2025 is off to a busy start with investors digesting updated earnings results, recent actions taken by the new administration, new economic data, and potentially new technological breakthroughs. While each day has brought new headlines driving further optimism or increased concern, markets have so far digested each day into a strong start to the year for equities. While daily stock and bond markets attempt to incorporate the most recent datapoints, the long-term picture remains largely dependent on how these recent developments impact long-term results. Unemployment remains largely steady, inflation has increased slightly, and corporate earnings have so far delivered one of the better quarters in recent years.
In our recent 2025 outlook podcast from early January, we discussed how we would tactically look to adjust client portfolios should that long-term picture change after two strong years. To that point, in mid-January one of our main asset allocation models our JNBA Investment Committee monitors indicated a more cautious outlook, and we followed by reducing equities (in this case S&P 500 exposure) and moving assets into short-term defensive holdings (short-term Cash earning roughly 4% annual yield). This trade resulted in reducing our previous overweight to stocks vs. bonds that was in place since the start of last year. In 2024, the S&P 500 outperformed the U. S. Aggregate Bond Index by approximately 23%. While no one has a crystal ball, our investment team agrees that there are more unknowns in the market to factor in than there have been in the past few years. Stocks are already back to all-time highs, and investors are constantly monitoring the landscape for impacts from potential trade and tax policies that could affect the delicate balancing act between inflation, unemployment, and corporate earnings.
In these situations, prudent risk reduction can take precedence over seeking absolute returns. So far 2025 has shown us how quickly things are changing, and with more moving pieces we believe an initial cautious stance is warranted as the long-term impacts unfold. These tactical changes are always fluid, and we will continue to be vigilant for more opportunities across all asset classes. As always, please reach out to your JNBA Advisory Team with any questions.
Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from JNBA Financial Advisors, LLC.
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