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ISERS staff reports market outlook: tariffs, imports and early‑quarter rebounds shape portfolio results
Summary
Staff summarized macroeconomic moves through Q1 and early Q2 2025, tying portfolio performance to a late‑February pullback, a surge in imports that depressed first‑quarter GDP, and subsequent tariff‑related volatility and policy responses.
Brian, ISERS investment staff, presented a market overview and the fund’s quarterly performance to the Imperial County Employees’ Retirement System board on May 21, 2025, describing the sequence of events — late‑February weakness, tariff shocks, an import surge and a partial market rebound — that produced mixed results across asset classes.
The summary told trustees why the quarter’s headline GDP and market numbers diverged: first‑quarter U.S. GDP contracted modestly in part because of an unusually large pre‑tariff surge in imports, while risk assets outside the U.S. outperformed as the dollar weakened and investors priced in a negotiation outcome for tariffs.
Brian walked trustees through the chronology: markets were “priced to perfection” before late‑February declines, consumer confidence and some hiring indicators softened, and tariffs later intensified volatility. He said markets were “kinda pricing in most of these tariffs going away, some deals being struck,” and noted that an abrupt rout was followed by a sharp rebound once trading partners paused new measures. Looking at returns he said second‑quarter results to date showed an S&P 500 gain of roughly 6%, international developed markets up about 9% and emerging markets up roughly 6.5% since April 1. He also flagged that first‑quarter GDP showed a -0.3% print driven largely by a spike in imports and that consumer sentiment remained subdued.
On labor market and policy topics, Brian said there had been a notable increase in layoff announcements and that particular federal workforce reductions would have limited macro impact because federal employment is a small portion of total U.S. employment. He described Doge (a federal program discussed by trustees) as having headline risk but limited effect on total employment so far and suggested that most economic scenarios fall between negotiated de‑escalation (best case) and structural tariff persistence with higher inflation and slower growth (worst case).
Brian concluded that the recent market bounce through early May had recovered some losses but that uncertainties remained; the board’s overall portfolio returned modestly for the quarter, roughly in line with the policy index net of fees, and trustees should expect continued monitoring as negotiations and data arrive.
Ending: Staff asked trustees to accept the market review for information; the board had no motions tied directly to the market briefing but used the discussion to frame upcoming performance reviews and asset allocation oversight.
