U.S. stocks closed out the quarter on a low note, with the S&P 500 falling more than 5% in March on continued uncertainty around tariff policy, sticky inflation, and rising concerns over future economic growth. Non-U.S. stocks held up somewhat better on the month, with developed international equities declining by 0.40%, while emerging markets stocks eked out a slight gain of 0.63%. The dollar played a large role in non-U.S. equity outperformance, weakening by more than 2% versus the EAFE basket of currencies and correspondingly adding to international returns for U.S. investors. Bonds ended the month essentially flat, but posted a quarterly gain of 2.78% as rates declined meaningfully from their intra-quarter highs. Commodities were a top performing asset on both the month and quarter, fueled by record high gold prices.
Equity
U.S. equities struggled throughout much of 2025’s first quarter as mega cap growth stocks led markets lower. Concerns over tariffs and waning sentiment at both the consumer and business level called into question the sustainability of the “American Exceptionalism” story. This was particularly evident in the performance of the Magnificent 7, which fell nearly 16% on the quarter and for a brief time entered a technical bear market (a 20% decline from its peak) in mid-March. Value stocks, although falling in March, generally weathered the storm, producing a gain of 2.14% in Q1 and outperforming their growth counterparts by more than 12%.
Non-U.S. stocks were the clear winner on the quarter, following a difficult 2024 that was greatly influenced by a near-historic strengthening of the U.S. dollar. Unlike the U.S., where the message was austerity (via cuts to deficit spending and the DOGE initiative), a much more stimulative and accommodative tone came out of Europe and China. This led to gains of 6.86% for the MSCI EAFE index and double-digit gains for the value side of the market (+11.56%), while emerging markets performance (+2.93%) was fueled by strong Chinese equity market gains. The dollar also provided an overdue boost to developed markets returns, as it weakened during the quarter by nearly 4% versus the EAFE-basket of currencies.
Fixed Income
Investment grade bonds began the year with a solid showing, gaining 2.78% in Q1. Treasuries were a top performer, as the yield on the 10-year treasury declined from a peak of nearly 4.8% in January to 4.2% at quarter-end. Although markets dealt with concerns around sticky inflation (which should pressure rates upward), this was generally outweighed by concerns over a potential economic slowdown due to tariff uncertainty. Within the U.S., high yield bonds, although positive for the quarter, were an underperformer. Returns for this credit-sensitive asset class struggled amidst March’s equity selloff, with spreads widening by nearly 60 bps on the quarter. Similar to the equity side of the market, emerging markets bonds were a leader in Q1, gaining 4.31%. Returns were driven by a combination of their attractive income, yield declines, as well as a near 2% decline in the dollar.
Real Assets
Broad-basket commodities outperformed just about all U.S. assets in Q1, gaining 8.88%. The asset class was driven higher by strong price gains out of a handful of its largest components. Gold for instance, ended the quarter at an all-time high price of more than $3,100 per troy/oz., equating to a YTD increase of 19%. Natural gas also contributed to the index’s total return, with price gains of just over 13% due to a combination of increased demand and supply constraints.
Closed End Funds
Closed end funds started off the year on sure footing, despite taking a slight step back in March. At a universe level, discounts ended the quarter at an average of 4.4% compared to 5.8% on December 31st. The most significant discount narrowing was seen within international equity, where discounts narrowed by nearly 400 bps, boosted by strong international equity market performance. Municipal bonds saw discounts narrow by more than 200 bps, as yields declined meaningfully throughout the quarter, while taxable fixed income discounts narrowed by nearly 100 bps despite spreads widening in March.
iCM Tactical Strategies
iCM’s tactical strategies, which utilize ETFs and/or mutual funds, performed well on both an absolute and relative basis during the quarter. Our equity strategy was supported by a relative overweight to value and non-U.S. stocks, as well as an out-of-benchmark position in broad-basket commodities. Our fixed income allocation saw a modest headwind from our underweight to duration, while an out-of-benchmark position in emerging markets local bonds was additive.
Important Disclosures
Integrated Capital Management, Inc. is an SEC Registered Investment Advisor. Registration does not imply any certain level of skill or training. Monthly “Market Flash” is intended solely to report on various investment views held by Integrated Capital Management. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer or recommendation to purchase or sell a security.
Past performance is no guarantee of future results. Please note that investments in foreign markets are subject to special currency, political, and economic risks. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index.
Asset Allocation Outlook is intended solely to report on various investment views held by Integrated Capital Management. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer or recommendation to purchase or sell a security. Outlook may change at any time given shifting market conditions. Past performance is no guarantee of future results. Please note that investments in foreign markets are subject to special currency, political, and economic risks. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index.
Closed end funds are exchange traded, may trade at a discount to their net asset values and may deploy leverage. When the strategy purchases shares of a closed-end fund at a discount to its net asset value, there can be no assurance that the discount will decrease and may possibly increase. If a closed-end fund uses leverage, increases and decreases in the value of its share price may be magnified. Distributions by a closed-end fund may include a return of capital, which would reduce the fund’s net asset value and its earnings capacity. Closed end funds are offered by prospectus. The prospectus and/or other applicable offering documents contain this and other important information about the investment strategy. You should read the prospectus and/or other applicable offering documents carefully before investing. Investors should consider the investment objectives, risks, charges and expenses of the investment strategy before investing. iCM uses third-party data that is believed to be accurate and complete. All data is subject to change.
All investing involves the assumption of risk and the possible loss of principal. The main risks as it pertains to iCM’s strategies are US equity risk, international equity and fixed-income market risk, interest rate risk and currency risk. While attempting to achieve the objectives of the strategies, investors will be exposed to the risk of loss from these sources along with others yet to be identified.
TICE Blended Benchmark comprised of 32% S&P 500/8% MSCI EAFE/38% Bloomberg Aggregate Bond/20% Bloomberg Municipal Bond/2% Cash
FTSE NAREIT All Equity REITs TR = U.S. REITs
S&P 500 Index = U.S. Large Cap
Russell 1000 Growth TR = U.S. Large Growth
Russell 1000 Value TR = U.S. Large Value
Russell 2000 Index = U.S. Small Cap
MSCI EAFE ND USD = Developed International Equities
Bloomberg High Yield Corp Bond = High Yield Bonds
Bloomberg Municipal TR = Municipal Bonds; BBgBarc
Bloomberg US Credit TR = U.S. IG Corp Bonds
Bloomberg Aggregate Bond = U.S. Taxable Bonds
Bloomberg Treasury TR = U.S. Treasury Bonds
MSCI Emerging Markets ND USD = Emerging Markets Equities;
JPM GBI EM Glbl Divers TR = EM Bonds;
Bloomberg Commodity TR USD = Broad Basket Commodities
First Trust Composite Closed-End Fund TR Index = Closed End Funds
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