Flash Investment Update

U.S. Stock Volatility Continues, but Diversified Bonds Hold Up and International Shines

By Laura Kuntz, CPA/PFS, MBT, Chief Investment Officer

Monday, April 21, 2025.

The Dow Jones Industrial Average (1) fell approximately 1000 points or 2.5% bringing it to -8% for the year (the S&P 500 — the largest 500 companies in the U.S. — posted -12%6 for the year). The U.S. dollar and U.S. treasuries (2) also fell, making it a trifecta. Some commentators call this trifecta the “sell America” trade that is motivated by decreasing confidence in the U.S. financial system. One of the catalysts for today’s negative results may have been President Trump’s pressure on the independence of the Federal Reserve Board. Many economists see the Federal Reserve Board’s independence as an important “check and balance” in terms of maintaining economic stability.

The fall in U.S. treasuries was small, i.e., -0.4%, but it is concerning because U.S stocks and treasuries fell in tandem instead of U.S. treasuries acting as a safe haven, i.e. a place to “park” money during stock volatility. This is a modest but important signal regarding investor confidence in the U.S. financial system. It may also be a signal that countries are pushing back against tariff increases by selling U.S. treasuries. Many commentators feel that President Trump listened to this very signal on April 8, motivating him to move to a 90-day pause on some tariffs on April 9th.

Investment markets also offered positive news:

• U.S.bonds (3) (including corporate bonds) continue to hold up and have posted +2% for the year.
• International stocks (4) dropped only slightly today and continued to post positive results for the year, approximately +6%.

As suitable, LWP portfolios contain these positive categories.

Today, also as suitable, we increased portfolio allocations to international treasury bonds. (5) These bonds tend to move opposite of U.S. treasury bonds. Including these bonds in portfolios offers diversification and also offers opportunity if U.S. volatility continues.

You can check your portfolio results on your LWP portal. While each LWP client has a different result, you may continue to find that your bond and international exposure give you important “cushion” during this challenging time for the U.S. stock market.

Are other countries selling U.S. Treasuries? The U.S. has a good deal of leverage in negotiating tariffs with many countries because their economies depend, in part on selling to the U.S. However, approximately one-third of the U.S. federal debt is internationally owned. International owners invest in U.S. debt out of their own self interest, but they might sell some of their debt position and park this money elsewhere to put pressure on the U.S. If U.S. debt is sold, it can increase the interest rate the U.S. federal government pays on its debt which can ultimately be inflationary, i.e., create pain for the American people. Essentially, after many years of global cooperation, there is financial interdependency between countries, i.e., the U.S. and many others, that makes it difficult for many countries, including the U.S., to take unilateral action. As we are already experiencing, changing these long-term financial relationships can be disruptive.

Investing Direction. We have always believed in looking both locally and globally as we serve you. It is clear that now is a time when a broad outlook — and nimble action — matter. Our goal at LWP is to meet your goals, including both your need for resilience and opportunity. Resilience comes from creating a strong financial plan that incorporates strategies for volatile times. Opportunity comes from knowledge and strength, knowing when and what to buy and having the “dry powder” to do so. Please contact us if you would like to connect regarding your financial plan.

(1) Dow Jones Industrial Average includes 30 industrial U.S. stocks. Stocks are subject to substantial price volatility and performance is never guaranteed. An index cannot be invested in directly.

(2) Represented by the iShares U.S. Treasury Bond ETF, which seeks to track the investment result of an index composed of U.S. Treasury bonds with maturities from 1 to 30 years. Treasury bonds are subject to interest rate and quality risks.

(3) U.S. bonds are represented by the SPDR Portfolio Aggregate Bond ETF which seeks to provide investment results before fees and expenses that correspond to the performance of the Bloomberg U.S. Aggregate Bond Index. Bonds are subject to both interest rate and quality risks.

(4) International Stocks are represented by the iShares MSCI EAFE ETF, which seeks to track the investment results, before fees and expenses, of an index composed of large- and mid-capitalization developed market equities, excluding the U.S. and Canada. measured by the MSCI EAFE. It includes a broad range of companies in Europe, Australia, Asia, and the Far East. International stocks are subject to company, currency, and price risks.

(5) International treasuries are represented by the SPDR Bloomberg Short Term International Treasury ETF (BWZ) which seeks to provide investment results, before fees and expenses, that correspond to the Bloomberg 1-3 Year Global Treasury ex US Capped Index. This investment is subject to country, currency, interest rate, and quality risks.

(6) U.S. stocks are measured by the S&P 500. This is an index of the 500 largest stocks in the U.S. It subject to substantial price fluctuation. Data from Envestnet Tamarac.

Data from yahoofinance.com unless indicated otherwise above.

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The foregoing content reflects the opinions of Laurel Wealth Planning LLC and is subject to change at any time without notice. Content provided herein has been obtained from sources considered reliable, but we do not guarantee the accuracy, or the completeness of any description of securities, markets, or developments mentioned. The content is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions, or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. LWP is a wealth management firm and does not practice law or accountancy.

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