Author: Kenzie

November 7, 2025

Equity markets shot up higher in October, driven by continued easing of trade tensions, robust corporate earnings, and a Fed interest rate cut just a few days before Halloween. The S&P500 returned 2.3% for the month, marking six consecutive periods of positive returns and extending its remarkable rally to almost 40% off the April lows. Multiple new all-time highs were achieved. Interestingly, these gains were delivered despite a modest deterioration in market breadth. The Magnificent Seven – and technology stocks generally – resumed the leadership that they had given up in recent months. As such, the tech-heavy NASDAQ was the strongest of the major indices, up 4.72% for October and now 23.5% for the year. We have written in the past about the importance of the three “legs of the stool” – economic data, corporate earnings, and declining interest rates. The legs remained sturdy and supportive during the month, providing reinforcement for the market to move higher notwithstanding its record run and stretched valuations. It has been remarkable to observe.

As with September, the greatest economic development during the month came in the form of the Fed interest rate cut. The central bank reduced its benchmark rate by a ¼ point – following the same action taken in September – amid signs of a cooling labor market. The key interest rate now sits in the 3.75-4% range, having come down 0.5% over the last two months. Arguably even more important, the committee announced plans to terminate its balance sheet runoff (otherwise known as “quantitative tightening”) beginning December 1st. Although this move was previously telegraphed during Chair Powell’s October 14th speech in London, it was celebrated by both stock and bond markets as a clear sign of further monetary easing. This positive mood was somewhat offset by Powell’s comments during his post-meeting press conference, where he delivered a surprisingly hawkish tone, indicating that a further reduction in December was anything but a “forgone conclusion.” Nonetheless, bond markets rallied on the cut, and the US aggregate index, which is a popular and widespread benchmark for the investment-grade bond market, is now up nearly 7% on the year.

As of this writing, the US government is now in the midst of the second-longest shutdown in history. Having already eclipsed a full month in length, betting markets are currently predicting the shutdown to last 47 days, which would be 12 longer than the current 35-day record of 2018-2019. The Congressional Budget Office has predicted that a four-week shutdown could reduce GDP growth by as much as -1%, equating to somewhere between $7-14B, depending on length. Presumably, some of this growth would be recouped in further quarters, but there is a distinct possibility that the shutdown could have meaningful effects on growth and – by extension – the capital markets. With the Senate having voted and failed 13 times to pass a funding bill or continuing resolution to reopen the government, it is unclear just how long this shutdown may last. Still, despite the prolonged disruption, capital markets have been resilient and have instead focused on previously mentioned interest rate cuts and strong corporate earnings.

Regarding the latter, the third quarter earnings season has delivered impressive results, with the S&P500 now reporting four consecutive quarters of double-digit growth. As of now, the blended earnings growth rate is currently 10.7%, well ahead of the 7.9% forecast. With approximately 64% of firms having reported thus far, 83% have beat earnings-per-share (EPS) estimates and 79% have outperformed revenue forecasts. Remarkable indeed. Not surprisingly, technology continues to be the shining star in terms of earnings, with that sector and communication services accounting for nearly 60% of all earnings growth. This continued strength in technology and AI-related names has prompted some investors to question whether the high valuations reflect a potential bubble in the sector. After all, the dotcom bubble from the early 2000s is still fresh in mind 25 years later. Still, it is worth noting that, unlike the dotcom bubble, current dynamics in the tech sector reflect solid, fundamental growth rather than pure speculation and no-revenue, no-product companies. The strength of these companies and the astounding profit margins they can achieve – along with strong balance sheets – suggest that the high valuations may be justified. In any case, technology and AI names continue to drive earnings growth and therefore market growth, and as of now this trend seems poised to continue.

Moving forward, we are looking at a bull market with strong momentum. We have seen six consecutive months of gains after the tariff and trade-related anxiety during the spring. Additionally, we have the Federal Reserve having cut interest rates twice already, with another potential cut on the table before the end of the year. Lastly, we have seasonality on our side, as November and December have historically been the top performing months for the S&P500 dating back to 1970 (+1.8% and +1.4% respectively). As ever, we are hopeful for the best but positioned for a wide variety of market and economic environments.

