*Please Note: This was written on March 31, 2025, prior to the significant market volatility in early April*
Marketpoint: Policy Shifts, Market Resets, and Our Path Forward
As we navigate into the second quarter of 2025, markets have adjusted to a significant realignment of expectations. Earlier investor optimism about broad tailwinds and deregulation from the new administration has given way to a more complex reality—one focused on recalibrating global trade relationships, addressing budget deficits, and reshaping how government operates. Both President Donald Trump and Treasury Secretary Scott Bessent have acknowledged that markets may experience a “detox” period as these structural changes take place. This represents a major policy pivot that warrants careful consideration as we position portfolios for the months and years ahead.
Economy and Policy: Shifting Priorities
Market focus has turned sharply in 2025, with headlines related to the administration’s policies supplanting the Federal Reserve as the primary driver of market sentiment. Three major policy initiatives have commanded particular attention:
- Tariffs – Heightened trade tensions are contributing to market volatility as businesses recalibrate supply chains and pricing strategies. The administration’s focus on addressing trade imbalances has introduced uncertainty for companies with global operations and complex international supply networks.
- Government Spending Cuts and Federal Workforce Reductions – Efforts to trim government expenditures, while potentially beneficial for long-term fiscal health, could weigh on short-term economic growth. The transition may create temporary disruptions as the private sector adapts to changing government priorities and spending patterns.
- Restricted Immigration and Deportation – These actions could constrain labor markets and economic growth at a time when many industries already face workforce challenges. The potential reduction in available labor comes as businesses across multiple sectors report difficulties finding qualified workers.
The Federal Reserve has responded to this evolving landscape with notable adjustments to its economic projections. At its March meeting, the Fed lowered its 2025 growth forecast from 2.1% to 1.7% while simultaneously raising its inflation outlook from 2.5% to 2.8% as it factored in the potential impact of tariffs. Its projections continue to indicate two rate cuts in 2025 and two more in 2026, though committee commentary has taken on a more hawkish tone.[1] Markets now interpret the Fed’s stance as an effort to counteract tariff-driven inflation rather than a signal that the inflation battle has been conclusively won.
Several economic indicators have begun to flash warning signs. Consumer spending at bars and restaurants declined for a second consecutive month, falling 1.5%.[2] Homebuilder sentiment reached its lowest level in seven months, with measures of current sales and buyer traffic at their weakest since late 2023.[3] Corporate guidance has also reflected growing caution, with companies like Accenture highlighting increased economic and geopolitical uncertainty, and FedEx lowering full-year guidance due to persistent weakness in the U.S. industrial economy.
Despite market uncertainty and pessimism, the underlying American economy shows remarkable resilience. Consumer spending remains robust, according to Bank of America’s CEO and major payment processors Visa and Mastercard. Key macroeconomic indicators have surprised to the upside—control group retail sales, industrial production, housing starts, and existing home sales all exceeded expectations. Meanwhile, core CPI for February came in cooler than forecast, indicating easing inflation pressures, while weekly initial jobless claims continue to signal solid employment conditions. We take these conflicting signals as signs that the economy remains fairly stable as it attempts to absorb the latest fiscal and monetary policies.
Markets: Volatility, Correction, and Rotation
The first quarter was marked by heightened volatility, with 18 days of moves exceeding 1% (compared to just 9 in Q1 2024).[4] Markets peaked on February 19 before entering correction territory on March 13, falling 10% over just 16 trading days—the fastest correction since the COVID-related decline in early 2020. While such movements can be unsettling, historical perspective offers some reassurance. Corrections typically occur once per year and last 3-4 months, and in 13 of the last 15 instances, markets were higher one year later with average gains exceeding 15%.[5]
Broad equity market indices declined between 1%-5% during the first three months of 2025, with the tech-heavy NASDAQ falling further at -10%. A notable feature of this quarter’s market action has been the significant outperformance of the equal-weighted S&P 500 versus its cap-weighted counterpart that has been driven for the last two years by the Magnificent 7 stocks. This rotation away from the market’s largest names reflects both profit-taking in technology stocks that had driven previous gains and broadening strength across the remaining 493 constituents. The powerful AI-driven tailwinds that fueled 2024’s impressive performance have moderated as earnings momentum slowed and developments around DeepSeek and other AI initiatives raised questions about long-term competitive dynamics and industry cost structures.
