The second quarter of 2025 offered a clear example of why patience and perspective remain investors’ best allies. Despite a rocky start and no shortage of headlines that might make even the most seasoned investor raise an eyebrow, markets rebounded decisively.
The S&P 500 gained 10.6% over the quarter, while international markets climbed 12%, offering broad-based strength across global equities. Bond markets remained relatively steady, with the Bloomberg Barclays Aggregate Bond Index returning 1.2%. All of this came in the face of geopolitical tension, fluctuating trade policy, and ongoing questions about interest rates and inflation. If anything, it underscores a key truth we emphasize often at WealthCrossing: markets are resilient, and staying invested in a diversified portfolio remains a time-tested strategy.
Unpacking the Headlines: From Conflict to Clarity
The early days of April were marked by unease. Tariff announcements and negotiations, rattled business leaders and markets alike. Meanwhile, tensions in the Middle East briefly escalated when Iran and Israel exchanged strikes, fueling fears of a broader conflict.
But despite the uncertainty, a few things became clear by quarter’s end:
- Inflation remained in check. The Consumer Price Index rose just 2.4% over the 12 months ending in May, not far from the Fed’s 2% target. Though some had expected a spike due to new tariffs, that pressure has yet to materialize in a meaningful way, but that may change as businesses use up their supply of imported goods from before tariffs were put in place.
- The Fed stood still. In its June meeting, the Federal Reserve chose to keep interest rates unchanged, opting for a wait-and-see approach. With employment steady and inflation softening, the central bank appears committed to avoiding sudden moves that might disrupt a cooling economy.
- AI continues to drive growth. After a brief slowdown in Q1, investment in artificial intelligence rebounded, bolstered by new enterprise applications and demand for advanced infrastructure. For tech-heavy indexes, this provided a significant tailwind.
As the quarter progressed, investor sentiment shifted from worry to cautious optimism, a pattern we’ve seen many times before.
The Importance of Staying Grounded
This quarter serves as a reminder of why long-term financial planning matters. When headlines shout uncertainty, it’s tempting to retreat or make impulsive changes. But as we often tell our clients, the market tends to climb a wall of worry, not because the news is good, but because the future still holds promise.
That’s not to say risk disappears. The U.S. economy posted an annualized GDP contraction of 0.5% in Q1, mainly due to declining imports and trade-related uncertainty. Leading economic indicators dipped again in May. And business leaders remain cautious, pointing to challenges around hiring, forecasting, and global supply chains.
But in this environment, caution doesn’t have to mean inaction. It means thoughtful action. And that’s where a sound investment strategy, tailored to your goals, plays a vital role.
What This Means for Your Portfolio
We continue to advocate for diversification across asset classes. While U.S. equities have delivered strong returns year-to-date, international markets showed renewed strength this quarter, a reminder that exposure beyond domestic borders can benefit portfolios in a shifting landscape. Meanwhile, bonds are again showing their worth, offering ballast against stock market volatility and providing income in a higher-rate environment.
This is an important moment to revisit your long-term objectives and risk tolerance. If market volatility in April caused stress and anxiety, then it could be an appropriate time to revisit your asset allocation and potentially take some risk out of the portfolio. Alignment between your goals, your risk tolerance, and your portfolio is key.
Looking Ahead
The remainder of 2025 will no doubt bring more headlines, but whatever unfolds, our role at WealthCrossing remains the same: to help you filter the noise, stay focused on what you can control, and protect the financial future you’ve worked so hard to build.
If you have questions about your portfolio, your retirement strategy, or any life change that could affect your finances, we invite you to reach out.
