Global equities declined in Q1 2025 amid renewed market volatility and rising geopolitical risks. U.S. equities retreated sharply following concerns over newly proposed trade tariffs, a pullback in technology stocks, and investor uncertainty surrounding global economic growth. The S&P 500 fell -4.2% during the quarter, reversing some of the gains from 2024. Technology and growth-oriented sectors underperformed, with the Nasdaq 100 dropping -8.1% as investor enthusiasm around AI tempered and profit-taking ensued. In contrast, value-oriented sectors such as energy and healthcare outperformed, supported by strong fundamentals and resilient earnings.

International equities outpaced U.S. markets. The MSCI EAFE Index, representing developed markets outside the U.S. and Canada, rose 8.0%, benefiting from a weaker U.S. dollar, investor rotation into non-U.S. equities, and improved sentiment around increased defense spending in Europe. The MSCI Emerging Markets Index also gained 2.9%, supported by a depreciating U.S. dollar and declining Treasury yields.

Bond markets rebounded as interest rates fell across the curve. The Bloomberg U.S. Aggregate Bond Index rose 2.8% for the quarter. The 10-year U.S. Treasury yield declined by 35 basis points, ending Q1 at 4.23%, as investors grew more cautious about the growth outlook and began pricing in additional rate cuts by the Federal Reserve. Although no new rate cuts occurred during the quarter, dovish Fed commentary supported fixed income performance. High-yield bonds remained stable, with the Bloomberg U.S. Corporate High Yield Index up 1.0%, supported by healthy corporate balance sheets and limited near-term default risk.

Commodities posted strong gains in Q1. The Bloomberg Commodity Index rose 8.8%, led by a sharp rally in precious metals as gold surged 19% during the quarter, driven by heightened geopolitical tensions and strong investor demand for safe-haven assets. Energy markets posted gains overall; crude oil edged higher, while natural gas prices rose sharply amid colder-than-expected weather and supply concerns.

As of March 31, 2025, OCERS’ portfolio had a market value of $24.4 billion, up from $24.3 billion at the end of year 2024. OCERS’ portfolio generated a quarterly return of 0.9% relative to policy benchmark return of 0.2%.