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ECONOMIC UPDATE
February 2025 | Monthly Economic Update
Source: FactSet
January was a good month for stocks, bonds, and even gold despite a bumpy ride. Concerns over potential tariffs, interest rate uncertainty, and worries that a Chinese company, DeepSeek, could potentially provide a faster, cheaper alternative to artificial intelligence (AI) rattled markets. U.S. equities gained 2.8% as technology stocks took a breather, while the blue-chip Dow gained 4.7%. European stocks outperformed U.S. equities for the month. Interestingly enough, stocks in Europe rose more in January than they did in all of 2024. Emerging markets, while positive, lagged the pack as China continued to trail other markets.
Within U.S. equities, all sectors, with the exception of technology, had positive returns. The DeepSeek AI shock led large technology stocks lower for the month. Among size, domestically exposed U.S. small- and mid-caps outperformed larger stocks, given the domestic focus from the incoming administration and lower exposure to the technology sector.
Across bonds, economically sensitive, lower-quality, high-yield bonds outperformed higher-quality bonds once again. Concerns over tariffs reigniting inflation led inflation-protected bonds (TIPS) to outperform standard bonds.
Gold gained 6.7% and noticed its biggest monthly gain since August 2011 as investors look to the shiny metal to hedge rising government debt and geopolitical uncertainty.
The global 60/40 balanced portfolio starts the year with a bang as stocks and bonds enjoy gains in January.
Source: FactSet
The Monthly Riddle
What demands an answer, but asks no question?
LAST MONTH’S RIDDLE: The more you take away from me, the bigger I get. What am I
ANSWER: A hole.
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