.  

Looking Ahead:

We begin Q2 with economic, geopolitical and market uncertainties elevated, but that’s not a big surprise.   As noted in our Q4 summary, It’s a transition year, and while the new administration is expected to be more “pro-business,” particularly as it pertains to decreased regulation and reduced taxes, President-elect Trump has promised to impose significant tariffs and deport millions of undocumented immigrants, both of which could fuel inflation and reduce consumer spending. 

The U.S. economy, while softening, ended Q1 relatively healthy, despite a lot of doom-and-gloom in the news.  There’s no denying it … a potential trade war resulting from recently announced tariffs will have some negative impact on aspects of the economy; however, to what extent and for how long remain to be seen.   On the flip side, the potential benefits are many, as touted by President Trump, and include returning jobs and manufacturing to the U.S., reducing the budget deficit and the national debt (which now equals the GDP) and stemming the flow of illegal immigrants and illegal drugs into the U.S.  Time will tell how this rolls out and the ultimate impact will be one for the history books.     

Expect volatility to continue.  We’ve enjoyed a long bull run, and market declines are a routine part of investing (accounting for somewhere around 30 to 40% of the time). Downturns can present extraordinary opportunities for investors.  Historically, it’s never long before the market resumes its upward trajectory.  In the words of Warren Buffet, “Be fearful when others are greedy.  Be greedy when others are fearful.”  

We can’t bulletproof your portfolio; however, we can strive to mitigate the downside risk by concentrating on the fundamentals and investing in quality companies in a diversified portfolio tailored to your goals, needs, risk tolerance, and time horizon.   

On a personal note, we wish to thank you for your outpouring of sympathy and support.  Your kindness means so much.

“The only thing you take when you go is what you leave behind.  If I have enriched your lives a little bit, I can leave with a smile.”  

                                                                                                           - James L. Spencer

We are committed to providing you with the highest standard of care in keeping with our corporate mission of 

Building Relationships … Enhancing Lives.

Executive Summary Sources:

https://finance.yahoo.com/news/peter-lynch-said-theres-always-193227376.html

https://www.atlantafed.org/cqer/research/gdpnow

https://www.bea.gov/news/2025/gross-domestic-product-4th-quarter-and-year-2024-third-estimate-gdp-industry-and

https://www.bls.gov/news.release/pdf/empsit.pdf

https://www.conference-board.org/topics/consumer-confidence

https://www.conference-board.org/topics/consumer-confidence/press/CCI-Mar-2025

https://www.bls.gov/news.release/pdf/cpi.pdf

https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_032825.pdf

https://www.census.gov/construction/nrc/pdf/newresconst.pdf

https://www.bankrate.com/real-estate/existing-home-sales/

https://www.whitehouse.gov/fact-sheets/2025/04/fact-sheet-president-donald-j-trump-declares-national-emergency-to-increase-our-competitive-edge-protect-our-sovereignty-and-strengthen-our-national-and-economic-security/

https://financialpost.com/investing/heed-warren-buffett-stock-market-meltdowns-short-lived

https://www.morningstar.com/indexes/dji/!dji/performance

https://www.morningstar.com/indexes/xnas/@cco/performance

https://www.morningstar.com/indexes/spi/spx/performance

https://finance.yahoo.com/quote/%5EDJI/history?p=%5EDJI

https://finance.yahoo.com/quote/%5EIXIC/history?p=%5EIXIC

https://finance.yahoo.com/quote/%5EGSPC/history?p=%5EGSPC

Past performance is not indicative of future results.

The views expressed represent the opinion of Asset Management Financial Solutions, Inc. (“AMFS”) and are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and AMFS’s view as of the time of these statements.  Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties.