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Market Commentary 3/19/25

Comments on the Recent Market Sell-Off

 
Stocks started 2025 trading higher but have since pulled back, with the S&P 500 entering “correction” territory with a 10% decline from its all-time high on February 19. As of the market close on Friday, March 14, 2025, the S&P 500 was down approximately 4% year to date, with the Nasdaq 100, an index of technology and growth stocks, and the small-cap-focused Russell 2000 down approximately 8% each. The Magnificent 7, a group of technology stocks that led much of 2024’s market gains, has declined nearly 15%.
 
Given the recent volatility, we wanted to discuss the current environment and provide perspective on past declines.
 
We believe several factors have contributed to the current market selloff. First, momentum stocks that led the 2024 rally are now experiencing a sharp reversal. 2024’s top performers have become 2025’s underperformers. Technology stocks led last year’s gains, fueled by enthusiasm for the artificial intelligence industry.
 
However, the concentrated rally led to stretched valuations and crowded positioning, particularly among the biggest companies. As those stocks lose momentum, it’s triggering a rapid unwind, with a large amount of capital rotating at the same time.
 
Second, investor exposure to the stock market was high entering 2025. Households’ allocation to stocks reached a record level, and institutional investors, such as pension funds, endowments, and insurance companies, increased their leverage and equity exposure last year as stocks traded higher. Recently, institutional investors and hedge funds have been deleveraging, adding to the selling pressure.
 
Third, optimism around the Trump administration’s pro-growth policies has given way to concern, with worries that spending cuts and tariff uncertainty may slow economic growth. And often, selling begets more selling, especially over short time periods.
 

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The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market value weighted index with each stock’s weight in the Index proportionate to its market value.

The NASDAQ 100 Index is an unmanaged group of the 100 biggest companies listed on the NASDAQ Composite Index. The list is updated quarterly and companies on this Index are typically representative of technology-related industries, such as computer hardware and software products, telecommunications, biotechnology and retail/wholesale trade.

The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.
Asset allocation and diversification are investment methods used to help manage risk. They do not guarantee investment returns or eliminate risk of loss including in a declining market.

Wells Fargo Advisors Financial Network did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the author(s) and are not necessarily those of Wells Fargo Advisors Financial Network or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request. This article was written by Dennis P. Barba, Jr. CEO, Managing Partner, Michael P. Finkelstein, CFA, Partner, and Robert Frenkel, CFP®, of Oxford Harriman & Company and provided to you by Mikal Haddad, Managing Director & Partner.

PM-09182026-7754997.1.1

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