The second quarter began with fireworks as the Trump administration announced sweeping 10% baseline tariffs on most imports, with higher rates applied to around 60 countries. While investors had braced for a protectionist agenda, the magnitude and abrupt implementation of the tariffs caught markets off guard. In response, the S&P 500 saw extreme volatility following the April 2nd “Liberation Day” announcement – initially dropping over 12% before bouncing back sharply on April 9th in one of its biggest single-day gains since World War II. From there, stocks surged steadily, pushing year-to-date returns solidly into positive territory by quarter’s end.
The quarter also saw a brief armed conflict between Israel and Iran, during which the U.S. intervened by bombing Iranian nuclear facilities. Tensions have eased somewhat following a late-June ceasefire, though the situation remains fragile. Markets largely looked past the geopolitical flare-up: oil prices spiked initially but quickly retreated, ending the quarter below where they started.
On the monetary policy front, the Federal Reserve held interest rates steady despite signs of a slowing economy and continued easing of inflation. Fed Chair Jerome Powell voiced concern that the new tariffs could rekindle inflationary pressures. As a reminder, the Fed operates under a “dual mandate”: to promote maximum employment and maintain stable prices. At present, Powell appears more focused on inflation risks, while President Trump remains focused on boosting economic growth and job creation. As a matter of fact, the President has repeatedly and publicly criticized the Fed for not lowering rates.
If there’s one word to describe the stock market right now, it’s “resilient.” That same resilience has been a defining trait of markets in recent years. Despite a tariff-driven selloff, geopolitical tensions in the Middle East, and a standoff between the Fed and the White House, equities remain near record highs.
Looking Ahead
As we head into the second half of 2025, many of the major storylines from the second quarter remain unresolved and are likely to stay in the headlines. Chief among them is the uncertainty surrounding tariffs. Until a more durable trade policy framework emerges, any escalation in tariff rhetoric could continue to inject volatility into the markets. As we noted last quarter, markets dislike ambiguity – and businesses even more so. In the absence of policy clarity, companies may hold off on investment and hiring decisions.
Tariffs also carry inflationary implications. With consumer sentiment already somewhat fragile, rising prices could place additional strain on household spending – a key engine of U.S. economic growth. The Federal Reserve will be watching closely, as will President Trump. With Chairman Powell’s term expiring next May, the dynamic between the Fed and the White House may become even more contentious. Powell, not concerned about reappointment, appears committed to staying the course. However, if economic data continues to weaken, the Fed may be compelled to cut rates – regardless of ongoing trade tensions.
That said, not everything is cause for concern. Corporate earnings have, so far, exceeded expectations. Still, elevated valuations leave less margin for error. As we’ve discussed throughout the year, companies will need to sustain earnings growth to support current stock prices – a challenge closely tied to consumer strength, inflation trends, and interest rate policy.
Regarding tensions in the Middle East, we continue to view most geopolitical events as largely unactionable for long-term investors. As we’ve noted before, while it’s essential to monitor these developments from a risk management standpoint, their market impact is typically short-lived. The most significant risk at this stage would be a renewed escalation of the Israel-Iran conflict, potentially driving oil prices higher. This, in turn, could add inflationary pressure and further complicate the Fed’s already delicate balancing act. But again, barring a major and sustained disruption, this is not currently actionable from an investment perspective.
A Note on Diversification
We would be remiss not to highlight – once again – that diversification is working in 2025. Through the first half of the year, international equities, gold, and several segments of the fixed income market have outperformed U.S. stocks. As we’ve often emphasized, complex markets are where a diversified portfolio tends to shine, and that’s been the case so far this year.
With markets navigating a challenging mix of trade tensions, economic uncertainty, and geopolitical events, we continue to believe that the most effective strategy is a diversified, disciplined, long-term approach. Reacting to short-term market swings, whether driven by headlines or data, rarely leads to better outcomes. Instead, broad diversification, thoughtful asset allocation, and a clear focus on your personal financial goals remain the most reliable tools for navigating uncertainty.
As always, our team is here to offer insights and support every step of the way. We’re grateful for the opportunity to serve you and look forward to helping you stay on course throughout the second half of 2025.
