Markets continue to navigate heightened uncertainty, especially around tariff policies and their potential impact on both inflation and growth. This has triggered further volatility and a larger pullback in the U.S. equity market. As of March 13, the S&P 500 had experienced a 10% decline from its prior high on February 19, with selling pressure concentrated in growth stocks (a segment of the market we had previously pointed out as being expensive on a valuation basis). In contrast, markets outside the U.S. have had a stronger start to the year, with both developed non-U.S. and emerging market indices climbing year-to-date. At times like this, it’s important to remember that the S&P 500 has averaged annual intra-year drawdowns of 10.5% since 2000. While drawdowns never feel good, it is normal for markets to go through repricing periods when uncertainty around the economic outlook is heightened.

Questions of how and when legacy and donor intent should drive the structure and strategy for philanthropic activity has taken on fresh relevance in recent years. The philanthropic sector is increasingly called upon to fill gaps in social services, advocacy, and community resilience efforts. At the same time, a new generation of philanthropists is questioning whether foundations should exist in perpetuity or spend down their endowments, reflecting a sense of urgency to address issues such as climate change.

In what was a turbulent month, US markets weathered significant economic headwinds with surprising resilience. The S&P 500 experienced a challenging month, with the Magnificent 7 stocks selling off nearly 9% and marking their worst performance since late 2022, yet remarkably the S&P 500 remained only 3% below its all-time high. Corporate earnings demonstrated strength, with the S&P 500 reporting 17.8% year-over-year earnings growth—the highest since Q4 2021—and slightly better-than-expected revenue growth of 5.3%. Economic indicators presented a mixed picture, with January payrolls adding 143,000 jobs while inflation exceeded expectations, prompting Federal Reserve Chair Jay Powell to signal continued cautious monetary policy. Rising negative sentiment, fueled by policy uncertainty and potential tariff impacts, could potentially dampen consumer spending and market confidence in the coming months.

As of mid-February, global markets are experiencing a rotation in leadership, with a more balanced rally across sectors. Developed Non-US equities driven by Europe are leading the way. While the S&P 500 is +4% YTD, leadership is no longer concentrated in just the Mega Cap Tech names, reflecting healthier market breadth.

Private markets have undergone a tremendous amount of structural change over the last several decades. 2024 brought these changes directly into the headlines. Select examples¹ include:  

• SpaceX Valuation Jumps to About $350 Billion in Insider Deal – Bloomberg 

• AI startup Databricks hits $62 billion valuation in record VC round – Reuters 

• OpenAI raises $6.6B and is now valued at $157B – TechCrunch

Global markets experienced a dynamic start to the year, marked by robust US economic data and geopolitical tension. Employment data continued to be strong as payrolls came in above expectations and the unemployment rate dropped. Core inflation also came in below expectations as shelter costs cool. The S&P 500 delivered a solid 2.8% monthly return even with the threat of substantial tariffs on imports from Canada, Mexico, and China. In the technology sector, Chinese AI startup DeepSeek introduced a cost-effective model that challenges major competitors, contributing to a slight tech industry sell-off. European equities demonstrated resilience, even amid Eurozone economic stagnation and the ECB (among other central banks) chose to continue to cut rates in January. The Federal Reserve, however, elected to keep their benchmark rate unchanged at 4.25-4.5% even with pressure from the White House to lower rates. Chair Powell reiterated that the Fed would remain apolitical as they continue to focus on bringing inflation down to more normal levels.

As highlighted in Pathstone’s 2025 Investment Outlook, we anticipate positive if slightly uneven global economic growth in 2025, led by the U.S. economy.  Investors are sharpening their focus on the new U.S. administration’s proposed fiscal, immigration, regulatory, and trade policies. The impacts of these policies, as well as military tensions across borders, will be watched closely for signs that the drivers of economic growth could be stymied.