The Markets
As the market turns…
When investor preferences shift and money flows from one sector, industry, investment style or geographic region into another, it is called a market rotation.1
For years, stock markets in the United States have outperformed stock markets elsewhere. “The outperformance is attributed to U.S. exceptionalism fueled by a strong culture of innovation and entrepreneurship; more flexible labor markets; higher productivity; stronger consumer consumption driving demand for goods and services; a more favorable regulatory environment; lower corporate taxes; stronger intellectual property rights; and more open markets and trade policy,” reported Larry Swedroe of Morningstar.2
One consequence of U.S. outperformance is that investors outside of the United States own a lot of U.S. stocks, about $18.4 trillion, reported Tracy Alloway and Joe Weisenthal of Bloomberg. The percent of European investors’ total equity portfolios invested in U.S. stocks has more than tripled since 2011, in part due to strong performance.3
Now, Europe’s financial markets are outperforming those in the United States.
“Across assets of all stripes, the Old Continent is collectively trouncing America in a way that’s rarely been seen before…German bonds last week beat Treasuries by the most ever. And while European shares have been knocked by the trade war, they’re turning out to be far more resilient than American ones,” reported Alice Gledhill, Abhinav Ramnarayan, and Julien Ponthus of Bloomberg last week.4
Over the last two months, global investors have backed away from United States markets. Bank of America’s monthly global fund manager survey found that asset managers have reduced U.S. allocations by more than half since February. “A majority think a trade war that triggers global recession is the biggest risk for markets,” reported Reuters.5
The recent geographic market rotation was a reminder of the importance of diversification. While diversification won’t prevent losses, it can help investors effectively manage risk. Investors who held a geographical diversified portfolio may have fared better this year than those who invested only in the United States.
Last week, which was shortened by a holiday, major U.S. stock indices moved lower, reported Teresa Rivas of Barron’s.6 Yields on U.S. Treasuries were mixed over the week.7
Data as of 4/17/25 | 1-Week | YTD | 1-Year | 3-Year | 5-Year | 10-Year |
| Standard & Poor’s 500 Index | -1.5% | -10.2% | 5.2% | 6.4% | 12.9% | 9.8% |
| Dow Jones Global ex-U.S. Index | 3.4 | 2.7 | 6.2 | 2.3 | 7.0 | 2.0 |
| 10-year Treasury Note (yield only) | 4.5 | N/A | 4.6 | 2.9 | 0.7 | 1.9 |
| Gold (per ounce) | 2.3 | 26.6 | 38.3 | 19.0 | 14.3 | 10.6 |
| Bloomberg Commodity Index | 1.4 | 4.2 | 0.7 | -8.7 | 10.6 | 0.1 |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
THE CURIOUS PATH OF THE U.S. DOLLAR. It’s easy to overlook the importance of the U.S. dollar. Many people have a few bills tucked in their wallets to buy sodas from vending machines, purchase vegetables at a farmer’s market, or pay their babysitters at the end of an evening out.
A lot of the currency issued by the United States is not held by U.S. citizens and U.S. companies. It is tucked away in central banks around the world. For decades, the U.S. dollar has been the world’s primary reserve currency, reported The Economist.8 The newspaper explained:
“For decades investors have counted on the stability of American assets, making them the keystones of global finance. The depth of a $27trn market helps make Treasuries a haven; the dollar dominates trade in everything from goods and commodities to derivatives. The system is buttressed by the Federal Reserve, which promises low inflation, and by America’s sturdy governance, under which foreigners and their money have been welcome and secure.”9
The U.S. dollar is not as dominant as it once was. In the early 2000s, many central banks began to diversify their holdings into Australian and Canadian dollars, Swedish krona, and Swiss francs, reported The Economist.8
Regardless, the reason other countries keep their reserves in U.S. dollars is because the U.S. has large and open financial markets and other countries can access their reserves when needed, reported Anshu Siripurapu and Noah Berman of CFR.10
Is the U.S. dollar a safe haven?