We wish you all a happy early Thanksgiving. As ever, thank you for your ongoing trust and support.

Sincerely,
Jason D. Edinger, CFA
Chief Investment Officer
Boston Wealth Strategies

This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

October 7, 2025

Both stocks and bonds enjoyed another month of gains in September, extending the rally that has been picking up steam since April. Back in the springtime, the recovery was driven initially by easing tariff concerns and extensions, but has been sustained in more recent time periods by supportive economic data, a robust corporate earnings picture, and the beginning of a new easing cycle for interest rates. These three “legs of the stool” have combined to provide support and momentum for financial markets at somewhat lofty valuations.

The broad indices were all higher in September, with the S&P500 and NASDAQ delivering impressive returns of +3.6% and +5.7% (marking 5 and 6 consecutive positive months, respectively). For the S&P500, it was the best September in 15 years and 2nd best in 27. Even more encouraging, the rally has broadened out to include categories and sectors separate from the normal leadership. Small-caps have narrowed the gap in returns between their large-cap counterparts, as evidenced by the Russell 2000 reaching its first new all-time high since November of 2021. This makes sense, as many of the small-cap sectors in the index have historically shown greater sensitivity to interest rate cuts. This increase in breadth and overall participation offers conviction and confirmation that the current up-trend remains firmly in place. Very positive stuff overall.

The single biggest economic development during the month was the ¼ point interest rate cut delivered by the Federal Open Market Committee. This move was widely expected and thus was essentially “priced in” well in advance. Nonetheless, financial markets celebrated the news and keyed in on the Fed’s language and projections, indicating stronger economic growth than earlier projected. Although there was some disagreement among committee members on the future level of interest rates (the so-called “dot plot” projections), financial markets are betting on at least one additional cut in 2025, perhaps two, and a further cut in early 2026. If this plays out, and the Fed can successfully thread the needle between sticky inflation and a softening labor market, it could provide additional support to equity and bond prices as we move into the last quarter of the year. For now, market participants are celebrating a lower rate while cautiously awaiting the next round of economic data.

Accordingly, fixed income markets also rallied in September, as interest rates of various maturities declined and credit spreads tightened slightly. The Bloomberg Aggregate Bond Index returned 1.09% during the month, bringing its yearly total return to a respectable 6.13% level. In a show of mean reversion after underperforming all year long, the municipal bond market caught up to its taxable counterparts, gaining 2.32% during the month. The solid returns in this space came despite concerns about a government shutdown and its implications for federal funding for state and local municipalities. Although year-to-date returns for “munis” still trail the other broad indices, this could mark the beginning of the municipal market’s attempt to catch up to other fixed income sectors.

As of midnight September 30th, the US government has “shut down” with Congress failing to keep the doors open via either a temporary solution (what is known as a continuing resolution) or a permanent budget. Historically, shutdowns have tended to be brief, typically lasting just a few weeks, with the longest shutdown lasting 35 days. Despite short-term volatility and uncertainty, financial markets have typically been able to easily weather shutdown storms, with equities rising during the last 5 shutdowns dating back to the 1990s. This phenomenon is mostly due to government shutdowns rarely affecting corporate earnings directly, and any effects on economic output being temporary and short-term. Still, this shutdown bears watching as the status of our current economy (ongoing tariff negotiation, persistent inflation, and a softening labor market) could make it more susceptible to any negative implications. We expect this situation to be resolved in the coming days or weeks; the broader markets at this time agree.

