Market Snapshot
By the Numbers
- Despite hitting an all-time high in February, the S&P 500 fell 1.4% for the month, the Nasdaq fell 4.0%, and the Dow Jones Industrial Average fell 1.6%.
- Year-to-date, the S&P 500 is up 1.2%, while the Nasdaq is down 2.4%, giving up its year-to-date gains during the month.
- The Aggregate Bond index gained 2.2%. The 10-year Treasury yield ended the month at 4.2%, but reached as high as 4.6% mid-month.
- The Consumer Price Index increased 3.0% year-over-year, higher than expected and faster than the 2.9% reading in December.
- Retail sales fell 0.9%, including a 1.9% decline in non-store retail sales. The household savings rate rose slightly to 4.6% but is still below the historical average of 6.2%.
- Bitcoin declined from over $102,000 at the beginning of the month to around $84,000 at month end.
Can a strong economy withstand policy uncertainty?
February was a volatile month for stocks. Inflation and tariffs fueled worries about growth as the Trump administration began implementing policy changes. Fourth quarter earnings reports were solid, though mixed economic data and policy uncertainty prompted investors to favor defensive sectors. While major market indices ended weaker, the S&P 500 also reached new all-time highs during the month, demonstrating the volatility that comes with rapid-fire policy changes. Bonds, especially longer-dated Treasurys, helped stabilize portfolios during the market volatility.
Tech continued the selloff that started in late December, with the Magnificent 7 falling 8.1% in the month, struggling to find its footing, even as plans for significant artificial intelligence spending were confirmed by several large technology companies and Nvidia reported solid earnings results. Investors continue to worry about the growth potential for some of the largest beneficiaries of the AI trade, especially if tariffs worsen production constraints.
While the recent selloff has improved valuations for many parts of the market, the Information Technology and Communication Services sectors remain priced at premiums compared to their historical averages. In fact, all but two S&P 500 sectors still have positive year-to-date returns. The top sectors, including Healthcare, Financials, and Consumer Staples, have tended to be more defensive.
Bonds have also played a positive role in this environment. The 10-year yield ended the month at 4.2%, more than one-third of a percentage point below where it began the month. When interest rates fall, the prices on existing bonds rise since their higher yields become more attractive. Thus, when interest rates decline alongside the stock market, bonds can help provide balance to portfolios.
As seen in the chart below, both fixed income and international markets have outperformed the S&P 500 year-to-date. While the stock market, and technology stocks in particular, have performed well over the past few years, February underscores the importance of being balanced across different parts of the market to help manage risk across different market conditions.
Tariffs & Inflation
It’s not surprising that one of the main drivers of market volatility in February was inflation, which has only amplified as we begin March given the tariffs being implemented. According to the Consumer Price Index, inflation is back at 3% for the first time since last summer. Other inflation readings also showed that prices across many categories are stickier than many economists had anticipated.
Consumer expectations of future inflation have also risen. The combination of still-rising food and shelter prices and the anticipated impact of tariffs is driving consumers to prepare for even higher prices. Over the next five years, consumers expect average inflation as high as 3.5%.
The fear of a resurgence in inflation has rattled some investors. In addition to their economic and financial market impacts, higher prices increase uncertainty around Fed policy. If inflation remains stubborn, the Fed may need to keep rates higher for longer. We are watching the tariff impacts very closely and will provide separate commentary after it unfolds a bit further.
Corporate earnings are a bright spot
Amid these market and economic concerns, corporate earnings continue to be strong. This earnings season was characterized by broad participation in growth across sectors and growing profit margins, which are indicators of a healthy economy. Notably, 75% of companies have exceeded consensus earnings estimates, in-line with the 10-year average. However, the size of the earnings beats was greater than the 10-year average.
Staying disciplined will only grow in importance with investor attention focused on the implementation of new administration policies, Federal Reserve decisions, and ongoing technological developments. Diversification remains critical; after 2 years of dominance the S&P 500 is currently being outperformed by sectors previously out of favor.
COTM: Many asset classes beyond U.S. stocks are positive this year
© 2025 Clearnomics, Inc.
The views expressed represent the opinions of Tiller Private Wealth as of the date noted and are subject to change. These views are not intended as a forecast, a guarantee of future results, investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial or legal advice or service to any person. The information contained has been compiled from sources deemed reliable, yet accuracy is not guaranteed.
Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website www.adviserinfo.sec.gov. Past performance is not a guarantee of future results.
The market indices discussed are unmanaged. Investors cannot directly invest in unmanaged indices.
The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The market index is unmanaged.
The NASDAQ Composite Index is an unmanaged, market-weighted index of all over the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.
The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
Data sources: Clearnomics, YCharts, The Wall Street Journal, Treasury Department, & US Federal Reserve.