Normally, when markets become volatile and investors flee to perceived “safe havens”, the U.S. dollar strengthens. But that isn’t what happened recently. Since the start of the year, the United States dollar has weakened despite market volatility, reported Randall Forsyth of Barron’s.11
“…the chaotic rollout of…tariff policy has resulted in declines in the dollar and prices of longer-term U.S. government securities in tandem with declines in risky assets such as stocks—a reaction contrary to the currency’s and Treasuries’ usual performance as havens during episodes of market volatility. Markets stabilized in the latest week but remain on edge,” wrote Forsyth.11
One market concern is that falling demand for the U.S. dollar and rising U.S. Treasury yields could spell trouble for the United States. High demand makes it possible for the U.S. to borrow money at a low cost, reported CFR. If demand falls, that could change.12
“…rising Treasury yields also cloud the outlook for U.S. government spending, and by extension economic growth. Higher yields mean the U.S. government will owe more interest on any debt it rolls over or issues for new spending, exacerbating worries about the federal deficit,” reported Jesse Pound of CNBC.13
The federal deficit is the difference between what the government receives and what it pays out. Each annual deficit is added to the national debt.
Weekly Focus – Think About It
“All that you touch You Change.
All that you Change Changes you.
The only lasting truth Is Change.”14
–Octavia Butler, Author
* These views are those of Carson Coaching, not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the 3:00 p.m. (London time) gold price as reported by the London Bullion Market Association and is expressed in U.S. Dollars per fine troy ounce. The source for gold data is Federal Reserve Bank of St. Louis (FRED), https://fred.stlouisfed.org/series/GOLDPMGBD228NLBM.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
Sources:
[1] https://www.morningstar.com/markets/how-sustainable-is-us-exceptionalism
3 https://www.bloomberg.com/news/articles/2025-04-16/trump-s-trade-war-boosts-european-stocks-and-bonds-eur-usd or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-21-25-Bloomberg-Worlds-Biggest-Pain-Trade%20-%203.pdf
4 https://www.reuters.com/business/finance/global-investors-dump-holdings-us-stocks-record-pace-bofa-survey-says-2025-04-15/ or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-21-25-Bloomberg-End-of-America-First%20-%204.pdf
6 https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202504 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-21-25-Barrons-Stock-Market-Another-Rough-Week%20-%206.pdf
7 https://www.federalreserve.gov/paymentsystems/coin_currcircvalue.htm
8 https://www.census.gov/library/stories/2024/12/new-year-population.html and https://www.federalreserve.gov/paymentsystems/coin_currcircvalue.htm or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-21-25-Economist-Trump-Might-Topple%20-%208.pdf
9 https://www.economist.com/finance-and-economics/2025/04/16/how-trump-might-topple-the-dollar or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-21-25-Economist-How-Dollar-Crisis-Would-Unfold%20-%209.pdf
[1]0 https://www.economist.com/leaders/2025/04/16/how-a-dollar-crisis-would-unfold
[1]1 https://www.barrons.com/articles/usd-us-dollar-604de403 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-21-25-Barrons-US-Spending-Threatens%20-%2011.pdf
[1]2 https://www.cfr.org/backgrounder/dollar-worlds-reserve-currency
[1]4https://www.goodreads.com/quotes/7567950-all-that-you-touch-you-change-all-that-you-change
The Markets
All eyes on the bond market.
The scale of the tariffs introduced by the administration shocked investors, sparking a roller coaster of a week for stock markets. Last week, U.S. stocks:
- Rallied on a rumor.1
- Fell when the rumor was recognized as a rumor.1
- Rose when President Trump paused reciprocal tariffs on most countries for 90-days.1
- Fell as investors considered how the remaining baseline tariffs (10 percent on all countries, steel and aluminum tariffs, and 100%+ tariffs on China) might affect companies and economies.1,2
- Rallied after the Federal Reserve assured investors it was prepared to step in, if needed.
