Presenters: Lowell Pratt, CFA, Andy Pratt, CFA, CAIA, and Bijal Patel CFA, CFP®, MT, RICP®
Here is the webinar recording from April 16, 2025. You can browse the topics discussed and main takeaways using the sections and time stamps below:
Click the time-stamp in each section title, and you will jump right to that part of the video on a new screen!
Introduction and Reciprocal Tariffs (00:00)
- The market experienced significant volatility following the April 2nd announcement of reciprocal tariffs that were higher than generally expected (Watch our Tariff Webinar Here)
- A 90-day pause was announced on April 9th, with only base 10% tariffs continuing as countries negotiate individually
- The quick backtrack was driven by a surprising rise in treasury rates and further weakening of the dollar
- Since Trump's inauguration, the dollar has steadily weakened, now lower than it was on election day
- The weakening dollar has a silver lining for multinational companies, as international earnings will be boosted when translated back to USD
Q1 Market Performance Overview (05:55)
- In Q1 2025, US stock market was the laggard among asset classes, down 4.7%
- International developed markets and emerging markets outperformed the US, highlighting the importance of diversification
- The bond market was off to a surprisingly strong start with price appreciation as bond yields began to come down
- The strong quarterly performance across most asset classes was disrupted by the April 2nd "Liberation Day" tariff announcements
Long-Term Market Summary (10:04)
- Looking at historical data, the markets tend to recover nicely even after periods of panic
- US stock market has shown solid double-digit returns over 10, 15, and 20-year periods
- During these same timeframes, US markets outpaced international markets by almost 2-to-1
- International investing is very quietly closing the gap in recent 1 and 5-year periods
- Portfolios built today should look different than those from 10-20 years ago, with more diversification
Market Volatility Index (VIX) (12:16)
- Prior to the tariff announcement, the VIX index was sitting around 20, indicating a calm market
- Over a four-day window, the VIX spiked from 20 to 50 - the third biggest increase in that timeframe ever recorded
- For April 2025, the VIX has traded above 30 for all but two days, indicating continued heightened volatility
- Historically, when the VIX index is at levels above 30, it produces the best forward-looking returns
The Impact of Fear: S&P 500 Forward Returns (13:17)
- The 25 best days in the stock market tend to cluster around the 25 worst days
- Seven of the best market days have occurred over a two-week window in the last 10 years
- Missing the 10 best days in the market significantly impacts long-term returns (10.4% vs. 6.1%)
- The S&P 500 experienced a 9.5% gain in a single afternoon following the tariff pause announcement
Market Returns: Historical Context (14:01)
- The four-day period ending April 8th saw markets down 12.1%
- This marks only the 12th time in history that markets have fallen that fast
- Other comparable periods occurred during the 1987 crash, the financial crisis, and COVID
- Markets have historically recovered well from periods of extreme volatility
Client Opportunities (16:23)
- Many clients are taking advantage of the market volatility to deploy cash that was previously in money market accounts
- Tax-loss harvesting opportunities have emerged from the market volatility
- Burney plans to launch a second ETF in Q4 2025
- The new ETF will allow clients to convert taxable stock assets into the ETF on a tax-free basis using a 351 exchange
- A 130/30 strategy is available that can create capital losses to offset other income while maintaining market exposure
The Good News: Large Caps (19:19)
- Large growth was the only segment of the market that made money on a rolling 12-month basis
- Recently, large value stocks have begun to hold up better than the rest of the market
- This shift may be related to tariff concerns, as domestic dividend-paying stocks may be less impacted by tariff uncertainties
- The team has shifted portfolio targets toward large caps, with current targets at 80% large cap
Recent Size and Style Shifts (23:17)
- Small and mid-caps continue to struggle despite occasional short rallies
- The market remains firmly in a pro-large-cap phase
- There has been a shift from growth to value, with pro-value momentum picking up since November
- In response, the team moved growth targets from 70% to 60% in November and is now at a 50/50 growth/value allocation
- Style cycles typically last 18-30 months, and the current pro-growth cycle has lasted about 20 months
Did the Stock Selection Model Help? (26:06)
- Burney's stock selection model can be protective during market downturns
- Through March, stocks rated as "buyable" by the model showed about a 12% performance advantage over those rated "as sells"
- The team combines stock selection ratings with an AI-powered revenue surprise signal
- Stock selection was a positive contributor to portfolio performance despite the broader market decline in March
Opportunity: Recovery Model? (29:23)
- The team is evaluating whether to activate their "recovery model" if market conditions warrant
- This model looks at past recoveries to find high-quality companies that were oversold during market drawdowns
- Recovery phases after bear markets tend to be V-shaped and somewhat predictable
- The investment committee is monitoring whether the current downturn is severe or long enough to activate this strategy
If you have questions like these or wish to discuss your financial planning needs, Schedule a Meeting with us.
CNBC’s annual FA 100 ranking was published on 10/2/2024 for the year 2024. The Burney Company did not pay CNBC any compensation for being considered for the list, however, Burney Company does pay a licensing fee to use the CNBC logo in marketing materials. A link to the CNBC selection criteria can be found by going to https://cnb.cx/3Pg6FVh. The CNBC award was given to the Burney Company, which includes portfolio managers associated with Burney Wealth Management and nine other affiliated portfolio managers.