This rotation comes at a time of extended valuations and U.S. market dominance. The S&P 500 began 2025 trading at 23 times forward earnings, above its 20-year average of 18 times. Concentration in the top seven names rose dramatically, from 22% of the index in 2022 to 37% at the beginning of 2025. Similarly, U.S. weighting in global indices has climbed from 50% in 2015 to over 65% in 2024—a substantial premium to America’s 26% share of global GDP and 43% of global market capitalization.[6] This combination of policy uncertainty and stretched valuations has prompted investors to reassess allocations, with international markets attracting renewed interest after years of significant underperformance.
Earnings: Strength Meets Caution
The first earnings season of 2025 has delivered generally positive results, with approximately 73.7% of S&P 500 companies reporting earnings above analyst expectations—exceeding the long-term average of 67%. Year-over-year earnings growth reached 17.1%, accompanied by revenue growth of 5.2%.[7]
However, forward projections reflect growing uncertainty. The estimated year-over-year earnings growth rate for Q1 2025 has declined to 7.1% from an initial estimate of 11.6% at the quarter’s start. For the full year, analysts project revenue growth of 5.8% (up from 5.1% in 2024) and earnings growth of 14.8%—still optimistic figures that may face pressure as companies more fully incorporate the impact of trade tensions and policy shifts into their guidance.[8]
Current valuation metrics, including the correlation between earnings multiples and core inflation, suggest that market valuations remain stretched despite the recent correction. Companies have not yet fully factored trade policy uncertainties into their capital spending plans or forward guidance, potentially setting the stage for downward revisions to future earnings estimates.
Our Strategic Positioning
In anticipation of market volatility and policy uncertainty, we have proactively diversified client portfolios over the past year. Our investment approach remains anchored in identifying high-quality companies with healthy balance sheets, strong cash flows, capable executive teams, and overall market leadership. This focus on reasonable valuations and quality—the cornerstones of our investment philosophy—positions us well to navigate the current environment.
Recent portfolio additions include NextEra Energy, Brookfield Corporation, and Deere—companies we believe offer resilience and long-term value. These businesses possess the pricing power, operational excellence, and market positions that can help weather economic uncertainty while maintaining growth potential.
We view market sell-offs as opportunities to uncover value. During periods of volatility, high-quality companies with strong fundamentals are often unfairly penalized alongside weaker businesses. These moments allow us to demonstrate our commitment to prudent, disciplined stock selection and positioning portfolios for long-term strength.
Looking Ahead
While the path forward may include continued volatility as markets adjust to new policies, we remain confident in the resilience of well-managed businesses and the long-term potential of properly diversified portfolios. History suggests that periods of policy transition often create attractive entry points for patient investors with disciplined investment approaches.
The breadth of market participation has improved notably, with the equal-weighted S&P 500 outperforming its cap-weighted counterpart and select international markets outperforming the U.S. markets. This rotation toward a more balanced market offers opportunities beyond the handful of mega-cap technology names that dominated returns in previous years.
As we navigate this transition, we maintain our disciplined approach to portfolio management, focusing on quality companies at reasonable valuations while remaining alert to both risks and opportunities. Our investment philosophy remains unchanged: to maintain appropriate diversification, focus on long-term value creation, and align strategies with each client’s specific circumstances.
Please reach out to our team if you would like to discuss your portfolio or financial situation in more detail.
[1] Federal Open Market Committee, March 19, 2025, Summary of Economic Projections
[2] US retail sales rise slightly as economic uncertainty mounts, Reuters, March 17, 2025
[3] Builder Confidence Falls on Cost Uncertainty, National Association of Home Builders, March 17, 2025
[4] FactSet
[5] Correction Tape, Barron’s, March 13, 2025
[6] FactSet
[7] FactSet
[8] FactSet
RECOMMENDED READING: FROM OUR LIBRARY TO YOURS
This spring, we’re offering clients exclusive access to 12 of our staff’s favorite books. Please let us know if you’d like to add any titles to your collection.
HEALTH AND WELLNESS
Outlive, by Dr. Peter Attia: Scientific rigor meets approachable advice as Attia makes a balanced case for viewing aging as a modifiable process. The book includes practical tips to enhance your lifespan and quality of life through exercise, sleep, stress management, and nutrition.
Being Mortal, by Atul Gawande: Using personal stories and medical insights, Gawande highlights how healthcare often prioritizes prolonging life over ensuring dignity. This book advocates for more compassionate, patient-centered approaches to aging and end-of-life decisions.
INVESTING
Same As Ever, by Morgan Housel: Blending storytelling with historical insights, Housel offers a fresh perspective on navigating uncertainty by focusing on timeless principles that shape human behavior and financial trends rather than short-term market movements.
In This Economy? by Kyla Scanlon: One of our recent virtual event speakers, Scanlon uses storytelling and humor to explain market dynamics, inflation, and other financial topics in accessible ways, challenging readers to engage with the economy on a deeper level.