“Economic angst enveloped every corner of Wall Street as U.S.-China trade tensions escalated, sparking a slide in stocks, the dollar and oil, with liquidations in U.S. assets pointing to disorder in the financial system,” reported Rita Nazareth, Isabelle Lee, Denitsa Tsekova, and Vildana Hajric of Bloomberg.”3
Disorder in the financial system
Some of the disorder was found in the United States Treasury market where yields were moving higher when many expected them to move lower. Investors who are concerned about risk and sell stocks tend to seek financial shelter in investments that are perceived to be steady in a storm. For many years, United States Treasuries have been a “safe haven”.4
So, last week, there was an expectation that, as investors sought shelter from the tariff storm, rising demand would push Treasury yields lower.5 That wasn’t the case. Investors sold U.S. Treasuries, pushing yields higher, reported Sydney Maki and Carter Johnson of Bloomberg.6
“Billed as so rock-solid safe they’re risk-free, US Treasury bonds have long been the first port of call for investors during times of panic. They rallied during the global financial crisis, on 9/11 and even when America’s own credit rating was cut…But this time may be different. As President Donald Trump unleashes an all-out assault on global trade, their status as the world’s safe haven is increasingly coming into question…Yields, especially on longer-term debt, have surged in recent days while the dollar has plunged,” reported David Rovella of Bloomberg.7
The Federal Reserve (Fed) soothed the market
On Friday, Minneapolis Fed President Neel Kashkari and Boston Fed President Susan Collins both discussed ways the Fed can “manage a dislocation, or pricing disruption, in the Treasury market…[the moves] are instruments designed to keep markets running smoothly by making sure there is enough liquidity, meaning financial institutions have access to the short-term funding they need to operate,” reported Nicole Goodkind of Barron’s.8
Markets were soothed by the assurance that the Fed stands ready to “keep financial markets functioning should the need arise,” reported Stephen Culp of Reuters.9 By the end of trading on Friday, major U.S. stock indices were in positive territory.10 Yields on longer maturities of U.S. Treasuries also finished the week higher.11
Data as of 4/11/25 | 1-Week | YTD | 1-Year | 3-Year | 5-Year | 10-Year |
| Standard & Poor’s 500 Index | 5.7% | -8.8% | 3.2% | 6.7% | 14.2% | 17.3% |
| Dow Jones Global ex-U.S. Index | -0.4 | -0.6 | -0.3 | 0.9 | 6.6 | 1.7 |
| 10-year Treasury Note (yield only) | 4.5 | N/A | 4.6 | 2.8 | 0.8 | 1.9 |
| Gold (per ounce) | 5.8 | 23.7 | 37.7 | 18.3 | 13.2 | 10.4 |
| Bloomberg Commodity Index | 1.8 | 2.8 | -0.9 | -7.0 | 9.9 | 0.2 |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
WHAT DO YOU KNOW ABOUT MONEY? The United States began using paper money in 1690. The Massachusetts Bay Colony paid soldiers fighting military campaigns against the French in Canada with paper notes. “This was an emergency measure, but it turned out to be a solution to the long-term problem of building an economy without large reserves of precious metals. Eventually, all of the other colonies issued their own bills,” according to Smithsonian Education.12
See what you know about the history of American money by taking this brief quiz.
