The bad news? The first quarter, which wrapped up yesterday, marked the S&P 500’s worst quarterly performance since 2022. The good news? Q2 has a lot of room for improvement.
By the end of 2024, the S&P 500 was roaring: the AI trade was booming, the Fed had lowered rates, and investors foresaw a lighter regulatory touch under the second Trump administration.
But the new year hit Wall Street like a truck. President Trump's heavy-handed tariff policies spooked investors, while key economic indicators showed that the labor market was slowing at the same time that consumer sentiment was cooling. All in all, the S&P 500 declined 4.6% over the quarter, while the Nasdaq fell nearly 11%, and the Dow lost just 1.3%.
However, there were some bright spots over the quarter. The highest-flying sector was energy, which climbed 9.3%, with two recession-proof sectors—healthcare and utilities—taking second and third place, respectively.
But the best-performing stocks in the S&P 500 over the quarter were all consumer staples that never go out of fashion—even when there’s the threat of the R-word. The best stock of Q1, CVS Health, soared 51%, while Philip Morris International climbed 31%, and Newmont Corporation gained 29%.
On the flip side, the consumer discretionary sector plummeted 14%, while information technology sank 12.8%. Stocks in these two sectors saw some of the steepest drops last quarter: Deckers Outdoor Corporation sank 46%, Tesla fell 37%, while ON Semiconductor Corporation also lost 37%.
And as a hedge for uncertainty, gold had a glittering Q1, gaining 19% throughout the first three months of the year for its best quarter since 1986.
Better days ahead—or abroad?
We’ll be honest: The factors that triggered Q1’s market meltdown haven’t gone away. But there are some strategies that analysts say could help protect you from the chaos.
One idea is to move out of US stocks and gain exposure to international markets. Many investors have been shifting their money to relatively cheaper European stocks, hoping that those are set for a boom while the US market continues to contend with tariff uncertainty.
The tactic has proved prescient: The Stoxx Europe 600 Index outpaced the S&P 500 by 9.8% in Q1, its biggest lead since 2015, according to Dow Jones data.—LB
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