Markets

As a result of the current economic uncertainty, U.S. equity markets experienced their worst quarter since 2022, as measured by the S&P 500. This is after the S&P 500 hit an all-time high in mid-February. A week into April, we are currently in the midst of a selloff. A selloff of more than 10% had not occurred since October of 2023, and one of 15% or more had not occurred since October of 2022.  These downturns are common for market participants. In fact, going back to 1942 a selloff of 5% has occurred about 3 times a year. Selloffs of 10% happen about every 16 months, 15% every 3 years, and 20% every 5.5 years. As long-term investors, it is important to remember that selloffs are the price we pay for owning publicly traded securities that move daily and are more volatile in times of uncertainty.

As a reminder, the index returns above should only be used as a very broad point of reference.

Cash & Fixed Income: Aggregate bonds led for the quarter, whereas high-yield bonds led for all other time periods. Tax-free bonds were the worst performer YTD and 1-year, while aggregate bonds were the laggard in the 3, 5, and 10-year periods. Cash was the worst performer over 15 years.

In March, we sold bonds in favor of U.S. equity. Even though high-quality fixed income continues to do quite well, particularly during the economic uncertainty, we took advantage of the lower prices by buying cheaper equities as part of a systematic quarterly rebalance.

Equities: Foreign stocks led for the quarter, while large-cap stocks led for all other time periods. Small-cap stock was the worst performer over the last quarter, 1, and 3 years, while foreign equity was the laggard in the past 5, 10, and 15-year periods.

In this environment, we prefer broad large-cap exposure to growth and value funds to help further diversify. As the selloff was underway, we added to domestic equity (mid and small) in client portfolios that were underweight equity by selling bonds and alternatives.

We remain constructive on the high-quality positioning across all asset classes that have allowed the portfolios to weather this economic uncertainty. Diversification is also extremely important as the investing landscape is moving quickly. The high-quality selection and the diversification are why the portfolios have remained quite resilient through the first quarter. Throughout the rest of 2025, economic uncertainty will likely continue, but the portfolios are built to weather economic storms when they arise. As always, we will get through this, and we will get to the other side once the clouds subside. In the meantime, we look forward to chatting with you as we get through this together.

This Commentary is provided by Spraker West Wealth Management, a registered investment advisor, and is for informational purposes only. It should not be construed as investment advice and is not intended as a solicitation of any specific product or service. Investments and/or investment strategies include risk including the possible loss of principal. There is no assurance that any investment strategy will achieve its objectives. Information provided is not intended as tax or legal advice and should not be relied upon as such. You are encouraged to seek tax or legal advice from a qualified professional.