Goldman Sachs Rising Dividend Growth Fund Q1 2025 Commentary

2025-06-25 09:10:00 ET

Market Overview

The first quarter of 2025 saw US markets grappling with the new Trump administration's immediate policy focus on tariffs, sparking concerns about economic growth. Additionally, government spending cuts via the Department of Government Efficiency (DOGE) further weakened the growth outlook as the fiscal impulse was no longer expected to be as positive as in recent years. US inflation data surprised slightly to the upside and given a background of weaker activity data but stable labor market and somewhat higher inflation, the US Federal Reserve held policy rates steady but downgraded growth forecasts and upgraded inflation expectations. US equities (S&P 500) suffered a 4.3% decline, leading a broader 1.8% drop in global developed market equities (MSCI World, NTR, USD). Small-cap stocks (Russell 2000) also underperformed, falling 9.5%. Euro Area equities (EURO STOXX 50, NTR, EUR) and emerging market equities (MSCI EM, NTR, USD) rallied 7.5% and 2.9%, respectively. The divergence in performance was largely a reflection of weaker activity data in the US and better data in Euro Area and China, in addition to expectations of tariff impacts. Within emerging markets, Chinese equities (MSCI China, NTR, HKD) delivered a strong return of +15% during the quarter on the back of better data and continued policy support from Chinese policymakers. However, this outperformance by Chinese equities came after significant underperformance in the prior quarter. Europe had a significant fiscal shift towards higher defense spending, spurred by the German election results. In the bond market, the US 10year Treasury yield decreased over the quarter whereas most other major developed market bond yields were up through the quarter, reflecting increased market expectations of rate cuts in the US later this year....

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