- Ben Franklin printed money for Pennsylvania, Delaware, and New Jersey. He often included images from nature, such as intricately detailed leaves. What was the primary reason Franklin included nature prints on notes?13
- The visually pleasing notes attracted customers
- The prints symbolized the growth of the nation
- The prints symbolized money circulating through the economy
- The prints made Franklin’s notes difficult to counterfeit
- When did the era of “lawful money” (the modern era) begin?14,15
- In 1792, when the US mint was created
- In 1893, after a bank panic
- In 1913, under the 1913 Federal Reserve Act
- In 1936, when Fort Knox was built
- United States currency is held as a reserve, and for trade, by many other countries. What percentage of our currency is held outside the United States?16
- One quarter
- One third
- Two thirds
- Three quarters
- Some denominations of U.S. paper money wear out faster than others. Which denomination has the shortest lifespan?17
- A $1 bill
- A $5 bill
- A $10 bill
- A $20 bill
Weekly Focus – Think About It
“I find television very educating. Every time somebody turns on the set, I go into the other room and read a book.”18
–Groucho Marx, Comedian
Answers: 1) d; 2) c; 3) c; 4) b
* These views are those of Carson Coaching, not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the 3:00 p.m. (London time) gold price as reported by the London Bullion Market Association and is expressed in U.S. Dollars per fine troy ounce. The source for gold data is Federal Reserve Bank of St. Louis (FRED), https://fred.stlouisfed.org/series/GOLDPMGBD228NLBM.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
Sources:
[1] https://www.bloomberg.com/news/articles/2025-04-11/as-markets-sank-and-soared-a-new-fear-spread-across-wall-street or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-14-25-Bloomberg-As-Markets-Sank%20-%201.pdf
2 https://www.barrons.com/livecoverage/trump-tariffs-china-us/card/trump-tariff-pause-welcomed-by-world-leaders-but-china-tensions-mount-UP7utx6ARqUB3SJx2WaJ or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-14-25-Barrons-Trump-Tariff-Pause%20-%202.pdf
3https://www.bloomberg.com/news/articles/2025-04-09/stock-market-today-dow-s-p-live-updates?srnd=phx-markets or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-14-25-Bloomberg-S&P-500-Tumbles%20-%203.pdf
4 https://www.investopedia.com/terms/s/safe-haven.asp
7 https://www.bloomberg.com/news/newsletters/2025-04-11/china-ups-the-ante-in-trump-s-trade-war-evening-briefing-americas?cmpid=eveus&utm_medium=email&utm_source=newsletter&utm_term=250411&utm_campaign=eveus or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-14-25-Bloomberg-China-Ups-the-Ante%20-%207.pdf
8 https://www.barrons.com/articles/fed-treasuries-bond-market-yields-stocks-5aaf4f24 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-14-25-Barrons-Fed-Knows-How-to-Stabilize%20-%208.pdf
[1]0 https://www.barrons.com/market-data?mod=BOL_TOPNAV or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-14-25-Barrons-DJIA-S&P-Nasdaq%20-%2010.pdf
[1]2 https://www.smithsonianeducation.org/educators/lesson_plans/revolutionary_money/introduction.html
[1]3 https://www.uscurrency.gov/sites/default/files/media/podcast/noteworthy-podcast-3-transcript-en.pdf
14 https://www.federalreserve.gov/faqs/money_15197.htm
[1]5 https://www.investopedia.com/terms/f/1913-federal-reserve-act.asp
[1]6 https://www.uscurrency.gov/about-us/currency-facts#
[1]7 https://www.federalreserve.gov/faqs/how-long-is-the-life-span-of-us-paper-money.htm
The Markets
“If you can keep your head when all about you are losing theirs…”1
The advice offered by Rudyard Kipling’s poem “If—” resonated last week. A sharp escalation in trade tensions sparked a stock market downturn despite news that the United States economy created far more jobs in March than economists had expected, reported Lucia Mutikani of Reuters.2
Late Wednesday, President Trump announced tariffs on countries around the world. The tariffs were significantly larger than anticipated, and stock markets immediately moved lower. Over two days, the Standard & Poor’s (S&P) 500 Index lost about $5 trillion in market capitalization, reported Lynn Thomasson of Bloomberg.3
It was the “largest decline for stocks listed on major U.S. exchanges since March 16, 2020, when $3.5 trillion in value was wiped out, according to Dow Jones Market Data,” reported Connor Smith of Barron’s.4 (March 2020 was when the COVID-19 outbreak officially became a pandemic.5)
In contrast, government bonds rallied as yields fell. Investors preference for lower risk assets “resulted in rising demand for government debt in the U.S., U.K., Germany, Japan and Australia — which sent yields down across all those countries,” reported Vivien Lou Chen of MarketWatch.6
Three reasons for the stock market downturn
While tariffs were the catalyst for the market downturn, they weren’t the only reason for the decline. Other contributing factors included:
- A tsunami of uncertainty. You’ve heard it before: Markets hate uncertainty. The new administration’s tariffs brought a tsunami of uncertainty. Some investors opted for safe havens as they awaited greater clarity around key questions, including:
- Are the tariffs a negotiating tool or a permanent tax?
