At the start of last week, the S&P 500 rallied three days in a row, with investors believing that the tariffs announced on Wednesday would be targeted. But with increasing expectations comes the potential for disappointment. On April 2, the much-anticipated tariff announcements arrived—and investors did not like the news. President Trump announced 10 percent tariffs across the board on all imports from all other countries, excluding Canada and Mexico. Had that been the extent of it, the market’s expectations would most likely have been met. But it also included tariffs on countries identified as bad actors when it comes to trade, which included 34 percent tariffs on China, 24 percent on Japan, and 20 percent on the EU.

March was a tough month for U.S. stocks, as all three major indices were down for the month and quarter. Bonds performed better, as falling interest rates supported prices, and developed and emerging markets both ended the quarter positively. Hiring and inflation also improved, and the solid economic backdrop should keep driving earnings growth. Despite this, we continue to face uncertainty—including tariff concerns and weakening consumer confidence.

The first quarter of 2025 took investors on a rollercoaster, driven by on-again, off-again tariff policy announcements. From Election Day through February 19, 2025, the S&P 500 experienced a 5.7 rally, including a 3.9 percent increase to start the year. Tariffs were initially tempered from what had been discussed on the campaign trail, and investors focused on the pro-growth elements of the Trump administration agenda.

Last week, I had the pleasure of presenting at a Commonwealth conference. I love spending time and sharing ideas with our advisors. They are the best in the business.

As of the end of trading on Thursday, March 13, the S&P 500 closed down 10 percent from its all-time high, marking an official correction. It was the first correction since October 2023—17 months ago. From an investment horizon perspective, that isn’t that long. While there wasn’t an official correction in 2024, there was an 8 percent drawdown. Still, those two years ended with the S&P 500 up 24 percent and 23 percent, respectively.

In our Market Observatory audio series, Sam Millette and I break down the latest market and economic signals that we believe will shape the month ahead. From tariffs to big tech, we share our perspective on what's happening now and what it could mean for investors going forward.

As the consumer goes, so goes the U.S. economy. Consumers make up roughly 70 percent of U.S. GDP. Our collective spending has powered the economy since the COVID-19 pandemic and proven wrong the 2022 and 2023 recession predictions by economists and investors. I like to call it the most telegraphed recession that never happened.

February was a tough month for U.S. markets. The S&P 500, Dow Jones, and Nasdaq all fell, with the Nasdaq getting hit the hardest. Despite the disappointing month, fundamentals showed signs of positive momentum, boosted by a strong jobs report and fourth-quarter earnings growth. Markets, however, still face real risks—including policy uncertainty, debt ceiling concerns, and the planned rollout of tariffs.

Brad here. As many of you know, I have been working on a much wider range of things here at Commonwealth, and as such, I have stepped back from a lot of the public-facing work I was doing. And that was fine as long as everything was going well. But when things become uncertain, we need someone to be able to explain what is happening—and why.

Markets rallied in January as improving fundamentals supported stocks. The S&P 500, Dow Jones, and Nasdaq ended the month in positive territory, and the story was similar internationally as developed and emerging markets rebounded. The healthy economic backdrop supported strong earnings results, and the solid labor market bolstered consumer confidence. While the market rally was welcome, investors still face real risks, including policy uncertainty with tariffs and potential market volatility.