February 26, 2025: Market Broadening Begins

As we have noted, when stocks are highly priced, they are increasingly vulnerable to even a hint of negative news. That proved true last week for the S&P 500® as enduring investor worries—on inflation, on trade, and on valuations—and a relatively downbeat report from Wal Mart helped send the index lower.

On a more positive note, our anticipation of market broadening has begun to come to fruition. Within U.S. markets, previously challenged value and dividend-oriented stocks have outpaced growth stocks. Looking beyond the U.S., international stocks have also experienced a long-awaited rebound and have outperformed U.S. stocks year-to-date. While cheaper valuations may have set the stage for this rally, optimism over a potential Russia-Ukraine ceasefire and the election of Germany’s new chancellor seem to have accelerated it.

This increased appetite for European stocks contrasts sharply with the period immediately following last fall’s U.S. election, a period in which investors sent U.S. stock markets higher and, as a result, left them more vulnerable to negative news. Alternatively, the low prices of international stocks created conditions for this year’s rally—a rally that for investors in international stocks is long overdue.

Weekly Market Update: February 26, 2025