Author: Eric Elbell

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After enjoying back-to-back years of strong returns in 2023-2024, US stocks have run into trouble in 2025. After posting a 4.3% decline in the first quarter, the bellwether S&P 500 index endured a sharp drop of nearly 10% over the first four trading days of April, leaving it with a 13.4% year-to-date loss through April 4. At that point the index had declined 17.4% from its most recent high on February 19, leaving it just a few percentage points shy of a traditional bear market (informally defined as a 20% decline).*

Other widely followed indices have fared worse: Through April 4, the Russell 2000 index representing small cap stocks and the Nasdaq Composite index recorded losses of 17.8% and 19.3%, respectively.

Given the healthy returns US stocks have posted in recent years, the sudden weakness in the early months of 2025 has captured headlines and reminded investors of the risk associated with owning stocks. In this paper, we address some of the drivers behind the recent volatility and consider recent declines in the context of a long-term and total portfolio perspective.

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*Intra-quarter declines are in price terms while other returns cited are in total return terms (i.e., including dividends)

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