Moving into October, we are encouraged by the messages that the markets are sending. Between widespread participation to continued leadership by AI and semiconductor industries, the equity rally appears to have both technical and fundamental support. A prospective late-month rate cut is on the table, which could provide additional air for the sails of both equities and bonds. That being said, we do have the usual slate of economic data to contend with (assuming it is not delayed by the government shutdown) as well as the combination of sticky inflation and soft labor dynamics. Thus far, the market has been able to look through these latter data and instead focus on earnings, economic growth, and interest rates. This is our baseline unless something major changes. We hope you are enjoying Autumn so far. We thank you for your continued interest, trust, and support.

Sincerely,
Jason D. Edinger, CFA
Chief Investment Officer
Boston Wealth Strategies

This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

September 8, 2025

US stocks delivered another record-setting month in August, the fourth consecutive period of gains, as the market seized on friendly interest rate indications and ignored a weak July employment report. The benchmark S&P 500 index gained 2.03% during the month, notching a series of new highs before retreating modestly. Smaller companies, in both the mid- and small-cap spaces, fared even better on investor consensus that a September interest rate cut is all but assured. The Russell 2000 exploded 7% higher during the month, which portends well for market breadth and participation beyond large-caps and technology. All in all, the rally broadened out in August with the potential for continued runway, both of which are encouraging signs as we head into summer’s final month.

August also rounded out the Q2 earnings season, which has been robust by most anyone’s standards. Earnings growth in the S&P 500 came in at nearly 12% year-over-year, well above forecasts and marking the third consecutive quarter of double-digit growth. Concurrently, 81% of companies beat earnings per share and revenue estimates, which is higher than both the 5- and 10-year averages. All the above combine to suggest that so far, the impact of tariffs on corporate performance has been muted. Although tariff implications remain a risk to financial markets, it appears that many companies are well versed in strategies to sidestep the worst impacts, drawing on experience from the COVID-19 pandemic and inflation ramp of 2022.

There were important developments in the bond world during the month. During the Fed’s annual Jackson Hole Symposium, often used as an opportunity to highlight coming policy shifts, Jerome Powell delivered the kind of remarks that the bond market has been waiting for. Citing broad economic conditions, specifically “downside risks to employment,” Powell indicated that potential policy adjustments may be in the offing (read: the bank may lower interest rates soon). This was a clear signal that future interest rate cuts are not only possible, they are probable given the combination of data under consideration. Although there is no guarantee of a September rate cut, the markets cheered on the dovish language and quickly priced in new odds of greater than 80%.

Accordingly, the bond market rallied in August, with the US Aggregate Index gaining 1.32%, bringing its yearly returns to the 5% level. We saw continued normalization of the yield curve, with short-term rates declining as long-term rates increased. Corporate and high yield bonds outperformed treasuries as credit spreads tightened, suggesting resilience on the part of the larger market. With a possible interest rate cut and a supportive credit environment, the potential for bonds to continue to deliver strong risk-adjusted total returns remains intact.

Economic data in August were mixed, continuing the trend in recent months. Inflation continues to hover slightly above the Fed’s original 2% target, with August’s readings coming in at 2.7% annually (Consumer Price Index) and 3.1% annually (Core CPI). Clearly, the central bank is still facing challenges in bringing prices across the economy down, although the numbers have stabilized in recent months and as of yet we have not seen concerning signs of any tariff-related inflation. Labor market data also sent varied messages, with jobless claims mixed (initial claims easing, continuing claims remaining elevated) and new job growth slowing. This signals that the economy could be stagnating, which could be a headwind for growth, but also strengthens the case for future monetary easing, which could be a tailwind for growth. Confusing and mixed, for sure. But not altogether terrible.

Looking forward, financial markets enter September with strong momentum, but with the usual host of risks (rising bond yields, elevated valuations, and geopolitical concerns). The employment report on September 5th will be a key indicator of the short-term direction of the labor market. Expectations are low – only 75K jobs created – and the unemployment rate is expected to tick up. We also have August inflation and other key economic releases. Thus far, the rally off April lows has been supported by tariff relief, strong corporate earnings, and future interest rate cuts. The path forward for the markets will most likely be determined by the interaction of these three elements. We are hoping for the best, as always.