Resilient Markets Amid Tariffs, Tensions, and Tight Policy
The second quarter began with fireworks as the Trump administration announced sweeping 10% baseline tariffs on most imports, with higher rates applied to around 60 countries. While investors had braced for a protectionist agenda, the magnitude and abrupt implementation of the tariffs caught markets off guard. In response, the S&P 500 saw extreme volatility following the April 2nd “Liberation Day” announcement – initially dropping over 12% before bouncing back sharply on April 9th in one of its biggest single-day gains since World War II. From there, stocks surged steadily, pushing year-to-date returns solidly into positive territory by quarter’s end.
The quarter also saw a brief armed conflict between Israel and Iran, during which the U.S. intervened by bombing Iranian nuclear facilities. Tensions have eased somewhat following a late-June ceasefire, though the situation remains fragile. Markets largely looked past the geopolitical flare-up: oil prices spiked initially but quickly retreated, ending the quarter below where they started.
On the monetary policy front, the Federal Reserve held interest rates steady despite signs of a slowing economy and continued easing of inflation. Fed Chair Jerome Powell voiced concern that the new tariffs could rekindle inflationary pressures. As a reminder, the Fed operates under a “dual mandate”: to promote maximum employment and maintain stable prices. At present, Powell appears more focused on inflation risks, while President Trump remains focused on boosting economic growth and job creation. As a matter of fact, the President has repeatedly and publicly criticized the Fed for not lowering rates.
If there’s one word to describe the stock market right now, it’s “resilient.” That same resilience has been a defining trait of markets in recent years. Despite a tariff-driven selloff, geopolitical tensions in the Middle East, and a standoff between the Fed and the White House, equities remain near record highs.
Looking Ahead
As we head into the second half of 2025, many of the major storylines from the second quarter remain unresolved and are likely to stay in the headlines. Chief among them is the uncertainty surrounding tariffs. Until a more durable trade policy framework emerges, any escalation in tariff rhetoric could continue to inject volatility into the markets. As we noted last quarter, markets dislike ambiguity – and businesses even more so. In the absence of policy clarity, companies may hold off on investment and hiring decisions.
Tariffs also carry inflationary implications. With consumer sentiment already somewhat fragile, rising prices could place additional strain on household spending – a key engine of U.S. economic growth. The Federal Reserve will be watching closely, as will President Trump. With Chairman Powell’s term expiring next May, the dynamic between the Fed and the White House may become even more contentious. Powell, not concerned about reappointment, appears committed to staying the course. However, if economic data continues to weaken, the Fed may be compelled to cut rates – regardless of ongoing trade tensions.
That said, not everything is cause for concern. Corporate earnings have, so far, exceeded expectations. Still, elevated valuations leave less margin for error. As we’ve discussed throughout the year, companies will need to sustain earnings growth to support current stock prices – a challenge closely tied to consumer strength, inflation trends, and interest rate policy.
Regarding tensions in the Middle East, we continue to view most geopolitical events as largely unactionable for long-term investors. As we’ve noted before, while it’s essential to monitor these developments from a risk management standpoint, their market impact is typically short-lived. The most significant risk at this stage would be a renewed escalation of the Israel-Iran conflict, potentially driving oil prices higher. This, in turn, could add inflationary pressure and further complicate the Fed’s already delicate balancing act. But again, barring a major and sustained disruption, this is not currently actionable from an investment perspective.
A Note on Diversification
We would be remiss not to highlight – once again – that diversification is working in 2025. Through the first half of the year, international equities, gold, and several segments of the fixed income market have outperformed U.S. stocks. As we’ve often emphasized, complex markets are where a diversified portfolio tends to shine, and that’s been the case so far this year.
With markets navigating a challenging mix of trade tensions, economic uncertainty, and geopolitical events, we continue to believe that the most effective strategy is a diversified, disciplined, long-term approach. Reacting to short-term market swings, whether driven by headlines or data, rarely leads to better outcomes. Instead, broad diversification, thoughtful asset allocation, and a clear focus on your personal financial goals remain the most reliable tools for navigating uncertainty.
As always, our team is here to offer insights and support every step of the way. We’re grateful for the opportunity to serve you and look forward to helping you stay on course throughout the second half of 2025.
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Resilient Markets Amid Tariffs, Tensions, and Tight Policy
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