June 2025 Market Review & Commentary

We hope you are well. With the 4th of July behind us, we’re moving into the second half of 2025. It’s been a busy year for our family-- such as the unexpected closure of Channing's school which led all the parents to scramble to form a charity (501c3) in order to reopen it. I imagine many of you have had similar challenges and surprises. Here’s to taking things one day at a time and hoping that you are making the most of summer with people and activities that bring you joy.

First Half of 2025 Review & Second Half Expectations:

           This first six months of 2025 can only be summed up as a tale of two tapes or simply an eventful emotional roller coaster ride to nearly nowhere. The year began with a volatile start marked by caution due to policy uncertainty and economics worry around AI technology. By the end of the Second Quarter, optimism returned as tariff impacts eased resulting in two distinct market moods.  

The S&P 500 returned +6.1% through the end of June after being down over -15% at one point in the 2^nd Quarter, and despite all the whiplash, the overall market is trading at nearly the same valuation it started the year off at. The Bond market did not get spared from the roller coaster of fun. Long-term interest rates, as measured by the 30-year U.S. Treasury bond yield, ranged from 4.40% to 5.10% but ended the first half of the year near 4.80%, where it started. For those not following markets closely, it might seem as though little has changed but for anyone tuned in during the first 6 months, they are most likely putting on a Dramamine patch behind their ear in preparation for what could come.

This year has been marked by frequent changes in U.S. trade policy, including periods of increased tariffs and targeted measures against trading partners, followed by exemptions and temporary agreements. Although the efforts in the second quarter reduced tariffs from their previous levels, uncertainty persists. With deadlines for tariff exemptions approaching in July and August, the policy landscape continues to evolve, and several important aspects remain undecided.

As we continue down this path of a tale of two tapes, let’s cover the Federal Reserve's challenges at hand. The central bank faces a difficult policy tradeoff: tariffs could lead to higher inflation, but they could also slow economic growth if higher prices reduce demand for goods and services. Given all the uncertainty, the Fed has held interest rates steady over the last 2 meetings, taking a wait-and-see approach. All the uncertainty can simply be seen in the Inflation expectations, which are at extreme levels but the Reported Inflation Data Measured by the Core CPI is continuing to drift lower. This divergence has most headlines and pundits changing their tune almost daily.  

Upcoming months will be critical, as economic data and earnings reports reveal how shifting trade policies affect business conditions, consumer spending, and the labor market. Second quarters’ GDP data and company guidance will offer further insights.

Though market volatility can be unnerving, history suggests that maintaining a diversified portfolio and a long-term perspective is wise. In the face of uncertainty, it's best to focus on controllable factors, avoid reacting to headlines, and stick to your financial plan for long-term success.