Tax management

Tax management update – Q1 2025

April 28, 2025 - 5 min read

SVP, Client Portfolio Manager, Integrated Portfolio Implementation – Natixis Investment Managers Solutions

Returns for equity indices were negative for the quarter as stocks reversed a multi-year period of growth, falling significantly in the latter portion of the quarter.

– Peter Klos, CFA^®

After two consecutive years of strong US equity markets, the S&P 500^® experienced weakness in the first quarter of 2025. Mega-caps tended to underperform during the period, reversing a long-term trend where technology and mega-caps have often led the market higher.

Anticipation grows around tariffs, tax bill

Congress continues to work through the early phases of passing a tax bill. Republicans will take a go-it-alone approach, using the reconciliation process, which allows them to bypass the Senate filibuster and forgo compromise with Democrats. This approach comes with other procedural challenges they will have to navigate. Progress was made in recent weeks when the House and Senate aligned on a one-bill approach to pass immigration, energy and tax priorities, and a debt ceiling increase. Key details are still unclear, and there are divisions in the conference about spending cuts, tax provision extensions, and new tax cuts. The conference hopes to stick to an aggressive timetable and pass a bill by Memorial Day, so expect its priorities, and differences, to become clearer as negotiations ramp up after the Easter and Passover recess. If past is prologue, the Memorial Day deadline may prove an overly ambitious one, but Republicans’ plan to include the debt ceiling increase will add some urgency to passing the bill, as the US is forecast to exceed its borrowing limit in August or September.

Winners and losers

The number of stocks in the S&P 500^® posting positive YTD returns shrank considerably when compared to 2024, with “only” around 45% of stocks rising in value during the first quarter. Markets experienced a sharp reversal in performance leadership as value stocks tended to dramatically outperform growth, with mega-cap and technology, in particular, weighing on returns. NVIDIA (-19%), Apple (-11%), Tesla (-35%) and Microsoft (-10%) were the four largest detractors from a performance perspective within the S&P 500^®, given their combination of poor performance and relatively large weight. Other large names such as Broadcom (-27%), Amazon (-13%) and Alphabet (-18%) were all down meaningfully for the period as well. As noted above, value stocks tended to perform significantly better, with Berkshire Hathaway (+17%), Philip Morris (+33%), and ExxonMobil (+12%) representing the three biggest contributors within the index.

Winners, losers and total return for the S&P 500^® by calendar year

Performance data shown represents past performance and is no guarantee of future results.
Source: FactSet, Natixis Investment Managers Solutions

Tax loss harvesting opportunities in Q1

Q1 2025 presented some improved opportunities from a loss harvesting perspective. Markets tended to become considerably more volatile in the latter portion of the quarter, with a good-sized number of mega-cap technology stocks dropping by over 10%. Longer-term investors in these stocks likely still have good-sized gains, but new investors likely had opportunity to harvest losses to offset gains in other parts of their portfolios. Non-US markets were generally stronger, but there were still pockets of weakness at the country or individual stock level as tariff-related volatility led to broader dispersion across individual names. Bond markets (especially higher-quality investment grade) also rose during the period, leading to fewer opportunities in that space compared to what we’ve seen over the past number of years. A proactive harvesting process that looks for opportunities throughout the year may be able to take advantage of some losses, especially for new investors within the US large-cap space. This harvesting opportunity will vary quite a bit based on client-specific events (when the client invested, cash flows, etc.) along with manager changes.

Tax management update – Q1 2025

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Tax-efficient investing in separately managed accounts (SMAs)

Direct indexing SMAs can help address key issues facing tax-sensitive investors. All accounts are actively managed to optimize tax loss harvesting while providing beta exposure to an index. Our tax-managed SMAs include:

S&P 500^® Strategy (Large Cap)

S&P 400^®Strategy (Mid Cap)

S&P 600^®Strategy (Small Cap)

S&P 1500^® Strategy (All Cap)

S&P Global 500 Strategy (Large Cap)

S&P ADR/International Strategy

What is tax loss harvesting?

A portfolio can harvest its losses for tax purposes by selling investments when their current value is less than the price originally paid for the security. These losses can be used to offset other capital gains on an investor’s tax return. If there are excess losses, they can be used to offset up to $3,000 in ordinary income – or be banked for use in future years.

Learn more

Want more information on tax-managed investment strategies?

Natixis Investment Managers does not provide tax or legal advice. Please consult with a tax or legal professional prior to making any investment decisions.

A tax liability is the total amount of tax debt owed by an individual, corporation or other entity to a taxing authority.

Capital gain is a rise in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price.

CFA^® and Chartered Financial Analyst^® are registered trademarks owned by the CFA Institute.

The S&P 500^® Index is a widely recognized measure of US stock market performance. It is an unmanaged index of 500 common stocks chosen for market size, liquidity, and industry group representation, among other factors. It also measures the performance of the large-cap segment of the US equities market.

The views and opinions expressed may change based on market and other conditions. This material is provided for informational purposes only and should not be construed as investment advice. There can be no assurance that developments will transpire as forecasted. Actual results may vary.

Indexes are not investments, do not incur fees and expenses, and are not professionally managed. It is not possible to invest directly in an index.

Investing involves risk, including risk of loss. Investment risk exists with equity, fixed income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided.

This document may contain references to copyrights, indexes and trademarks that may not be registered in all jurisdictions. Third-party registrations are the property of their respective owners and are not affiliated with Natixis Investment Managers or any of its related or affiliated companies (collectively “Natixis”). Such third-party owners do not sponsor, endorse or participate in the provision of any Natixis services, funds or other financial products.

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