Monthly Observations - February 2025

By Chris Zaccarelli

Monthly Observations

The S&P 500 rose 2.8% in January, which gave it a strong start to the year. The MSCI All Country World index also rose during the month, gaining 3.8%, which improved its year-to-date return to 3.8%. The Bloomberg BarCap U.S. Aggregate Bond index was unchanged during January, leaving its year-to-date return at 0.0%.

The stock market rose sharply following the inauguration of the new president, with investors optimistic about economic growth, lower taxes and deregulation. However, markets also had to grapple with the reality that the new president was serious about tariffs, which caused some concern about inflation and trade wars.

Monthly Highlights

The new president was inaugurated and markets rose sharply

DeepSeek shocked the AI world with a low-cost AI model

Tariffs are now a real threat and markets are starting to price them in

News in Review

Below are some stories that caught our eye this past month. To learn more, follow the links to the full article.

Trump Begins His Second Term with Sweeping Executive Orders

President Trump was inaugurated on January 20th and immediately signed a series of executive orders, many of which were designed to reverse the policies of the Biden administration. Some of the most market-relevant ones included pulling out of the Paris Climate Agreement, declaring a national energy emergency, and directing various agencies to review and potentially roll back many of the regulations enacted during the Biden administration.

DeepSeek Sends Shockwaves Through the AI World

A Chinese AI startup called DeepSeek released an AI model that reportedly matches the performance of the leading US AI models at a fraction of the cost. This caused a sharp selloff in AI-related stocks like Nvidia because investors worried that the massive capital spending on AI infrastructure might not be necessary if cheaper alternatives exist. The news was a shock to the AI world and is likely to have long-lasting implications.

Trump Threatens Tariffs on Canada, Mexico and China

The new administration threatened significant tariffs on the three largest US trading partners: Canada (25%), Mexico (25%) and China (10%). Canada and Mexico are both part of the USMCA trade agreement and their governments threatened to retaliate, raising the specter of a trade war that would be harmful to all three economies.

Man Mistakes His Own Reflection for a Burglar, Calls Police

A 73-year-old man in Germany called the police after he thought he saw a suspicious person looking through his window. When the police arrived, they discovered that the man had spotted his own reflection in a window. Apparently the lighting conditions and the angle were just right to fool him into thinking someone was looking into his house.

DISCLOSURES

Securities offered through LPL Financial, Member FINRA/SIPC. Blackbridge Financial is another business name of Independent Advisor Alliance, LLC. All investment advice is offered through Independent Advisor Alliance, LLC, a registered investment adviser. Independent Advisor Alliance, LLC is a separate entity from LPL Financial. The opinions expressed in this material do not necessarily reflect the views of LPL Financial.

This newsletter was written and produced by the Independent Advisor Alliance, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.

S&P 500 INDEX: The Standard & Poor's 500 Index is an unmanaged, 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.

NASDAQ 100 INDEX: The Nasdaq 100 Index is an unmanaged, capitalization-weighted index of the largest 100 non-financial stocks traded on the Nasdaq market. Unlike the S&P 500 it does not represent all major industries and may be more volatile than more broadly constructed indices.

MSCI ACWI INDEX: The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 24 emerging markets (EM) countries. With 2,495 constituents, the index covers approximately 85% of the global investable equity opportunity set.

Bloomberg U.S. Aggregate Bond Index: The Bloomberg U.S. Aggregate Bond Index is a broad-based index of the U.S. investment-grade, fixed-rate bond market, including both government-related and corporate securities and mortgage-backed and asset-backed securities.

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