The securities markets experienced considerable fluctuations during the first quarter, largely driven by volatile energy prices, geopolitical factors, and the ongoing conflict in Iran. The impact of daily news cycles and pervasive commentary contributed to market sentiment. One year after the imposition of broad-based tariffs on ‘liberation day,’ similar volatility ensued; however, as of early April 2025, the S&P 500 has risen approximately 15%.
Performance discrepancies among major indices reached a very wide range in the first quarter, with commodities and natural resources increasing by about 23% while growth-oriented technology stocks declined nearly 7%. Bond markets remained stable, and both emerging and developed international equities closed in modestly positive territory.
Short-term volatility and sector divergences are expected to persist until developments in Iran, including the status of the Strait of Hormuz, reach resolution. Nevertheless, strong economic fundamentals suggest that stable markets may return in due course.
Northern Trust has identified several investment and economic themes likely to influence future outcomes:
- Rapid advancements in artificial intelligence (AI) are being integrated across all economic sectors, resulting in reduced costs, enhanced efficiency, and improved productivity and earnings.
- Robotics will increasingly offset demographic declines, necessitating greater emphasis on education and retraining for vocational roles. Although job displacement risks are present, a reduced labor pool may facilitate stronger wage growth.
- Expanding government deficits and compounding debt are prompting monetary expansion, inflation, and higher interest rates. Elevated debt-to-GDP ratios constrain private sector capital investment. However, increased awareness is encouraging efforts to curtail fiscal mismanagement, though change may be gradual. If the U.S. maintains fiscal discipline and achieves higher GDP growth (even by 1% annually from the recent 2% level), the U.S. Dollar reserve currency status should remain secure.
- Innovations in AI-assisted healthcare will allow an aging population to extend physical and cognitive abilities, thereby reshaping career longevity and workforce dynamics.
- Global trends toward national self-sufficiency in energy and basic materials to support AI development are set to foster stronger regional trade agreements and cooperation.
Further information regarding these forecasts is available upon request. Meanwhile, maintaining a balanced, diversified portfolio of high-quality, income-generating assets remains a prudent strategy in periods of heightened volatility.
Please contact us to discuss your investment strategy or to review your portfolio in detail.
