The first quarter of 2025 presented a mixed picture for global equities, with the MSCI All Country World IMI Index declining by 1.6%. The U.S. lagged by the widest margin, with the Russell 3000 Index dropping 4.7%, and the 'Magnificent 7' tech giants posting lower returns during this period. Past performance is provided for context only and should not be relied upon as an indicator of future trends. In contrast, non-U.S. markets showed resilience, as International Developed Stocks gained 6.2% and Emerging Markets rose 2.9%, underscoring the value of diversification.

Market dynamics were heavily influenced by a new U.S. administration, with tariff threats sparking volatility and retaliatory concerns. U.S. energy stocks performed well, while tech leaders like Nvidia and Tesla faced declines. Meanwhile, countries like China and Mexico posted double-digit returns, defying tariff pressures.

Globally, inflation remained persistent, clouding expectations for central bank rate cuts. The FOMC raised its 2025 target rate projections, reflecting caution. Style-wise, value stocks outpaced growth, but small-cap and profitability premiums lagged, signaling uneven performance across factors.²

(For a more thorough breakdown, see IFA Founder and CEO Mark Hebner's video below.) 

Domestic Equities 

Five out of six of IFA's domestic equity indexes posted negative returns with exception to Large Value which posted a 2.18% for the quarter. Interesting enough Large Value had the worst performance in the fourth quarter with a -2.16% return. This highlights the potential benefits of diversification as a strategy to manage risk, recognizing that no strategy can guarantee positive outcomes or protect against market losses due to unpredictable quarterly index performance. For more on what a diversified portfolio should look like click here.  

International Equities

A bright spot in the volatile quarter were the International Indexes as all finished the quarter in positive territory. The IFA International Value Index which ended Q4 down -5.90% did an about face and returned a 10.71% for Q1. Coming in a close second was the IFA International Small Cap Value Index returning 9.03% for the quarter followed by the IFA International Small Company Index coming in at 4.90%.

Emerging Markets Equities

Stocks issued by companies based in developing countries had mixed results for the quarter with two of IFA's Emerging Market Indexes posting positive returns for Q1. The IFA Emerging Markets Value Index led the way coming in with a 2.54% return followed by the IFA Emerging Markets Index returning 1.17%. The IFA Emerging Markets Small Cap Index was the laggard returning -1.45% for the quarter.

Real Estate Equities

For the quarter REITs performed well given market conditions. IFA's Global REIT Index ended the quarter up posting a positive return of 2.82%. 

Fixed-Income

For Q1, IFA's fixed-income benchmarks produced returns with most topping 1%. The IFA Short Term Government Index finished the quarter with a postive 0.99% return. All other indexes topped the 1% mark with the IFA Five-Year Global Fixed Income Index coming in with a return of 1.10%. Whereas the IFA One-Year Fixed Income Index and the IFA Two-Year Global Fixed Income Index finished up 1.12% and 1.13%. 

IFA Index Portfolios

With stocks and bonds posting mixed returns, IFA Index Portfolios finished the first quarter with varied results. Portfolios with heavier weightings to stocks experienced negative returns in Q1 while those titled more towards bonds were positive front runners. For the quarter, our all equity Portfolio 100 returned -2.13% while our portfolio 10 made up of 90% bonds and 10% equity posted a postive 0.56% return.

Below is an overview of how several IFA Index Portfolios performed in Q1 as well as during the previous quarter. All of these returns are shown net of IFA's maximum annual 0.90% advisory fee through March 31, 2025.

Each quarter, we monitor our recommended funds for clients. As part of that process, we've developed a rating system. For a summary of those results, please feel free to check IFA's latest Performance Monitoring Report (PMR). 

IFA encourages both novice and experienced investors to discuss their financial situation and investment goals with an IFA wealth advisor, tailoring strategies to their personal risk capacity and long-term objectives.  Besides offering an online Risk Capacity Survey, we provide to each client a complimentary and holistic financial plan. 

The wealth of IFA's educational materials are available for Apple iOS and Android devices via the IFA App. This free App is available to download from both the Apple App Store and the Google Play Store for Android.

Footnotes

1. The Magnificent 7 stocks include Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla
2. Dimensional, Q1 Market in Review, Jan, 2025

Performance results for actual clients that invested in accordance with the IFA Index Portfolio Models will vary from the backtested performance due to the use of funds for implementation that differ from those in the index data, market conditions, investments cash flows, mutual fund allocations, changing index allocations over time, frequency and precision of rebalancing, not following IFA's advice, retention of previously held securities, tax loss harvesting and glide path strategies, cash balances, lower advisory fees, varying custodian fees, and/or the timing of fee deductions.

This is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product or service. There is no guarantee investment strategies will be successful. Investing involves risks, including possible loss of principal. Performance may contain both live and back-tested data. Data is provided for illustrative purposes only, it does not represent actual performance of any client portfolio or account and it should not be interpreted as an indication of such performance. IFA Index Portfolios are recommended based on time horizon and risk tolerance. Take the IFA Risk Capacity Survey (www.ifa.com/survey) to determine which portfolio captures the right mix of stock and bond funds best suited to you. For more information about Index Fund Advisors, Inc, please review our brochure at https://www.adviserinfo.sec.gov/ or visit www.ifa.com.

Hypothetical performance is constructed using historical data and assumptions, including periodic rebalancing and fixed market conditions that are unlikely to fully reflect future outcomes. Such performance is provided solely for illustrative and informational purposes and does not represent actual client portfolio performance or guarantee future results.

Hypothetical scenarios assume adherence to specific models or allocation strategies without considering real-world constraints, such as behavioral tendencies, cash flows, transaction costs, or tax implications, which may significantly impact results. References to diversification, portfolio construction, or market trends are intended to educate and provide historical context but should not be construed as prescriptive or guaranteed strategies for success.

Information provided is based on data and methodologies believed to be accurate but is subject to change as market conditions evolve. Readers are encouraged to further discuss their unique financial situations and specific investment strategies with a qualified advisor before making investment decisions.