Quarterly Newsletters
Quarterly Newsletter for the 2nd Quarter 2025
Amid a still-evolving macroeconomic backdrop and uncertain tariff wars, the U.S. equity markets posted strong gains in the second quarter of 2025. Marked by a swift rebound from early April declines and renewed enthusiasm for mega-cap technology stocks, the indexes reached new all-time highs in June.
After posting losses in the first quarter, the market roared back in the second quarter with (on a price return basis) the Dow Jones Industrial Average (DJIA) gaining 4.98%, the Standard and Poor’s 500 (S&P 500) picking up 10.57% and the NASDAQ rewarding us with an impressive 17.75% gain. Thus, year-to-date, through June 30, the DJIA is up 3.64%, the S&P 500 is up 5.50% and the NASDAQ is up 5.48%. The MSCI All Country World ex-US Index, that posted positive returns in the first quarter, added to those gains with an additional 12.03%; thus, ending the first half of the year up 16.04%. Emerging Markets produced a 11.99% return for the quarter and a 15.27% year to date gain. In the fixed income environment, the Merrill Lynch 3-month Treasury Bill Index yielded 1.04% and the Bloomberg Aggregate Bond Index returned 1.21% for the quarter- putting their year-to-date yields at 2.07% and 4.02% respectively.
Fixed Income Market (Bonds): Tariffs continue to pave a rocky road for both the equity market and the fixed income market. The Fed left interest rates unchanged during the quarter but signaled a more dovish stance for the second half of the year. In our last newsletter, we indicated that the markets had three rate increases priced throughout the year- with some investors forecasting up to five. Now, most forecasters estimate one and possibly two increases by year end. GDP and employment gains moderated meaningfully, and, in our opinion, the Fed remains overly restrictive. Ex-housing, there is no real inflation and there is little risk of a recession. Of concern is the increasing pressure that Trump is putting on Jerome Powell (Chair of the Federal Reserve) to lower rates. Replacing Powell prior to the end of his term would be unprecedented and disruptive. Future Fed decisions will be instrumental in charting the path of U.S. economy.
Equity Market- US and Overseas (Stocks): The tariff rhetoric does not seem to have a resounding effect on either the US stock market or the Overseas market. These markets have remained strong and resilient as investors view these tariffs as more political posturing than concrete, long-lasting economic policy. Inflation seems to be a non-issue. We have seen some increases in the cost of coffee, furniture, clothing and appliances; but, by contrast, we have seen significant decreases in the cost of gasoline- now at a national average of $3.13 per gallon. The war between Russia and Ukraine as well as the war between Israel and Palestine have had little effect on the overseas markets as they are performing beyond expectations. As central banks remain accommodative and the world economy continues its growth path, we believe these markets will remain strong. On the U.S. front, the second half of this year could bring us slower growth, mild inflation, higher interest rates and problems on the “supply and demand” front if world economic environment changes for the worst. However, we have a good labor market, a probable Fed interest rate cut, a strong IPO (Initial Public Offering- when a company goes public) market, corporate earnings that are exceeding expectations, positive consumer sentiment, and pent-up investment demand. As an additional positive, we have the passing of the One Big Beautiful Bill Act (OBBBA). Regardless of whether one agrees with the new law, it does add a massive amount of tax certainty to the market and, as we have stated before, the market hates uncertainty.
In conclusion, we remain positive about the U.S. market and think it will produce additional returns through year end. We continue to contend that the overseas market is undervalued; thus, we remain positive about these investments. Regarding the fixed income environment, we are neutral- stay the course. We favor short and intermediate term investments.
Permit us to express our sincere appreciation for the opportunity to be of service to you. As always, should you have any questions or wish to discuss the above in more detail, please do not hesitate to contact us.