Monthly Market Update for February 2025
Key Points – Monthly Market Update for February 2025
- S&P 500 Falls After Hitting All-Time High on February 19
- Sector Performance Remains Diverse
- Negative Returns for Small Cap Growth and Value Indices
- Positive Momentum in the Bond Market Continues
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Recorded on March 9, 2025 (Data as of February 28, 2025)
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Monthly Market Update for February 2025
Welcome to the Modern Wealth Market Update for February 2025, where we take a quick look at stocks, bonds and the economy. In February, the U.S. stock market turned lower, with the S&P 500 falling by 1.3% after gaining 2.8% in January. Most of the decline occurred during the last seven trading days after the index hit a new all-time high on the 19th.1
FIGURE 1 – S&P 500 Index Monthly Returns – Morningstar Direct
Stocks ended the month with a year-to-date gain of 1.4%. Sector performance was diverse, with defensive sectors like staples and healthcare and interest rate sensitive sectors like real estate and utilities performing the best.2
The more economically sensitive sectors such as industrials and consumer discretionary performed the worst, indicating investor concerns about the future for economic growth.
FIGURE 2 – S&P 500 Index – Sectors – Bloomberg, GICS Sectors
From a market cap and style perspective, large cap value stocks greatly outperformed large cap growth stocks. But the trouble was felt most acutely in smaller cap companies, with the small cap value index down by almost 4% and the small cap growth index declining by almost 7%.3
FIGURE 3 – S&P 500 Index Size and Style – Morningstar Direct
In overseas markets, many countries outperformed the U.S. again this month, benefitting from the tailwind of a decline in dollar.4 Germany and the UK performed well with China as the standout. Brazil and India performed poorly.
Bonds performed well in February after a good January, with the U.S. aggregate bond index returning 2.2%, bringing it to a gain of 2.7% for the year so far.5 Both Treasury bonds and corporate bonds were generally in line with the broader index, with the mortgage-backed securities outpacing both of them.
FIGURE 5 – U.S. Bond Market – Morningstar Direct
Finally, there was no Fed meeting in February, but the futures market expects the Fed to remain on hold until June.6 Headline inflation edged higher for the fourth straight month in January, and interest rates across the Treasury curve declined on concerns about the impact that tariffs may have on economic growth.
That concludes your market update for February. If you have any questions about what I covered in our Monthly Market Update for February 2025, please start a conversation with our team below.
Resources Mentioned in This Article
Other Sources
[2] https://www.spglobal.com/spdji/en/documents/performance-reports/dashboard-us-sector.pdf
[3] https://www.morningstar.com/markets/march-2025-us-stock-market-outlook-tariffs-are-wild-card
[4] https://www.morningstar.com/funds/investors-turn-international-etfs-us-stocks-stumble-february
[5] https://www.morningstar.com/bonds/bonds-take-lead-over-stocks-2025
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