Monthly Market Update: March 2025
April showers came a month early as stocks fell in March, rattled by a mix of trade tension and weaker economic data. New tariffs introduced by the Trump administration in March sparked concerns about rising costs for companies and consumers. For some businesses, that means tighter profit margins. For households already mindful of inflation, it means higher prices — or delaying purchases altogether. That uncertainty has real economic consequences, from slowing consumer spending to companies pausing hiring and investment decisions.
Navigating Market Volatility: Staying Focused on Long-Term Success
Above all else, let’s remind ourselves that we are long-term investors. These trade changes are an ongoing process, and it will take time to see their full effects. While stocks are volatile in this uncertain period, bonds are holding up, showing the power of diversification.
Remember that investors have faced many challenges over history, including the pandemic, inflation fears, wars, recessions, bubbles, political turmoil, and technological revolutions. In every case, markets went on to new highs, even if it took some time. While the past is no guarantee of the future, it’s important to not lose sight of this fact.
The Trade Story Unfolds
To help cut through the noise, below we summarize some of the biggest developments and issues from the tariff announcement:
The immediate market reaction is negative, with the S&P 500 declining. Partially offsetting this, bonds have gone up, and the falling US dollar has helped international exposures.
The newly-announced tariff measures have been set at a minimum 10% rate, and the average tariff rate across countries is 25%, with rates for some countries as high as 49%. The level and scope are greater than many investors and economists expected
This all comes at a time where consumer and investor sentiment is low. Concerns currently include higher inflation and a possible recession, although uncertainty remains around policy implementation timelines and economic effects
At a company level, some U.S. manufacturers might benefit from less foreign competition. Conversely, about 30% of large U.S. companies' sales come from overseas, so changes in trade rules could impact their business. Many companies are already adjusting their operations in response
Given limited visibility into trade policy outcomes, the Federal Reserve has maintained interest rates, viewing tariff effects as "transitory" one-time events. If needed, the Fed could step in to support markets
When it comes to asset allocation, diversification has helped investors so far in 2025. Various asset classes—including bonds, international stocks, and some alternative investments—have helped support balanced portfolios during this period of stock market volatility.
Growth Expectations Dial Down — but Not Out
After weaker-than-expected retail sales data for January and February, LPL Research trimmed its U.S. GDP growth forecast from 1.9% to 1.7%. That’s still growth — just at a slower pace. The risk of a recession has nudged higher, largely because of the potential ripple effects of prolonged trade disruption.
Still, Reasons for Optimism
While March may have felt gloomy, there are important positives to keep in mind:
Consumers are resilient. Savings remain solid, income growth has been steady, and household net worth is strong. That’s a powerful foundation for continued spending and investment.
Inflation pressures are easing. Slower growth is keeping inflation in check, which gives the Federal Reserve more room to support the economy with interest rate cuts.
Corporate health is strong. Despite tariff headwinds, many companies remain well-positioned for earnings growth — even with a significant increase in average U.S. tariff rates.
Looking Ahead: What’s Next for the Market?
These tariff announcements represent a major shift in trade policy. That said, successful investing isn't about reacting to headlines or trying to time market movements. Rather, it's about maintaining perspective and a well-diversified portfolio aligned with your long-term financial goals. There are many reasons to believe markets and the economy can eventually move past the current set of concerns. It's important to recognize that this pattern falls within normal market behavior. Historically, about two-thirds of years deliver positive returns while one-third are negative. Despite these occasional downturns, the stock market has demonstrated growth across decades and market cycles. Furthermore, maintaining perspective and portfolio diversification remains crucial for investors. Having the fortitude and discipline to stay invested and stick to a personalized financial plan - or even to take advantage of more attractive valuations - is a key principle to long-term financial success.
Perhaps Warren Buffett said it best in 2008, during the middle of the global financial crisis: "In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”
As always, contact us with any questions or if you would like to dive into our market outlook further!
Important Information
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
All data is provided as of April 1, 2025.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.
All index data from FactSet.
The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Past performance does not guarantee future results.
Asset allocation does not ensure a profit or protect against a loss.
This research material was prepared by LPL Financial, LLC.