Second Quarter 2025 Market Commentary and Economic Outlook

If we had predicted at the beginning of the second quarter that a balanced stock and bond portfolio would be return close to 7% for the quarter and have positive year to date returns over 7.5% by July, we would have sounded crazy. Honestly, predicting that would have felt crazy, too. The last three months have illustrated, yet again, why we do not try to time the markets.

The second quarter was a wild ride for the stock market as trade and tariff policy unfolded, but by the end of the quarter the S&P 500 was making new all-time highs. For all the turmoil, through the end of June the labor market was still strong, and inflation was not showing signs of tariff problems.

Of course, one wild (and positive) quarter does not make the market and there are still plenty of causes for concern. The tariff and trade landscape continues to shift and the markets are digesting new data that suggests the effects of these policies are yet to play out.

Our team of portfolio advisors at East Bay Investment Solutions have provided a full analysis that you can read here, or you can watch Mario’s video presentation.

 Summary:

• Markets gyrated this quarter as they priced in effects of unfolding tariff policies.

• S&P 500 ended the quarter at an all-time high.

• Developed International stocks continued growth by increasing 12.0% during the quarter (MSCI World ex USA).

 Glass Half-Full:

• Short-to-intermediate bonds performed well in Q2

• U.S. stocks rebounded in Q2.

• Recent macroeconomic data suggests the U.S. labor market continues to remain solid.

• Inflation declined to 2.4% in the last reading from May 2025 relative to the 2.9% seen in December 2024.

 Glass Half-Empty:

• Continued uncertainty around tariffs and ongoing trade wars between U.S. and international trade partners.

• U.S. federal government debt rating was downgraded in May.

• Continued geopolitical concerns in the Middle East and between Russia/Ukraine.

• Full effect of tariffs on inflation might not be fully realized yet.

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