- How will tariffs effect the outlook for economic growth?
- How will tariffs effect corporate profitability?
- How will other countries respond?
“The scope, speed and magnitude of the Trump administration’s tariff blitz left investors with a lot of questions. But one point came through crystal clear: The post–World War II global world economic order is no longer. That is forcing a reassessment by countries on how to respond and pushing investors to reassess long-held assumptions about profit margins, investments, and inflation, reported Reshma Kapadia of Barron’s.”7
- High market valuations. Over the past two-plus years, excitement about artificial intelligence, an economic soft landing, pro-business policies, and other factors have helped lift stock prices to extraordinary levels. By many measures, U.S. stocks were expensive, which made them vulnerable to decline, reported Jacob Sonenshine of Barron’s.8 The imposition of extraordinary tariffs forced investors to reassess expectations for U.S. economic growth, corporate earnings, inflation, and share prices.
“Over the medium to longer term, Trump’s tariff and trade policy will likely accelerate the move to diversify supply chains, emphasize regionalization over globalization, and invest in becoming more self-reliant… But given the uncertainty and increasing costs of inputs, companies may rethink where they allocate long-term capital,” wrote Kapadia. “…’tariffs plus associated uncertainties provide more incentives to build around the U.S., not in the U.S.,’” stated to a source cited by Kapadia.7
- The tariff narrative. Narrative economics is a theory developed by Nobel-prize winning economist Robert Shiller. Its premise is that viral stories influence economic behavior.9 As a result, viral narratives can influence markets. Shiller explained, “…whether it’s the belief that tech stocks can only go up, that housing prices never fall, or that some firms are too big to fail. Whether true or false, stories like these—transmitted by word of mouth, by the news media, and increasingly by social media—drive the economy by driving our decisions about how and where to invest, how much to spend and save, and more.”10
Last week, a dominant narrative was that tariffs may cause a trade war, which could have unfavorable and long-lasting effects on the U.S. economy. “While trade wars don’t involve armies and bloodshed, some of the same rules apply—especially when it’s a war of choice. Strengths need to be assessed, allies cajoled, goals set, and preparations made. When done right, victory can be reached with relative ease and result in an increase in standing. When poorly planned, strengths turn into weakness, quick victories become battles of attrition, and unintended consequences can last for years,” reported Ben Levisohn of Barron’s.11
By the end of the week, the technology-heavy Nasdaq Composite Index was in bear market territory, down more than 20 percent from its previous high. The Dow Jones Industrial Average had moved into correction territory, and the S&P 500 Index had experienced its worst week since 2020, reported Amalya Dubrovsky, Karen Friar, and Ines Ferré of Yahoo! Finance.12 Yields on longer maturities of U.S. Treasuries moved lower, pushing the value of previously issued Treasuries higher.13
Stock market volatility is likely to continue as the tariff story plays out. While the tariff story plays out, it’s a good idea to stay calm and focus on your plan. Your portfolio allocation and diversification strategies were put in place to help you achieve your financial goals. Taking drastic action in response to a short-term market upheaval could affect your ability to reach those goals. If you have questions or would like to discuss recent events, please get in touch.
