Market Commentary | Apr 03, 2025
1Q2025 Market Commentary: Escalate to Escalate
Michael J. AroestyCFP®
CFP®
“I told my plebes – stay focused. Take the jabs. They’re an annoyance intended to distract you from the real danger; punches.”
- Eric Peters, CIO One River Asset Management
Muhammad Ali is widely considered the greatest boxer of all time. He not only fought with athleticism, but also with style and wit. Ali famously employed the “rope-a-dope” strategy, where he hunched against the ropes allowing his opponents to swing at will. Bobbing and weaving, his adversaries would tire themselves out as Ali waited for his chance to go on offense. While difficult to endure, his fifty-six wins, three heavyweight championships, and one gold medal speak for themselves.
Through the first months of 2025, US equity investors have absorbed several blows. The “US Exceptionalism” narrative, taken as fact in January, came under direct fire in February and March when the new administration unexpectedly announced aggressive trade policies, including significant and widespread tariffs on long-time US allies. Heightened policy uncertainty collided with crowded investor positioning in US stocks, as investors were allocated to US equities near all-time high levels.
Accordingly, the S&P 500 experienced its fifth fastest correction (a drawdown of 10% or more) in over 50 years. Unlike the past few years, the US stock market is now competing for capital with international equities, real estate, and fixed income. This stands in stark contrast to 2023 and 2024, when the US stock market appeared to be the only game in town. For long-term oriented asset allocators and investors, it has been a not-unexpected regime shift, where diversification across asset classes, geographies, sectors, and market capitalizations is being rewarded once again.
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Michael J. Aroesty
CFP®