The first quarter of 2025 was marked by heightened volatility across global markets as investors navigated a complex landscape of new tariff policies, slowing economic data, and declining consumer sentiment. While some parts of the market experienced gains in Q1, others struggled under the weight of uncertainty.

The uncertainty surrounding trade policies in the first quarter led to increased market volatility, with investors closely monitoring for a resurgence in inflation. In March the Trump administration announced tariffs of 25% on imports from Canada and Mexico, as well as 10% on Chinese goods, citing national security concerns. The threat of tariffs caused concerns of reigniting inflation, supply chain disruptions, and broader government policy uncertainty. International automakers are among the businesses most affected by the tariffs, as the Trump Administration aims to shield certain U.S. companies to mitigate the domestic economic impact. In addition, trade relations between the U.S. and Europe became increasingly strained, with EU leaders warning of potential retaliatory measures and increasing their own domestic military investments. 

The technology and healthcare sectors of the stock market exhibited diverging performance in Q1. The Nasdaq technology composite fell -15% from its recent peak, driven by cautious corporate spending and investor rotation away from high-growth sectors. In contrast, healthcare stocks were up 6.5%, emerging as one of the best-performing sectors in the S&P 500 during the quarter. Defensive positioning, stable earnings, and reasonable valuations for pharmaceuticals and healthcare services helped the sector remain resilient despite broader market headwinds. This marked a shift from previous years, where healthcare had underperformed relative to technology. 

In March, consumer confidence fell for the third consecutive month to its lowest level since 2022. This reading reflected concerns over tariffs, inflation, and broader economic uncertainty by Americans. Increased costs of imported goods, coupled with stock market declines, led to subdued consumer spending. This downturn in sentiment raised concerns about slowing economic growth, particularly in the retail and discretionary spending sectors.

JFG Outlook

As of this writing, it has been three days since the Trump Administration announced tariffs on foreign imports. These measures are severe enough that, without meaningful concessions from trade partners, the U.S. economy may be at risk of slipping into a recession. The impact on companies facing rising input costs is substantial, with negative ripple effects extending beyond the directly affected businesses to a wide network of related industries. This surge in uncertainty has already placed significant strain on the financial markets. While the outcome of trade negotiations remains unpredictable, one thing is clear: periods of dislocation often present buying opportunities. Investors should look for companies whose operations are largely insulated from tariffs and whose revenues are not heavily reliant on international sales. These businesses — if caught in the broader market selloff — may offer compelling value for long-term investors.

As we’ve said in previous market commentaries, bonds remain one of the best diversification tools in years, and this year they have provided a strong hedge against stock market declines. When the average stock in the Nasdaq technology index fell by -32% in Q1, the bond aggregate index rose by +2.8%. At the same time, the largest stocks in the S&P 500, or the “Magnificent 7”, declined by -17% on average. We remain focused on identifying sectors with strong fundamentals, such as healthcare and certain consumer discretionary names, where we see attractive opportunities for investment.

Thank you for your continued trust in Juno Financial Group.