US Markets
Markets started 2025 on a strong footing, buoyed by expectations of interest rate cuts, easing inflation, and continued enthusiasm around artificial intelligence and tech innovation.
The S&P 500 surged 10.2%, the Nasdaq Composite jumped 11.9%, and the Dow Jones Industrial Average advanced by 5.6% during the first quarter.¹
January’s Optimism
Markets kicked off the year with solid gains, as inflation data continued to move in the right direction and hopes grew that the Federal Reserve would begin cutting rates by mid-year.
Tech stocks led the charge, supported by strong performance from mega-cap names and ongoing investment in AI infrastructure.
However, there were some signs of consumer fatigue, with mixed results from the retail sector.²
Fed Patience in Focus
In February, attention turned to the Federal Reserve.
Economic data was mixed—while inflation remained contained, job growth stayed resilient, suggesting the Fed may not rush into rate cuts.
Fed Chair Jerome Powell maintained a cautious tone, reinforcing that while progress on inflation is encouraging, policymakers want to see more sustained improvement.³ This led to some market volatility, especially in interest rate-sensitive sectors.
March Momentum
March brought a renewed rally, particularly in tech and communication services, as investors digested better-than-expected corporate earnings and a dovish tone from the Fed at its March meeting.
The Fed left rates unchanged, but officials indicated that three rate cuts remain on the table for 2025. That helped send the S&P 500 to new record highs, while bond yields drifted lower.⁴
World Markets
Global equities also advanced in Q1, though returns were more mixed compared to the U.S.
The MSCI EAFE Index (developed international markets) rose 4.8% during the quarter.⁵
-
Europe: Germany gained 6.1%, France rose 3.4%, and the UK posted a modest 1.9% increase. Spain and Italy also delivered small positive returns.
-
Asia-Pacific: Japan’s Nikkei soared 10.5%, fueled by yen weakness and strong exports. By contrast, China’s Hang Seng Index dropped 2.3%, weighed down by ongoing concerns over real estate and consumer confidence.
-
Emerging Markets: Mixed performance overall. India gained 2.6%, while Brazil declined 3.1% amid political uncertainty and commodity price pressures.
The Fed
As widely expected, the Fed held interest rates steady throughout Q1, keeping the Fed Funds Rate target range at 5.25%–5.50%.
Chair Powell emphasized that rate cuts are likely later in the year, but the exact timing will depend on inflation and employment data.⁶
The next FOMC meeting is scheduled for May 1st, and markets are currently pricing in a potential first rate cut as early as June or July, depending on how data evolves.⁷
What Investors May Be Watching in Q2
-
Fed Policy: All eyes will be on inflation and jobs reports as investors gauge when the Fed might make its first move.
-
Corporate Earnings: Q1 results are expected to show modest growth. Guidance for the rest of the year will be key.
-
Global Trends: Watch for stimulus efforts in China and potential central bank actions in Europe as growth there remains tepid.
-
U.S. Election Build-Up: Though still early, investors may begin to focus more on policy implications of the 2024 campaign trail.
Our blog posts are intended for information purposes only and should not be interpreted as financial advice.
You should always engage the services of a fully qualified financial planner before entering any financial contract.
To discuss engaging the services of Fortitude Financial Planning please email us at info@fortitudefp.ie.
Fortitude Financial Planning Ltd will not be held responsible for any actions taken as a result of reading these blog posts.
Sources:
-
S&P Dow Jones Indices, Nasdaq, Yahoo Finance, March 31, 2025
-
Bloomberg, January 2025
-
Federal Reserve Press Conference, February 2025
-
CNBC, March 2025
-
MSCI, March 31, 2025
-
Federal Reserve, FOMC Statements, Q1 2025
-
CME FedWatch Tool, as of March 31, 2025
Production