US Market Volatility & Portfolio Performance

18/03/2025

After reaching a record high on February 19, the recent sell off in the S&P 500 has understandably caused alarm for many investors.

This market decline is largely the result of a rotation away from the Magnificent Seven stocks that delivered much of the growth in the historic market rally we’ve seen over the last two years.

While the market decline has been fast in these last few weeks, the selloff is still small in comparison to the rally and inflows that came before.

We are comfortable with how our portfolios are positioned, aiming for long-term growth through strategic asset allocation and diversification. We do not advise making any reactionary decisions based on this short-term market action.

Portfolio Performance YTD (14-03-2025)

• Conservative: -0.4%
• Balanced: -0.9%
• Moderate: -1.5%
• Dynamic: -2.0%
• Adventurous: -2.3%

The MSCI All Countries World Index – quoted as a reasonable equivalent of 100% global equities – is down 5.3% YTD.

Full Analysis
The historic market rally over the past two years has been driven in large part by the Magnificent Seven stocks. This has meant elevated equity valuations, particularly in the US, and increasing concentration of a handful of companies (also in the US) in global stock markets. These features have exacerbated recent market moves, with large declines in a handful of extremely large companies dwarfing less extraordinary moves elsewhere in the market. While the market decline has been fast in these last few weeks, the selloff is still small in comparison to the rally and inflows that came before.

Of the managers in our portfolios, Jennison is most exposed to these names and has benefitted the most. 2025 has seen a reversal of this trend, with names like Nvidia and Tesla recently reaching lows of around 30% and 50% respectively when compared to their peaks. Indeed, much of the selloff in the US is being driven by AI related companies, with companies not exposed to AI holding up much better.

We have no cause for concern over Jennison currently, given how short-term this decline has been. With their investment philosophy, we would expect them to fare worse than the wider market in a drawdown like this one. Our investment consultants continue to monitor and meet with them regularly, and we will keep you updated if any of our views change.

Rest assured, we are comfortable with how our portfolios are positioned and diversified. The recent drawdown has demonstrated the benefits of this approach, with Schroders and JO Hambro faring considerably better than the wider stock market.

In a similar fashion, the fixed income and liquid alternative funds in our portfolios have also held up relatively well (although there has been some weakness in credit markets since spreads have widened). This highlights the benefits of diversification, ensuring our portfolios aren't overly exposed to a single factor/theme, providing protection when that factor/theme sells off, as we are seeing with growth and AI at the moment.