An Investor’s Life, by Ralph Wanger, CFA: Experience global events of the last 50 years alongside our friend and client Ralph Wanger. One of the world’s greatest public market investors, Wagner weaves wit and wisdom into essays on history, romance, science, and investing.
PERSONAL DEVELOPMENT
Bring Your Human to Work, by Erica Keswin: Learn strategies for building meaningful connections in the workplace through research and real-world examples highlighting the power of purpose, trust, and relationships in creating cultures that value people as much as performance.
Give and Take, by Adam Grant: Grant uses research to show how generous, altruistic people often achieve the greatest long-term success, sharing tips on cultivating a giving mindset while avoiding burnout.
The Power of Habit, by Charles Duhigg: Explore the science behind habits through case studies examining the “habit loop”—cue, routine, and reward—and learn practical ways to break unhealthy cycles and build good ones.
PERSONAL FINANCE
I Will Teach You to Be Rich, by Ramit Sethi: This practical guide offers humor and actionable advice on automating savings, investing, and guilt-free spending. Sethi outlines a six-week program to help readers manage money efficiently while living a rich life based on conscious spending.
The Psychology of Money, by Morgan Housel: Through engaging stories, Housel shows how luck, patience, behavior, and emotions influence financial success more than traditional wisdom suggests, encouraging readers to adopt a long-term mindset toward wealth-building.
TRUE STORIES
Bad Blood, by John Carreyrou: Written by the Wall Street Journal reporter who exposed Theranos, this cautionary tale reveals how Elizabeth Holmes’ charismatic leadership maintained appearances while misleading patients, employees, and investors about the company’s blood-testing technology.
The Undoing Project, by Michael Lewis: Explore the groundbreaking collaboration between psychologists Daniel Kahneman and Amos Tversky, whose research on decision-making and biases revolutionized economics and reshaped fields from medicine to public policy.
FIRM UPDATES
NEW TEAM MEMBERS
We are delighted to welcome two new employees to our Denver office:
Ryan Fincher, Senior Associate, Wealth Advisory: Ryan supports our team in delivering personalized financial strategies. He brings experience from the executive search field, where he helped private equity firms build leadership teams. Ryan holds a BA from Franklin and Marshall College and is pursuing his MBA at the University of Michigan.
Allyson Pauletto, Associate, Client Services: Allyson works with our relationship managers to address client needs and onboard new relationships. She previously played professional soccer in Lithuania and Portugal, competing in the UEFA Women’s Champions League. Allyson holds degrees in Ecosystem Science and International Studies from Colorado State University.
PROMOTIONS
We’re thrilled to announce two well-deserved promotions:
Elise Wood, Director, Client Services: Elise leads our client service team with exceptional accessibility and positivity. She has built a culture where our service team confidently advocates for clients’ interests while advancing our goal of a highly efficient, technology-driven service model.
Patrick Yarborough, Vice President, Investments and Client Advisory: Pat has significantly impacted our firm by strengthening our alternative investment offerings and developing advisor toolkits while also working closely with many families as their relationship advisor. He consistently brings fresh ideas for enhancing our clients’ financial lives.
OBERMEYER WOOD RECOGNIZED
These awards reflect our team’s dedication to serving clients through holistic wealth management, thoughtful investment strategies, and careful financial planning.
FORBES / Top Women Wealth Advisors
Forbes and SHOOK Research’s 2025 rankings include President Ali Phillips, Senior VP Dana Nightingale, CFA, CFP®, and VP Brooke Gais, CFP®. This prestigious national ranking features 100 female advisors managing approximately $386 billion in assets. This marks Brooke’s first inclusion, and we’re the only Colorado RIA with three advisors featured.
BARRON’S / Top 1200 Financial Advisors
Barron’s 17th annual ranking recognizes Chairman and Partner Wally Obermeyer as the No. 5 financial advisor in Colorado. The publication highlights the value of collaboration in providing comprehensive wealth management services beyond core investment expertise.
WORTH MAGAZINE / Top RIA Firms 2025
Worth’s newly relaunched Top RIA Firms includes Obermeyer Wealth among 350 leading registered investment advisory firms, selected based on assets under management, expertise in addressing wealthy clients’ complex financial needs, and independence from broker-dealers.
To view complete rankings for each award, visit the respective publication’s website. For information on ranking methodology, visit our website.
HAPPY 20th ANNIVERSARY
President Ali Phillips joined Obermeyer in 2005 and has been an integral leader and advisor for two decades. Her wisdom, expertise, and strategic vision continue to benefit our team, clients, and our community. Please join us in celebrating Ali’s 20th anniversary!
