Mid-Year Market Update 2025
Good morning, and welcome to our mid-year update and Q2 recap! Given the market ups and downs this year, our team has unsurprisingly received a lot of questions from clients and colleagues alike about their individual financial plans, the state of the markets, the Big Beautiful Bill, the future of Social Security, and more.
Instead of our traditional quarterly recap, we thought it made sense to pull together a handful of the questions we’re hearing and to give you our honest perspective.
Have a question we aren’t covering here? Reply to this email, or reach out here! We’d love to hear from you.
Q: What happened to the market in the first half of 2025? Should I be worried about my portfolio?
A: The first half of 2025 has certainly been eventful. We saw significant market volatility driven by trade policy tensions, geopolitical conflicts in the Middle East, currency fluctuations, and other concerning headlines. The S&P 500 experienced a sharp correction in April, with year-to-date returns dropping to approximately -15%.
However, what followed was truly remarkable – one of the fastest market recoveries we've witnessed. From those April lows through May, the index surged nearly 19%, bringing it back toward record territory. This demonstrates the market's underlying resilience and the importance of maintaining a long-term perspective.
If you stayed invested during the volatility, you're likely in a stronger position today than those who tried to time the market. This is exactly why we emphasize staying disciplined during turbulent periods.
Q: How should I think about all the uncertainty around tariffs and trade policies?
A: Trade policy uncertainty has definitely contributed to market volatility this year. It's important to understand that tariffs are often used as negotiating tools for broader diplomatic objectives beyond just trade, including immigration and national security issues.
While the immediate impact on consumer sentiment has been significant, with many households worried about higher prices for everyday goods, history shows us that markets typically adapt to trade policy changes over time. We saw this during the previous trade tensions in 2018 when similar policies were ultimately used to secure new trade agreements.
The key is maintaining proper diversification in your portfolio so it can weather various scenarios. Rather than trying to predict specific policy outcomes, we focus on positioning your investments to perform well across different economic environments.
Q: Are geopolitical tensions affecting my investments? What about oil prices?
A: Geopolitical tensions, particularly conflicts in Eastern Europe and the Middle East, have certainly added complexity to the investment landscape. These events can affect energy prices and potentially disrupt supply chains.
Oil prices have been volatile as conflicts have escalated, swinging based on daily headlines. However, it's worth noting that oil prices remain substantially below the 2022 peak of over $120 per barrel. This year, oil has varied between $60 and $82 per barrel, showing that markets have developed some resilience to these shocks.
The important thing to remember is that if markets are already focused on a particular risk – whether it's wars or tariffs, financial market prices already reflect much of that concern. And since we cannot predict the future, diversification remains the most effective way to protect your portfolio.
Q: Will the Federal Reserve cut interest rates this year?
A: The Fed faces a challenging balancing act right now. On one hand, trade policies may contribute to inflationary pressures; on the other, signs of economic softening may require monetary support.
The Fed has maintained its current interest rate stance at 4.25% to 4.50% this year, demonstrating a measured approach. Based on their own projections, Fed officials suggest there could be two rate cuts in 2025, with further reductions anticipated in 2026 and 2027, eventually reaching a longer-run rate of around 3.0%.
However, these are projections, not promises. The actual path will depend on how economic data evolves. Rather than trying to predict exactly what the Fed will do, we focus on positioning your portfolio to weather a variety of interest rate environments.
Q: I'm worried about Social Security. Will it be there when I retire?
A: This is one of the most common concerns we hear, and it's understandable given the headlines about the program's long-term funding challenges.
The good news is that we don't anticipate dramatic changes that would immediately impact current retirees or those approaching retirement in the near term. Historically, when Social Security adjustments have been made, they've been implemented gradually and with protections for those closest to retirement age.
If significant reforms are enacted, they would more likely affect younger generations, providing time for adjustment and planning. We continue to monitor developments closely and will update our retirement planning models as needed, but we don't recommend making major changes to your retirement strategy based on Social Security concerns alone.
Q: Should I be investing internationally given all the uncertainty in the U.S.?
A: Actually, international markets have been one of the bright spots of 2025. Developed and emerging market stocks have generated strong double-digit returns year-to-date, significantly outperforming U.S. markets during the same period.
This outperformance has been driven by more attractive valuations compared to elevated U.S. market multiples, improving economic conditions in key regions, and the weakening U.S. dollar creating a beneficial currency tailwind.
This reinforces why we maintain international exposure in diversified portfolios. While U.S. markets dominated for much of the past decade, periods of international outperformance remind us that market leadership can shift over time.
Q: What should I do now? Any changes to my investment strategy?
A: The events of the first half of 2025 reinforce several key principles we always emphasize:
Stay disciplined: Those who remained invested during the April downturn were rewarded with the subsequent recovery
Maintain diversification: Well-constructed portfolios across asset classes, sectors, and geographies helped mitigate risk
Focus on your timeline: Short-term market movements rarely derail long-term financial plans
Look for opportunities: Market volatility often creates chances for rebalancing and tax loss harvesting
Rather than making dramatic changes based on headlines, we recommend staying focused on your specific goals and timeline. If you have concerns about your current allocation or want to discuss any adjustments, we're here to help you make informed decisions.
Q: How often should we review my portfolio given all this uncertainty?
A: We believe regular communication is especially important during uncertain times. While we don't recommend making frequent changes based on market movements, having conversations about your portfolio and financial plan helps maintain perspective.
We encourage you to reach out whenever you have questions or concerns. These discussions are particularly valuable during periods of market uncertainty, and we're here to provide the guidance and perspective you need to stay on track toward your financial goals.
These responses reflect our current market views and are provided for informational purposes. Individual circumstances may vary, and we recommend discussing your specific situation with your advisor.