As the new school year begins and summer breeze gives way to autumn leaves, we thank you all for your continued trust and support.

Sincerely,
Jason D. Edinger, CFA
Chief Investment Officer
Boston Wealth Strategies

This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

August 6, 2025

They say that good things come in threes. At present, that checks out, as July continued the rally which began in mid-April, sending stocks higher for the third month in a row (4th for NASDAQ). The widely followed S&P500 clocked its third-best July in nearly 50 years, recording 10 all-time highs and gaining 2.2% during the month. The broad market was aided by sustained strength in technology and AI-related sectors, in addition to a strong rebound in megacap tech names (Magnificent Seven). Trade deals also provided an additional boost, as the US inked several new deals before the August 1st deadline, most notably with the EU and Japan. All in all, it was a great month for equity investors and the indices remain at or near all-time high levels.

Q2 earnings season kicked off heartily, with ~60% of S&P500 companies having reported thus far. The results have been solid, with most companies exceeding guidance and expectations. As of this writing, nearly 83% of companies have conveyed earnings-per-share above estimates, which exceeds the 5- and 10-year averages of 78% and 75% respectively. Arguably even more important, forward guidance and the tone of earnings calls continue to come in positive and optimistic – especially in tech and other AI-related sectors – which bodes well for future corporate performance. Although we do see weakness in certain sectors such as consumer discretionary (airlines, hospitality, restaurants), the headline numbers look strong, providing a tailwind for markets that have heretofore been concerned mostly with tariffs and trade.

The passage of the One Big Beautiful Bill Act (OBBBA) – by the slimmest of margins – also enhanced market sentiment. Signed on July 4th, this sweeping legislation reshaped the landscape of many policy areas, including taxes, healthcare, energy, and others. Critically, most of the provisions in the 2017 Tax Cuts and Jobs Act were made permanent, easing market fears of higher future tax rates. The OBBBA set a ceiling on the income tax at 37% for joint filers exceeding $750K of income. Other key outcomes for the bill include increased standard and SALT deductions, no taxes on overtime and tips, an increase in the child tax credit, and a new brand of IRAs for minors entitled “Trump Accounts.” Although OBBA is expected to produce generationally large budget deficits while in effect, it has the potential to provide a massive stimulative impulse for the economy, which thus far the markets have celebrated.

Major bond markets retreated slightly in July, as fixed income investors pondered the outlook for interest rates and the economy. Modestly higher interest rates during the month, predicated on the mostly strong economic data, resulted in the US Aggregate Bond index falling just a bit (-0.26%). The bond market appears to be comfortable with a “goldilocks economy” – not too hot, not too slow – and although there have been intermittent periods of volatility this year, for the most part bonds have been quiet and stable. Even the Federal Reserve’s July decision to hold interest rates steady in a 4.25-4.5% range did not excite the bond market very much, despite the central bank casting doubts on if and when an eventual cut may occur. After the July payrolls report, the odds of a September cut rose significantly, but it is still anyone’s guess if Jerome Powell is ready to normalize rates (and by how much).

Looking ahead, the calendar flips to August, which is generally not a strong month for equities (especially growth and tech). Since the early 1970s, the NASDAQ has averaged a monthly gain of just 0.3%. Since 2010, August has seen an average return of -0.45%, with over half of those years negative. Combine that with the prospect of tariff inflation, an uncertain interest rate picture, and the remarkable rally from April, and the market may be due to take a breather. You can only sprint for so long before you need to pause and catch your breath.

August also concludes the Q2 earnings season and will contain the usual package of economic releases: jobs, inflation, and GDP. The Federal Reserve holds its annual Jackson Hole symposium, which will likely offer insight into future interest rate policy. With several major political initiatives out of the way, stock and bond markets are likely to direct their focus on economic data and corporate fundamentals.

Overall, we remain in a good position for the back half of the year. The tried-and-true principles of diversification, discipline, and time horizon remain in place, and we stand ready to accept whatever the market may throw at us. As we move into the Dog Days of Summer, we would like to thank our clients, friends, and family for their steadfast trust and support. We are truly grateful for it.

