Q1 2025 Schwab Intelligent Portfolios & Market Performance¹
How did Financial Markets do?
U.S. large cap stocks saw their largest quarterly decline since 2022, as the seemingly insatiable risk appetite of the past two years reversed as the potential impact of tariffs on U.S. economic growth and inflation came into view. The highest-fliers of the past few years suffered the most in the first quarter as investors sought refuge in more attractively valued parts of the market such as high dividend stocks, which rose in the quarter. International stocks were another beneficiary of the rotation to lower valuations, with large cap international stocks outperforming U.S. large cap by more than ten percentage points to start the year.
Interest rates fell in the first quarter without any assistance from the Federal Reserve, which opted to leave the Fed Funds rate unchanged at their January and March meetings. Bonds broadly advanced in the quarter, though municipals saw a modest decline blamed on selling pressure in March related to tax payments due on April 15th. U.S. and international REITs advanced in the quarter, though U.S. REITs retreated in March on concerns that tariff-induced economic headwinds and stubborn inflation could prove challenging for the remainder of the year.
Figure 1: Market performance (ranked by Q1 2025 total return)
| Asset class | Q1 2025 [Index Total Returns (%)] | 1-Year [Index Total Returns (%)] | 3-Year (annualized) [Index Total Returns (%)] |
|---|---|---|---|
| High-yield bonds | 0.860 | 7.218 | 4.576 |
| U.S. treasuries | 2.929 | 5.452 | 1.479 |
| Emerging markets bonds | 3.453 | 4.107 | 1.602 |
| Treasury Inflation-Protected Securities (TIPS) | 4.165 | 6.167 | 0.061 |
| Emerging markets stocks | 2.928 | 8.091 | 1.443 |
| Investment-grade corporate bonds | 2.363 | 4.869 | 1.128 |
| U.S. large cap stocks | -4.272 | 8.252 | 9.064 |
| International small cap stocks | 3.688 | 3.098 | 0.882 |
| Securitized bonds | 3.273 | 5.369 | 0.537 |
| Municipal bonds | -0.222 | 1.220 | 1.528 |
| International large cap stocks | 6.864 | 4.882 | 6.053 |
| U.S. small cap stocks | -9.479 | -4.007 | 0.522 |
| U.S. real estate investment trusts (REITs) | 0.944 | 9.859 | -0.634 |
Source
Source: Morningstar Direct, as of March 31, 2025.
Performance figures shown are total returns for each asset class during the designated period. Indexes used are: High-yield bonds, Bloomberg High Yield Very Liquid Index; U.S. Treasuries, Bloomberg U.S. Treasury 3-7 Year Bond Index; Emerging markets bonds, Bloomberg Emerging Markets Local Currency Government Bond Index; Treasury Inflation-Protected Securities, Bloomberg TIPS Index; Emerging markets stocks, MSCI Emerging Markets Index; Investment-grade corporate bonds, Bloomberg U.S. Credit Index; U.S. large cap stocks, S&P 500® Index; International developed market small cap stocks, MSCI EAFE Small Cap Index; Securitized Bonds, Bloomberg Securitized Index; Municipal bonds, Bloomberg Municipal Index; International developed market large cap stocks, MSCI EAFE Index; U.S. small cap stocks, Russell 2000® Index; U.S. real estate investment trusts, S&P United States REIT Index. Past performance does not guarantee future results. Indexes are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly.
How did Schwab Intelligent Portfolios do?
Global portfolios generally outpaced U.S. models as most international assets outperformed. Income portfolios with higher allocations to U.S. and international high dividend stocks benefitted from investor preference for value-oriented stocks. All five Fundamental Index ETFs outperformed their market cap-based counterparts in the first quarter, as well.
Looking ahead
The Intelligent Portfolios are designed to help our clients achieve their objectives over the long term. While this quarter saw its share of volatility, we know that creating and sticking to a plan, maintaining a diversified approach to investing, and not overreacting to current events gives investors the best chance of achieving their objectives. We have many resources available designed to help you achieve your investment goals and we're always available by phone to answer any questions you may have.
Thank you, and we look forward to continuing to serve you in the coming quarters and years ahead.
Additional Resources
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