U.S. equity markets faced a challenging first quarter. U.S. large-cap stocks, as represented by the S&P 500, ended the first three months of 2025 down 4.3%, while the small-cap Russell 2000 Index declined 9.5%. This marked the worst quarter for both U.S. large- and small-cap stocks since the second quarter of 2022. In contrast, U.S. fixed income markets fared better, with the Bloomberg U.S. Aggregate Bond Index gaining 2.8% in the first three months of the new year.

Final fourth-quarter gross domestic product (GDP) results, released at the end of March, confirmed that the U.S. economy continued its steady pace of growth throughout 2024. GDP growth for the quarter was revised marginally upward, from 2.3% to an annualized 2.4%.1 Government spending increased at an annualized rate of 3.1% while consumer spending grew by 4.0%—the strongest pace of 2024.