Sincerely,

Jason D. Edinger, CFA
Chief Investment Officer
Boston Wealth Strategies

This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

July 8, 2025

Stocks rallied sharply in June, with both the S&P500 and NASDAQ indices ending the month and quarter at new all-time highs. After an impressive May performance, the S&P500 gained 5.1% in June for the index’s first back-to-back monthly gains since September of last year. While tariffs and trade policy dominated headlines in early spring, this month it was Middle East turmoil which drove market direction. After the June 13th Israeli airstrike of critical Iranian nuclear facilities, which also took out several key military leaders and civilian scientists, President Trump was able to broker a deal between the two nations which ended the conflict after just 12 days of action. Equities rallied hard during the back half of the month to complete a powerful, V-shaped recovery from the intraday lows put it on April 8th.

2025 has been an incredibly volatile year for equities, with both a 21% drawdown from February highs and a subsequent 26.4% rally (S&P500). But if one were to look at stocks through the first half of the year, one would note that 2025 appears to be a very average year. Stocks are up 5.5% and bonds are up just slightly less. But this “average” performance masks an extremely unstable period with outsized downside momentum. As investors, we have had to endure a lot of ambiguity and unsettling news this year. It is truly amazing that, despite all the challenges laid out above, both stocks and bonds are doing just fine as we enter the second half of the year. On ward and upward from here (we hope).

Declining bond yields, in addition to being a tailwind for the upward moves in stocks, bolstered fixed income returns in June. The US Aggregate Bond Index returned 1.15% during the month, corresponding with the 10Y Treasury yield falling by 17 basis points. This decline, largely a result of the previously mentioned unrest in the Middle East (and subsequent flight to safe-haven assets), was somewhat offset by the ever-increasing budget deficit and the recent downgrade of US debt by Moody’s. Nevertheless, bonds managed to post a positive month again and are quietly up just over 4% on the year.

Surprising no one, the Federal Reserve held interest rates steady during its regular June policy meeting. The central bank emphasized it remains in a “data-dependent” status which most investors translate into “wait and see.” The committee did note that low unemployment and a solid labor market points to broadly positive underlying conditions but also said that persistent inflation has contributed in a big way to the bank’s inactivity on rates. The bond market is currently pricing in two 25 basis point rate cuts for the back half of this year, likely starting no earlier than September. As a reminder, the Fed’s last rate cut was in December 2024.

In terms of economic releases, most of the June data showed a continuation of the themes that have played out in recent months: slowing but resilient GDP growth, a tight and robust labor market, and sticky but not terribly high inflation. The June nonfarm payroll report showed the creation of 139K jobs in May, which was above estimates but slightly below April’s reading. The Consumer Price Index, which is the most widely followed and quoted measure of inflation in the economy, increased modestly at 2.4% annualized, which was in line with expectations. All told – not a lot of surprises in the June data. Market participants will be paying close attention to President Trump’s tax and spending package, entitled the “One Big, Beautiful Bill,” which as of this writing is still being debated in both houses of Congress. All eyes will also be pinned to the calendar on July 9th, when the 90-day postponement of “reciprocal tariffs” is due to expire.

Looking forward to the second half of the year, markets will be grappling with tariff strain, ongoing conflict in the Middle East, and the usual slew of economic data. While it is possible (and probably likely, given recent history) that tariffs could be further pushed out beyond July 9th, uncertainty still persists, and we recall how violently the market reacted to tariffs just a few months ago. Meanwhile, despite the interest rate picture likely to stay unchanged during the July 29-30 meeting, the Fed remains focused on balancing its dual mandates of price stability and full employment.

Overall, we are still in a good position as we kick off the second half of the year. Market fundamentals remain sound, and the economy is relatively healthy. While there are near-term risks to be aware of (and prepared for), over the longer horizon, we hope to continue to experience economic growth and further market appreciation.

