Insights
Stock Market Recap: January 2025
Month in Review
- Markets started off 2025 on a positive note, led by a broader set of equity markets. For the month, developed international (MSCI EAFE NR USD) returned +5.26% and large cap value (Russell 1000 Value TR Index) returned +4.68%, leading all markets.
- There were pockets of volatility during the month, caused by developments in artificial intelligence and changing trade policies.
- Overall, diversified investors enjoyed January. Participation in the market broadened: the average stock (Equal-Weight S&P 500 TR Index) finished January +3.50%, ahead of market cap weighted index’s 2.78% return (S&P 500 TR Index). Large cap value finished +4.68% (Russell 1000 Value TR Index), ahead of large cap growth’s +1.98% return (Russell 1000 Growth TR Index).
Stocks are Rarely Average
Last year marked the second consecutive year the S&P 500 returned over 25%, making it only the fifth time since 1926 that the index has produced consecutive results of that magnitude. While there have been positive developments in 2025, the fact still remains that the S&P 500 is very concentrated in the top 10 companies, which have pushed the S&P 500’s valuation to above-average levels. How should investors think about this data?
History is a great starting point, with over 100 years of various market conditions, recessions, and geopolitical headlines. History shows that stocks typically have “better-than-average” and “great” years in clusters, much like the S&P 500 has experienced recently. Since 1926, the S&P 500 has averaged 10.4% per year; during that period, it has only posted calendar year returns around the average (8% to 12%) in 6 years. This shows that over longer periods, fundamentals drive stock prices, not year-to-year price fluctuations- the benefit of being a long-term investor.
In addition to understanding historical trends, investors should recognize the broadening out in the current bull market. In January, the S&P 500’s Technology sector was the only sector to fall during the month; the average stock also finished ahead of the index. Investors should view developments such as these favorably as the current bull market continues ahead.
Source: Morningstar as of 12/31/24. U.S. stocks are represented by the S&P 500 Index from 3/4/57 to 12/31/24 and the IA SBBI U.S. Lrg Stock Tr USD Index from 1/1/26 to 3/4/57, unmanaged indexes that are generally considered representative of the U.S. stock market during each given time period.
What’s on Deck for February?
- Earnings season for the fourth quarter of 2024 will continue. As of February 2nd, 32% of S&P 500 companies have reported, with 74% beating earnings estimates and 62% beating revenue estimates.
- The new Administration will continue to roll-out new policies, in addition to Congress working on budget and tax legislation.
