Q2 2025 Market Update

The quote below may have resonated more from mid-February through early April, when we were in the throes of a nearly 19% decline in the S&P 500. Now, with the benefit of hindsight, it serves as a reminder of the condition we all experience as investors. The tone of this commentary would have undoubtedly been different had we written it during that downturn.

“Doubt is not a pleasant condition, but certainty is absurd.”
-Voltaire

In stark contrast to the relative calm of 2024, stocks, bonds, and the US Dollar have all experienced higher levels of volatility. In some sense, we expected this volatility; however, it is never an easy experience in the midst of it. Our friend and associate, Andy Melnick, was the first one that we recall to suggest that Covid changed the world, and everything we have experienced since then is both a consequence and the true beginning of a new era. It was a sentiment that made sense years ago and has only become more prescient as time has progressed. This year’s events are merely an extension of this view. Regardless of individual perspectives on President Trump's policies, he represents a symptom of a greater change, rather than its root cause. It is this broader view that has driven many of our investment decisions in recent years and will continue to influence our strategic thinking.

​In the near term, we hold both an optimistic and a cautious view. As the market has recovered, the administration has taken steps to soften the blow from the initial shock of the tariff plans. As ongoing trade negotiations take place, we believe that we will see more good news than bad. The broader question facing investors is whether the damage has already been done. We are likely to spend the summer on recession watch, something that has become all too familiar, but it is an environment in which stocks can nonetheless perform well. While we can only speculate on the future, the economy may experience a modest slowdown before recovering. In our view, there is a reasonable likelihood that we will avoid a recession. 

From a market perspective, we have seen a rapid recovery from the recent lows. We anticipate further gains in stocks between now and year-end, and we also expect some volatility in those returns. Diversification has been our friend this year, as non-US equities have been the sole consistent bright spot in portfolios.

Over the coming days, Congress is likely to continue discussions on a new federal budget and tax reform, areas that could become contentious. Markets are likely to react to any news on the bill, as both chambers try to reach some consensus. It would be foolish to pretend that we know exactly how this will play out, and that is why we continue to invest with the expectation of further near-term market volatility. While there is a lot to accomplish and execution will be key, longer term, our technology-driven secular bull market view remains intact.

We were fortunate to have had two great years of stock market returns in 2023 and 2024, and while 2025 has thus far been more challenging, it has hardly been catastrophic. Remember that stock markets climb a wall of worry, and it is when there are seemingly no worries that you should be most concerned. This is a transition year, in which uncertainty is higher than normal, but it has generally been expected. We have navigated through the first part of it, and we believe that we are well-positioned to manage whatever comes.

As always, if you feel your level of worry rising or have any questions, please reach out.

Index Descriptions:
The Standard and Poor's 500, or simply the S&P 500, is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the USA.
The Russell 2000 Index is a stock market index that tracks roughly 2000 US small companies, and is considered a key benchmark for US small cap stocks.
The MSCI EAFE Index is a stock market index that measures the performance of large- and mid-cap companies across 21 Developed markets countries around the world. Canada and the USA are not included. EAFE is an acronym that stands for Europe, Australasia, and the Far East.
The MSCI Emerging Markets Index captures large and mid-cap representation across 24 Emerging Markets (EM) countries.
The Bloomberg US Aggregate Bond Index, or the Agg, is a broad based, market capitalization-weighted bond market index representing intermediate term investment grade bonds traded in the USA.

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