Thank you for riding alongside us during this wild first half. It has been one of the most interesting stretches in market history, and there has not been a dull moment. We appreciate your interest and support, and as always we stand ready to help as needed.

Sincerely,
Jason D. Edinger, CFA
Chief Investment Officer
Boston Wealth Strategies

This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

June 13, 2025

June 6, 2025

Equities were broadly higher in May, as de-escalation in the global trade war fueled a rally that brought the major indices very close to levels seen just prior to “Liberation Day.” After the intense volatility endured in March and April, stocks entered the monthly at highly oversold levels, setting up for a relief rally at the slightest hint or headline of good news. Sure enough, that is what occurred as equities ripped off their April lows and rewarded patient investors who stuck with the plan during this challenging period. Gains were strong across both domestic and international markets, with both the S&P500 and the NASDAQ recording their best months since November 2023 (+6.3% and +9.6% respectively). After a tumultuous March and April, thus far year-to-date the S&P500 is miraculously positive (+1.1%) while mid- and small-caps remain in the red. Still, coming on the heels of we saw earlier this spring, it is no wonder that investors are breathing a much-needed sigh of relief. At least for now.

Departing from stocks, May brought weakness across the fixed-income complex, as treasury yields backed up throughout the curve and pressured bond prices lower. Yields were higher anywhere between 15-30 basis points depending on maturity, which is not the largest move we have seen this year but was more than enough to compensate for any income generated. Thus, the Aggregate Index fell by around 3/4%. This back up in yields came despite the Federal Reserve holding short-term rates steady, indicating the bond market is more concerned with inflation, budget deficits, and the employment situation.

The other big headline in bond-land was Moody’s Ratings downgrade of US government debt on the 16th. The agency dropped its credit rating one mark from Aaa (the highest possible rating) to Aa1, joining the “downgrade club” of which Fitch and S&P are standing members. The latter two agencies had previously demoted US debt in 2011 and 2023 respectively. The reasons for the downgrade are numerous and varied but primarily arise from the ballooning national debt, which is approaching $37T and expanding at a rate of $2T per year. Other contributing factors include fiscal challenges and continuous congressional conflict over the national debt ceiling. The reaction in both stock and bond markets was relatively muted, and history has shown that short-term losses in these assets following a debt downgrade have been short-lived. The downgrade, while catching headlines for a few days, appears to be a market “nothingburger.”

Key economic data trends during the month were mixed, giving both bulls and bears food for thought. Price inflation continued to moderate in May, with both consumer (CPI) and producer (PPI) prices showing marginal decreases in their year-over-year rates. Core consumer prices also declined, which could prove beneficial to the all-important US consumer, who accounts for roughly 70% of annual GDP. Elsewhere in the economy, manufacturing data and labor market readings both held relatively steady, while consumer sentiment as measured by the Conference Board Index jumped, likely a reflection of renewed optimism that trade war issues could be resolved soon.

In terms of tariffs, tensions have eased meaningfully in recent weeks. Given the heightened levels of volatility, investors were clamoring for good news on this front, and they received it in the form of a US-China agreement on lower absolute levels of tariffs (reduced from 145% to 30% on the US side and 125% to 10% on the China side) for the next 90 days. This tenuous deal between the world’s two largest economies provided hope that the larger tariff picture will eventually settle out at levels much lower (and less scary) than initially thought. It is worth remembering that tariffs were also a source of major market volatility during President Trump’s first administration, as the S&P500 fell nearly 14% from its highs in 2018 to end the year down over 4%. The index subsequently rose and recovered all losses as trade deals materialized, and we hope that will be the case for Trump 2.0 as well.

Looking forward to the last month of spring, we will be paying close attention to any developments on the trade front, in addition to the status and outlook for the US consumer. Thus far, the hard economic data appear resilient and supportive of equities at current valuations. However, any change to tariffs or overall trade policy would have the potential to reignite volatility as we move towards summer. We are not out of the woods yet, but underlying fundamentals remain solid, and our cautiously optimistic outlook is affirmed here.