Data as of 4/4/25 | 1-Week | YTD | 1-Year | 3-Year | 5-Year | 10-Year |
| Standard & Poor’s 500 Index | -9.1% | -13.7% | -1.4% | 3.5% | 13.8% | 9.3% |
| Dow Jones Global ex-U.S. Index | -5.6 | -0.2 | -1.0 | 0.0 | 7.6 | 1.9 |
| 10-year Treasury Note (yield only) | 4.0 | N/A | 4.3 | 2.4 | 0.7 | 1.9 |
| Gold (per ounce) | -0.6 | 17.0 | 33.2 | 16.5 | 13.1 | 9.7 |
| Bloomberg Commodity Index | -5.8 | 0.9 | -2.5 | -7.4 | 9.7 | -0.1 |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
FIRST QUARTER REVIEW: CHANGING EXPECTATIONS. In late January, as the new administration took office, markets anticipated that proposed tariffs would create economic headwinds that could be offset by the positive effects of deregulation (a productivity boost) and tax cuts (economic stimulus), reported Ben Levisohn of Barron’s.14 By the end of the quarter, market expectations had changed dramatically.
“The highest-conviction trades coming into 2025 – buy U.S. exceptionalism and the Mag 7, avoid the rest of the world, sell bonds – have been turned on their head. Chinese and German stocks are up by double digits since Jan. 20, while the U.S. – and notably information tech and consumer-discretionary stocks – is down since then,” reported Randall Forsyth of Barron’s.15
A market rotation
Financial markets experienced a rotation during the first quarter as market expectations shifted. Rotations occur when a dominant trend fades. Typically, investors sell investments that were in favor and buy assets that they believe are better opportunities, reported Sarah Hansen of Morningstar.16 During the first quarter of 2025, we saw sector, style, and regional rotations.
U.S. technology stocks lost their luster. In the United States, the information technology, communication services, and consumer discretionary sectors – home to the Magnificent Seven – delivered stellar total returns in 2023 and 2024. However, their dominance faded in the first quarter of 2025, while more defensive sectors of the market delivered positive returns. 17,18
Value stocks came into favor. “Worries over historically elevated tech stock valuations, combined with a tariff-induced bout of risk avoidance, have driven the recent rotation from growth into value,” reported Esha Dey of Bloomberg.19 The S&P 500 Value Index was up 0.28 percent during the first quarter, while the S&P 500 Growth Index dropped 8.47 percent.20
International stocks outperformed. “As the US stock market lost ground in the quarter, international markets surged amid a global shift. Chinese markets gained 14.17 [percent], while eurozone markets rose 12.24 [percent], thanks in part to major fiscal initiatives designed to stimulate growth and enhance the region’s defense capabilities amid the ongoing conflict between Russia and Ukraine,” reported Sarah Hansen of Morningstar.21
Rotations can be healthy. The key is “to focus on emerging leadership in other sectors demonstrating relative strength,” stated a source cited by Levisohn.14
Weekly Focus – Think About It
“When I hear somebody sigh, ‘Life is hard,’ I am always tempted to ask, ‘Compared to what?’”22
– Sydney J. Harris, Journalist
* These views are those of Carson Coaching, not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the 3:00 p.m. (London time) gold price as reported by the London Bullion Market Association and is expressed in U.S. Dollars per fine troy ounce. The source for gold data is Federal Reserve Bank of St. Louis (FRED), https://fred.stlouisfed.org/series/GOLDPMGBD228NLBM.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
Sources:
2 https://www.reuters.com/markets/us/us-job-growth-beats-expectations-march-2025-04-04/
3 https://www.bloomberg.com/news/newsletters/2025-04-04/stock-market-crash-trump-trade-war-hits-s-p-500-nasdaq-100 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-07-25-Bloomberg-Trump-Takes-Wrecking-Ball%20-%203.pdf
4 https://www.barrons.com/livecoverage/stock-market-today-040325?mod=hp_LEDE_A_1 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-07-25-Barrons-Stock-Market-Worst-Day%20-%204.pdf
5 https://www.yalemedicine.org/news/covid-timeline
7 https://www.barrons.com/articles/trump-tariffs-u-s-trade-war-china-europe-cf9a1227 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-07-25-Tariff-Damage-Cant-be-Undone%20-%207.pdf
8 https://www.barrons.com/articles/stock-market-expensive-rally-cd5f460e or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-07-25-Barrons-Stock-Market-Avoid-Bloodbath%20-%208.pdf
9 https://news.yale.edu/2019/11/04/robert-shiller-power-narratives
