February Market Recap
Tariff threats went up while stocks went down in February.
Equities stumbled through their first negative month of the year despite exceptional corporate earnings growth, which shows that optimism is waning even as profitability soars. The S&P 500 and Dow Jones Industrial Average lost between 1.4% and 1.6%. The NASDAQ lost nearly 4% as many of last year’s top-performing technology stocks tumbled lower.
Six of the 11 sectors in the S&P 500 finished higher last month. Consumer Staples (+5.6%) and Real Estate (+4.1%) performed the best. Consumer Discretionary (-9.4%) and Communication Services (-6.3%) fell the most.
Benchmark Returns: February 2025 | YTD 2025
|
Dow Jones
|
S&P 500
|
NASDAQ
|
-1.58% | +3.05%
|
+-1.42% | +1.24%
|
-3.97% | -2.40%
|
|---|
Driven by fresh inflation concerns and looming tariffs scheduled to take effect on March 4, investors turned pessimistic in the second half of February. Consumer confidence fell abruptly, posting the largest monthly decline in three-and-a-half years. Stock prices followed suit, with the S&P 500 falling nearly 5% from its all-time high.
The US government is primed to implement new 25% tariffs on imports from Canada and Mexico, plus a second round of tariffs against China that will result in 20% tariffs on Chinese goods. If left in place, the scope of these tariffs would far surpass smaller measures put in place during Donald Trump’s first administration, though it’s difficult to predict how long these import taxes are likely to last. That uncertainty is part of what elevated market volatility last month.
As stock prices dipped, so too did bond yields. Ten-year US Treasury yields ended February at 4.23%, their lowest point in three months. It’s a sharp drop from the 4.81% yield on Treasuries as of mid-January and indicates stronger demand for the safety of bonds and a move away from riskier asset classes.
Mortgage rates fell to a 2025 low. As of late February, the average 30-year fixed loan carried a 6.75% interest rate. 15-year fixed loans had interest rates of 5.9% on average.
Investors shunned stocks despite incredibly strong earnings reports. S&P 500 companies grew earnings by more than 18% in Q4 2024 compared to a year earlier. That’s the strongest earnings growth since late 2021 and far beyond the 11.7% growth forecast as of December 31. Even with high expectations, corporate earnings continue to exceed the bar.
The latest inflation data caused some anxiety when the Consumer Price Index (CPI) rose 0.5% month-over-month and 3% from a year earlier. The Personal Consumption Expenditures (PCE) numbers were less concerning. PCE increased by 2.5% from a year ago, down slightly from a month earlier.
International stocks were serious outperformers in February. Non-US Developed equities gained nearly 3% last month. Emerging Markets rose 1.2%. It’s interesting that foreign stocks would be viewed as somewhat insulated from the same tariff policies driving US stocks lower. We’ll see whether the outperformance becomes a trend or proves to be short-lived.
Marks Group strategies have no exposure to cryptocurrencies but as the asset class matures, it will have some impact on financial markets as a whole. Cryptocurrencies have been mostly flying high since the November election but became exceptionally volatile in February; this despite Trump’s announcement that the federal government would create a new “strategic reserve” of cryptocurrencies that includes popular names Bitcoin and Ether.
Traditional commodities like oil also fell last month. West Texas Intermediate crude finished February trading just below $70 per barrel, down 3.8% since the end of January.
Ben Marks
Chief Investment Officer
Brett Angel
Senior Wealth Advisor
Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.
Marks Group Wealth Management performs in-house analysis on companies. Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings. The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice. Additional information is available upon request.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser. Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.
Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets. No strategy assures success or protects against loss. Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.
Past performance is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price to-book ratios and higher forecasted growth values.
Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.
MSCI EAFE Index consists of the following developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.
VIX-The Chicago Board Options Exchange’s CBOE Volatility Index, a popular measure of the stock market’s expectation of volatility based on S&P 500 index options. It is calculated and disseminated on a real-time basis by the CBOE, and is often referred to as the fear index or fear gauge.