It has been a wild ride in capital markets over the past few months. We hope, as many of you likely do, that more sanguine days lie ahead. We will continue to monitor the situation on the ground and report back accordingly. As always, we express our sincere gratitude for the trust and confidence you place in us.

Sincerely,

Jason D. Edinger, CFA
Chief Investment Officer
Boston Wealth Strategies

This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

May 7, 2025

Stocks sold off in April, as financial markets faced mounting challenges in the wake of “Liberation Day.” Equities were punished and ultimately ended lower for the month, but closed well off the worst levels seen in the tumultuous first half. Market anxiety was driven primarily by the announcement of heavy-handed, “reciprocal” tariffs which imposed a baseline 10% tax on imports from all countries, with select countries like China penalized even heavier. Stock markets tanked swiftly and uniformly after the announcement, with growth companies and “Magnificent 7” areas hit hardest while defensive sectors held up better. Nonetheless, after the April 9th announcement of a 90-day tariff pause, the S&P500 posted its best day since October 2008 and rallied hard in the subsequent weeks, ending the month of April down just a tad at -0.7%. Miraculously, the NASDAQ Composite posted a positive return for the month, after being down double digits just a few short weeks ago. He who limps is still walking.

This incredible about-face was the result of de-escalation and improvements on the trade policy front, as messaging from the White House suggested that deals with Japan and India were nearly complete. Simultaneously, rumors of Fed Chair Powell being replaced by President Trump were quelled, which gave extra wind to the backs of the equity market sails. Corporate earnings, which have taken a back seat to geopolitical headlines of late, have come in strong thus far, with both Microsoft and Meta (two of the darling “Magnificent 7”) reporting impressive financial results and encouraging forward guidance. Stability and continued growth in the biggest and most dominant American companies helped to alleviate investor concerns and contribute to the strong rally we saw to close the month.

Turning our attention to the bond market, it was a month where safety and conservatism mattered, as the risk-off move in equities was mirrored in many fixed income sectors. Corporate and municipal bonds saw weakness in the face of yield back-ups, but higher quality and shorter maturities were able to weather the storm. This repricing was a result of the aforementioned tariffs, and “riskier” segments of the bond market felt a similar pain that their equity counterparts were enduring. Still, fixed income as an asset class held up to its reputation as a diversifier and volatility dampener, with the Aggregate Index gaining 0.39% during the month, bringing its yearly advance to a respectable 3.56%. Bonds are back, as they say.

In terms of hard and soft economics, the data were more mixed. The initial reading of Q1 GDP showed a surprising slowdown, falling 0.3% on an annualized basis to its lowest level in three years. It is worth noting, however, that the decline was driven primarily by high frontloaded imports ahead of potential future tariffs, a dynamic that we think (and hope) will be temporary. Consumer sentiment numbers also came in light, dropping to its lowest level in nearly three years. Happily, not all of the monthly reports were bearish, as both CPI (price inflation) and PPI (producer inflation) were cooler than anticipated, assuaging much of the lingering fears that inflation would rear its head yet again. All told, while recent economic data have been mixed, it does not appear that the economy is at high risk of a recession in the near term. Encouraging.

April was a wild month in capital markets, with record volatility and extreme moves in many markets. Stocks moved from a scary -14% to an inspiring +15% from the lows before settling. Volatility has entered the chat. Still, we lean on and benefit from the pillars of our investment process: a sound plan based on fundamentals and common sense that is adhered to across all market environments. This necessarily entails diversification across a broad spectrum of asset classes, a disciplined portfolio management process, and a long-term view. Investment management lives in the world of the unknowns, which is what makes it so challenging (and so rewarding!). But given the unknown range of outcomes, through a robust and rigorous portfolio management process, we hope to provide a successful experience for our clients.

We wish you all the very best as this spring season of renewal unfolds. We thank you genuinely for your trust and support.