11 https://www.barrons.com/articles/stock-market-trump-tariff-bear-288ed46b?refsec=up-and-down-wall-street&mod=topics_up-and-down-wall-street or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-07-25-Barrons-Trump-is-Fighting-Trade-War%20-%2011.pdf
[1]4 https://www.barrons.com/articles/stock-market-outlook-rethink-trump-tariffs-federal-reserve-policy-5776184b?refsec=up-and-down-wall-street&mod=topics_up-and-down-wall-street or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-07-25-Barrons-2025-Market-Prediction-Soured%20-%2014.pdf
[1]5 https://www.barrons.com/articles/u-s-stocks-suffer-trump-economic-paradigm-shift-86306db0?mod=article_inline or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-07-25-Barrons-Trump-Engineering-Paradigm-Shift%20-%2015.pdf
16 https://www.morningstar.com/markets/stock-market-rotation-is-underway-will-it-last
[1]7 https://www.spglobal.com/spdji/en/documents/performance-reports/spdji-sector-performance-matrix.pdf
[1]8 https://www.spglobal.com/spdji/en/documents/performance-reports/dashboard-us-sector.pdf
[1]9 https://www.bloomberg.com/news/articles/2025-03-28/value-stock-gains-need-fresh-catalyst-with-earnings-a-wild-card or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/04-07-25-Bloomberg-Value-Stock-Gains%20-%2019.pdf
20 https://www.spglobal.com/spdji/en/indices/equity/sp-500-value/#overview and https://www.spglobal.com/spdji/en/indices/equity/sp-500-growth/#overview [Factsheets]
21 https://www.morningstar.com/markets/13-charts-q1s-dramatic-rotation-stocks
22 https://www.inc.com/bill-murphy-jr/365-inspirational-quotes-for-2025/91066225
The Markets
Risk-on. Risk-off.
If you read the financial press, you may have seen the terms “risk-on” and “risk-off”. When investing, there is a risk-return spectrum. Stocks typically have higher risk and higher return potential than high-quality bonds. High-quality bonds have lower risk and lower return potential than stocks, although they typically have higher risk and higher return potential than cash.1
In financial speak, investors are:
- Risk-on when they are excited about investing in stocks (and other types of assets that have higher risk profiles). “Risk-on environments can be carried by expanding corporate earnings, optimistic economic outlook, accommodative central bank policies, and speculation. As the market displays strong influential fundamentals, investors perceive less risk about the market and its outlook,” reported Adam Hayes for Investopedia.2 A risk-on environment may lead to rising stock prices.
- Risk-off when they become cautious and concerned about losses. Risk averse investors may sell some types of stocks (and other types of assets that have higher risk profiles) in favor of dividend-paying stocks and more stable types of investments that can help preserve principal. Risk-off environments may arise when economic growth slows, economic uncertainty rises, company earnings slide lower, consumer confidence wavers, or financial markets experience other kinds of disruptions. A risk-off environment may lead to falling stock prices.2
Last week, investors moved from a risk-on to a risk-off outlook. The change in attitude resulted from concerns about:
- Tariffs. Concerns about tariffs intensified last week when “An unexpected move against car imports this week renewed warnings from economists that tariffs will almost surely raise consumer prices and harm economic growth,” reported Jeran Wittenstein and Ryan Vlastelica of Bloomberg.3
- Sticky inflation. Last week, the personal consumption expenditures (PCE) index, which is one of the Federal Reserve’s preferred inflation gauges, showed that headline inflation remained steady month to month and year to year. However, core inflation, which excludes food and energy prices, rose month to month and year to year.4
- Consumer sentiment. The final reading for consumer sentiment in March did not improve. “This month’s decline reflects a clear consensus across all demographic and political affiliations; Republicans joined independents and Democrats in expressing worsening expectations since February for their personal finances, business conditions, unemployment, and inflation,” wrote University of Michigan Surveys of Consumers Director Joanne Hsu.5
During periods of market volatility, it’s important to keep a long-term perspective. Having an asset allocation strategy that reflects your risk tolerance and financial goals helps insulate your assets from market turbulence. Asset allocation helps manage risk, but it does not prevent losses.
