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. With new tariff policies enacted by the new administration, uncertainty around the day-to-day headlines has been at renewed highs. After a strong start to the year and an even strong two-year run, U.S. equities are roughly down YTD. The recent pullback is certainly not ideal, but as shown in the chart above the argument for broader stock and bond diversification for long-term portfolios is making a strong case. International equities have outperformed the U.S. in 2025, and bonds have continued to pay attractive coupons while rates have generally decreased in 2025.
While daily stock and bond markets attempt to incorporate the most recent data points, 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 is expected to increase more in the short-term, and corporate earnings largely delivered one of the better quarters in recent years. Overall, the main pillars for longer-term performance in the economy are still standing, but potential cracks may be starting to emerge.
As shared previously, in January, the JNBA Investment Committee made a tactical decision to reduce our equity exposure across client portfolios in favor of fixed income. 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 have pulled back from 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 going forward.
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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