As I noted in last month’s market update, February has a tendency to be weak during post-election years. This year was no exception, as stocks struggled during the second month of 2025. Below are the February returns for the popular benchmarks that investors track (Data provided by Y-Charts & Commonwealth Financial Network):

S&P 500 Index: -1.4%
Dow Jones Industrial Average: -1.6%
Nasdaq Composite Index: -4%
Russell 2000 Index: -5.2%
S&P Target Risk Moderate: +1%

This isn’t the first time the S&P 500 has followed a strong January with a weak February. As shown below, 2025 marks the 17th occurrence of this pattern since 1950. Historically, when the year starts this way, stocks have ended higher 75% of the time. (Source: Grant Hawkridge & Optuma)

It’s common for stocks to experience choppy, sideways movement during the first quarter of a post-election year. However, history suggests that markets often find their footing by late Q1 or early Q2, typically gaining momentum and trending higher through year-end.

It is important to remember that market corrections and pullbacks are a normal part of investing. On average, stocks experience multiple declines of 5% or more in a given year, along with at least one correction of 10% or more. These short-term fluctuations are the price investors pay for long-term returns that outperform the risk-free rate. A strong pullback doesn’t necessarily signal prolonged weakness—history shows that markets often recover and continue their upward trajectory.

Volatility remains elevated, meaning we should expect more significant market swings in both directions (up and down) until it subsides. Current sentiment data (what investors think about the stock market) is very bearish and consistent with levels where we usually see a short-term market bottom or a reprieve from selling. While this isn’t a foregone conclusion, similar instances in the past suggest that conditions like these often precede a short-term rally.

As always, don’t hesitate to contact our team with any questions.