February 2025 market recap: Volatility ahead
February 2025 market recap: Volatility ahead
February 2025 market recap: Volatility ahead
03.13.2025
Amid uncertainty surrounding tariffs and geopolitics, stock prices were mixed in February with out-of-favor areas from 2024 leading the way. International stocks gained while the U.S. fell. Within the U.S., defensive sectors such as Consumer Defensive and Utilities outperformed.
February began with tariff announcements levied against Mexico, Canada, and China, but Mexico and Canada saw them delayed into March. Some were expecting another extension or additional negotiations, but none arrived, and markets have so far mostly reacted negatively to begin March. While current tariffs have created challenges for many businesses, damaged relations with our neighbors, and will likely present a headwind for growth, the macro impact to GDP may be less than many are expecting.
Silver linings
A potential silver lining for equity and bond investors is that expectations for rate cuts have re-accelerated. Bond markets appear more focused on tariffs’ potential negative impact on growth than on their potential to drive inflation. Interestingly, in contrast to when tariffs were initially proposed, the dollar has weakened as they have been implemented.
While capital markets initially cheered President Trump’s election, the new reality is that his administration is and will be taking dramatic actions. This brings heightened uncertainty. Coupled with a highly concentrated U.S. market, investors should be prepared for significant price movements in both directions.
Magnificent month for some
The Magnificent Seven remained especially volatile, with mixed results. Nvidia posted another quarter of rapid growth, but the stock declined as very lofty expectations were not met. Tesla continued to surrender its post-election gains as sales results were disappointing. Reaction to Elon Musk’s new government role also negatively impacted sentiment for many.
Wait and see
There have been multiple instances over the past few years when it appeared a style rotation away from U.S. mega-cap growth into international and value stocks had begun, but each faltered relatively quickly. It is too soon to know if this episode will prove more lasting.
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Market stats and data mentioned in the text are sourced from Empower's internal YCharts, as of February 5, 2025.
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You cannot invest directly in an index. Asset allocation, diversification, or rebalancing does not ensure a profit or protect against loss.
Bond prices generally fall when interest rates rise (and vice versa) and are subject to risks, including changes in credit quality, market valuations, inflation, liquidity, and default. High- yield bonds have a greater risk of default.
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Craig Birk, CFP®
Contributor
Craig Birk is the Chief Investment Officer for Empower Personal Wealth. A CERTIFIED FINANCIAL PLANNER™ professional, he is responsible for Empower’s retail investment portfolio, providing strategic and executive direction to drive the optimal management of client assets.
The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. No part of this blog, nor the links contained therein is a solicitation or offer to sell securities. Compensation for freelance contributions not to exceed $1,250. Third-party data is obtained from sources believed to be reliable; however, Empower cannot guarantee the accuracy, timeliness, completeness or fitness of this data for any particular purpose. Third-party links are provided solely as a convenience and do not imply an affiliation, endorsement or approval by Empower of the contents on such third-party websites.
Certain sections of this blog may contain forward-looking statements that are based on our reasonable expectations, estimates, projections and assumptions. Past performance is not a guarantee of future return, nor is it indicative of future performance. Investing involves risk. The value of your investment will fluctuate and you may lose money.
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