March 29, 2025 Market Update

All major U.S. equity indexes declined sharply during the week, with the tech-heavy Nasdaq leading the losses.   Investor sentiment was rattled by the announcement of new tariffs on auto imports, raising concerns over higher costs and potential retaliatory actions.     Despite the broad selloff, U.S. equity funds saw their largest weekly inflows since November, suggesting some investors viewed the pullback as a buying opportunity.

Treasury yields fluctuated last week in response to economic data stoked fears of stagflation., including core PCE readings that pointed to persistent inflation, and a dip in consumer sentiment.  Nonethless, by week’s end, bond prices were little changed.

The first quarter of 2025 was a turbulent one, driven in large measure by tariff and other policy decisions, as well as shifting interest rate expectations.  President Donald Trump recently imposed a 25% tariff on all foreign-made cars, aiming to boost domestic manufacturing but raising concerns about higher consumer costs and inflation.  Additionally, the Federal Reserve chose to keep its primary policy rate at 4.5%, noting it needs greater confidence that inflation is moving sustainably toward 2% before considering rate cuts.

Another less obvious contributor to market volatility has been the need for some investors to raise cash to pay their 2024 tax bill.  Perhaps you are also putting the finishing touches on your 2024 return—assuming you’re not filing for an extension.  If so, it’s a good time to think about what made this year’s filing process difficult — and how to make next year’s go more smoothly.

One of the least pleasant surprises that can arrive on Tax Day is an unexpectedly large tax bill.  Common causes include under-withholding, insufficient quarterly tax payments, larger-than-expected realized capital gains, or income from dividends and interest.  If you are facing a large tax bill, consider adjusting your quarterly estimated payments, updating your paycheck withholding, minimizing investment income taxed at ordinary rates, and exploring more tax-efficient ways to make charitable gifts.

If you spent too much time chasing down 1099s, reconciling cost basis, or organizing charitable donations, consider improving your tax documentation recordkeeping.  A few changes—like consolidating accounts, setting up a better method to track your deductions, or automating your giving—can lighten your load when tax season rolls around again.

While you're at it, be sure you’re tracking deductible expenses throughout the year, including:

• Charitable donations.
• Medical expenses (if they exceed 7.5% of AGI).
• IRA and Health Savings Account (HSA) contributions.
• Student loan interest.
• State sales taxes (especially if you're in a no-income-tax state).

Also, don’t forget to keep track of the cost basis of your investments and any real estate you own.  For example, if you’ve made home improvements or reinvested dividends over the years, those adjustments can increase your basis and reduce your tax bill.

Lastly, reviewing this year’s return can highlight opportunities for proactive planning—such as taking advantage of tax-loss harvesting, optimizing asset location across taxable and tax-advantaged accounts, or making strategic use of your tax brackets.

Although tax season isn’t much fun, it serves as a valuable reminder that advanced planning can make it less burdensome next year.

That’s all for now.  Have a great weekend and invest wisely, my friends.