March 2025
Market Update

Monthly Market Summary

• The S&P 500 Index returned -1.3%, outperforming the Russell 2000 Index’s -5.2% return. Six of the eleven S&P 500 sectors traded higher, led by defensive sectors.

• Bonds traded higher, with the U.S. Bond Aggregate delivering a +2.2% total return. Corporate investment-grade bonds produced a +2.4% total return as Treasury yields declined, outperforming corporate high-yield’s +0.9% total return.

• International stocks traded higher and outperformed the S&P 500. Developed Markets gained +3.0%, led by Europe, while Emerging Markets returned +0.74%.

Stocks and Bonds Move in Opposite Directions Amid Market Rotation

Stocks traded lower in a late-month sell-off as sentiment weakened. The S&P 500’s decline erased most of its post-election gains, which had been driven by expectations for stronger growth and deregulation under the new administration. Smaller companies underperformed, with the Russell 2000 ending the month more than -10% below its late November peak. Beneath the surface, the January market rotation continued as last year’s outperformers lagged. The Magnificent 7, a group of mega-cap tech stocks that drove most of 2024’s gains, fell by -8% and dragged down the Nasdaq 100, the Large Cap Growth factor, and the S&P 500. In contrast, defensive sectors and international stocks traded higher, while gold set a new all-time high. In the bond market, Treasury yields declined, with the 10-year yield falling to its lowest level since early December. The decline in interest rates caused bonds to rise, partially offsetting the stock market sell-off.

Economic Growth Holds Steady, but Market Reacts to High Expectations

The sell-off wasn’t triggered by a single event or data point but by a combination of interconnected factors. Economic reports underperformed expectations and revealed a cooling U.S. economy, as the services sector contracted and consumer confidence deteriorated. The combination signaled slowing consumer demand, a key pillar of economic growth during recent years. In Washington, policy uncertainty remained high, with renewed tariff threats against key trading partners and DOGE spending cuts. The market’s primary concern: imposing tariffs and reducing government spending could slow economic growth. In the stock market, Nvidia’s highly anticipated earnings report failed to reignite enthusiasm for AI companies, leading to a broader sell-off in technology stocks.

Market Sentiment Shifts from Growth to Caution in February

Following the election, the market initially focused on the incoming administration’s pro-growth policies. Expectations for tax cuts, deregulation, and increased energy production fueled hopes for stronger U.S. economic growth. At the start of the year, investors were optimistic about a “Goldilocks” scenario—moderate growth, cooling inflation, and lower interest rates. The optimism propelled stocks to new record highs this year, but with economic and policy uncertainty building, investor sentiment has become more cautious. The focus has now shifted from solid earnings growth and a robust labor market to concerns about slowing economic growth and uncertain government policy.

Summary of Market Returns

Current Positioning

Our core equity model has maintained its focus on U.S. large companies. This has been a prevailing trend for many years; however, in recent months, international markets have started to catch up. While we have seen similar patterns in the past, only time will tell if this develops into a sustained long-term trend. We remain committed to closely monitoring market conditions and adjusting our approach as needed.

Another key trend we are watching is interest rates. As volatility has increased due to tariff-related uncertainty, long-term interest rates have been gradually moving back toward 4%. In our tactical bond strategy, we continue to favor bank loans due to their attractive yields and lower interest rate risk. We recognize that this approach reduces the potential appreciation we might see if we held more interest rate-sensitive bonds. However, given the lower volatility, we believe this is a worthwhile tradeoff. That said, we remain actively engaged in monitoring the bond market and our current holdings, and we will adjust our strategy as market conditions evolve in 2025.

As always, if you have questions about your risk level, please reach out and schedule a meeting so we can discuss this further.  We appreciate the trust and confidence you’ve placed in Copperwynd Financial!

Upcoming Events:

Client Appreciation Spring Training Games –

Game 1: Currently we have 4 tickets remaining.  Let us know if you’d like to attend!

• Date: Tuesday, March 11. 2025

• Time: Game starts at 1:05 PM

• Where: Cubs – Sloan Park
  First Base Party Deck
  2510 W. Rio Salado Parkway Mesa, AZ 85201

• Teams: Chicago Cubs vs. Milwaukee Brewers

Game 2: Currently at capacity – Currently at capacity - no Seats avaiable.

• Date: Saturday, March 15, 2025

• Time: Game starts at 1:10 PM

• Where: Salt River Fields
  Blue Moon Landing Deck
  9800 Talking Stick Way, Scottsdale, AZ 85256

• Teams: Arizona Diamondbacks vs. Chicago White Sox

If you would like to join us, please email kcostlow@copperwyndfinancial.com or give us a call at the office 480-348-2100 to reserve tickets. In an effort to let as many clients attend as possible, please limit your initial request to two per family. Once you have reserved your tickets, more information will follow.

Hope to see you there!

If you have any questions, please do not hesitate to contact our office at 480-348-2100.

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To download the March 2025 Newsletter: CLICK HERE

Copperwynd Financial, LLC is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Copperwynd Financial, LLC and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Copperwynd Financial, LLC unless a client service agreement is in place.

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This commentary reflects the personal opinions, viewpoints and analyses of the Copperwynd Financial, LLC employees providing such comments and should not be regarded as a description of advisory services provided by Copperwynd Financial, LLC or performance returns of any Copperwynd Financial, LLC client. Investments in securities involve the risk of loss. Past performance is no guarantee of future returns.

The S&P 500 Index or the Standard & Poor’s 500 Index is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies. The S&P 500 is a float-weighted index, meaning company market capitalizations are adjusted by the number of shares available for public trading. Note: Investors cannot invest directly in an index. These unmanaged indices do not reflect management fees and transaction costs that are associated with most investments.