Last week, major U.S. stock indices moved lower.6 Yields on U.S. Treasuries were mixed.7
Data as of 3/28/25 | 1-Week | YTD | 1-Year | 3-Year | 5-Year | 10-Year |
| Standard & Poor’s 500 Index | -1.5% | -5.1% | 6.2% | 6.9% | 16.3% | 10.3% |
| Dow Jones Global ex-U.S. Index | -1.2 | 5.7 | 5.1 | 2.6 | 8.9 | 2.7 |
| 10-year Treasury Note (yield only) | 4.3 | N/A | 4.2 | 2.5 | 0.7 | 2.0 |
| Gold (per ounce) | 1.9 | 17.7 | 38.7 | 16.6 | 13.7 | 10.0 |
| Bloomberg Commodity Index | 0.5 | 7.1 | 6.3 | -5.7 | 11.3 | 0.6 |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
THE SILVER LINING OF MARKET DOWNTURNS. Volatile markets are challenging. Watching the value of your assets bounce higher and lower can be frustrating. In times like these, it can be helpful to focus on the opportunities that can be created by market volatility. One of those opportunities is tax-loss harvesting.
Investors “harvest” tax losses by selling an asset for less than they purchased it. Unfortunately, not every investment delivers stellar returns. Almost every investor has either owned an asset that loses value due to company underperformance or a market downturn. When the asset is sold at a lower value than its purchase price, the investor realizes a capital loss.
From a tax perspective, losses are quite valuable. They can help:
- Minimize capital gains tax. Capital losses can be used to offset capital gains, dollar for dollar. For example, if an investor sells shares of Company A for a gain of $1 and sells shares of Company B for a loss of $1, then the loss offsets the gain.8
- Reduce taxable income today. When tax losses aren’t used to offset gains, the losses can reduce taxable income by up to $3,000. So, if an investor has a capital loss of $6,000 and a capital gain of $3,000, the capital loss could offset the capital gain and the $3,000 loss that is leftover could be used to reduce the investor’s taxable income.8
- Reduce capital gains and taxable income tomorrow. When capital losses are greater than capital gains and income reductions combined, the extra losses can be carried forward and used to offset capital gains and taxable income in the future.8
The key to tax loss harvesting is that the money from the asset sale must be invested in a new opportunity – perhaps capitalizing on the chance to invest in a strong company at an attractive price, which is another benefit of market downturns. In general, the new investment should fill a similar role in the investor’s asset allocation strategy to the investment that was sold.
The silver lining of market downturns is that investment losses can be tax wins.
Weekly Focus – Think About It
“Courage is the price that life exacts for granting peace.”9
– Amelia Earhart, Aviation pioneer
* These views are those of Carson Coaching, not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the 3:00 p.m. (London time) gold price as reported by the London Bullion Market Association and is expressed in U.S. Dollars per fine troy ounce. The source for gold data is Federal Reserve Bank of St. Louis (FRED), https://fred.stlouisfed.org/series/GOLDPMGBD228NLBM.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
Sources:
2 https://www.investopedia.com/terms/r/risk-on-risk-off.asp
3 https://www.bloomberg.com/news/articles/2025-03-28/market-rout-starts-with-big-tech-as-tariff-inflation-fears-hit?srnd=homepage-americas or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/03-31-25-Bloomberg-Market-Rout-Intensifies%20-%203.pdf
4 https://www.bea.gov/sites/default/files/2025-03/pi0225.pdf [Tables 5 and 7]
5 http://www.sca.isr.umich.edu
6 https://www.barrons.com/market-data?mod=BOL_TOPNAV or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/03-31-25-Barrons-DJIA-S&P-Nasdaq%20-%206.pdf
8 https://www.irs.gov/taxtopics/tc409
9 https://www.today.com/life/quotes/strong-women-quotes-rcna66486