Sincerely,
Jason D. Edinger
Chief Investment Officer
Boston Wealth Strategies

April 2, 2025

March 10, 2025

After notching all-time highs intra-month, equity markets fell off considerably to close lower in February, with the S&P500 declining -1.3% for its second negative month in the last three. Weakness was seen especially in technology and other economically sensitive small-cap areas, while defensive sectors like energy and utilities held up well. Continuing the emerging 2025 trends, International stocks (both developed and emerging) outpaced US markets, and the equally weighted S&P index exceeded its market-cap weighted counterpart. Treasury yields fell and safe-haven assets such as gold posted strong gains in the flight to safety. Volatility spiked with the VIX index rising above 20 and holding, a clear signal of market anxiety.

This plunge in sentiment was a result of several bearish themes. Inflation angst intensified, as February’s CPI report showed rising prices which spooked investors and underscored the need for more Fed work to combat sticky inflation. Uncertainty around trade policy also came to the fore, as President Trump expanded his previously announced tariffs to include an additional 25% on vehicle imports, with potential further duties targeting the semiconductor and pharmaceutical industries. Investors are understandably weighing the potential impacts of these aggressive policies, with many economists expecting lower growth and/or higher future inflation. To add insult to injury, economic growth concerns emerged as the both the Conference Board Index and Purchasing Manufacturers Index for services contracted steeply. Risk off, risk off.

Despite the challenging month, there were glimmers of hopes for bulls to hold onto. Corporate earnings growth has shown remarkable resilience, with 75% of reporting S&P500 companies posting positive earnings surprises and 63% exceeding revenue expectations. The blended Q4 earnings growth rate sits at 18.2%, far exceeding market expectations of 11.9% and marking the strongest quarterly performance in over three years. Expectations for 2025 remain high, and if they are met – or exceeded – we could see strong earnings provide some much-needed fundamental support for the post-election rally to continue.

An additional pillar of support could take the form of a lower interest rate environment. During February, Fed Chair Powell testified before Congress and despite comments on holding short-term rates steady, longer-term bond yields fell steadily during the month. Although short-term rates continue to grapple with mixed inflation and labor-market data, the 10-year treasury yield has quietly declined from a peak of 4.79% in January to 4.2% by the end of February. These declining yields supported fixed income returns during the month, which were broadly positive. More importantly, they served as a counterweight to the broad sentiment decline seen in the equity markets and provided ballast to diversified and more bond-heavy allocations.

A quick note here on an important word in the preceding sentence: diversified. For much of recent market history, diversification as an allocation principle has not been overly rewarded. As market breadth and concentration has narrowed it has been a smaller and smaller subset of markets, sectors, and companies that have propelled the market onward, while other neglected sectors have lagged. Often, diversification has felt disappointing. But in recent months, diversification has been well rewarded as market dynamics have shifted and different assets have begun to move in different directions.

We saw that in clear relief during February’s turbulence as technology and risky segments sold off while international stocks, bonds, and more defensive stocks held up. This is a welcome reminder that diversification remains a solid principle around which to construct a portfolio. Spreading allocations across a variety of asset classes, geographies, and vehicles is an effective strategy to reduce the idiosyncratic risk of having a lot of eggs in a single basket. This helps to smooth out what might otherwise be a bumpy ride, which is exactly what we saw in February. Diversification is the bedrock of our asset allocation process at Boston Wealth Strategies, one that we stick with across all market environments, and one that we feel will serve us (and our clients) well into the future. February’s sell-off has provided a welcome reminder of this fact.

Next month we have the usual slew of economic releases, as well as the FOMC meeting on the 19th. We will be watching closely and will keep you posted as developments arise. As ever, we sincerely appreciate your trust and support.

Sincerely,
Jason D. Edinger
Chief Investment Officer
Boston Wealth Strategies

* Disclosure: Diversification does not assure a profit or protect against loss in declining markets, and diversification cannot guarantee that any objective or goal will be achieved.