Q2 2025 Market Insights

Financial markets delivered broad-based gains in the third quarter of 2025, reflecting optimism around easing trade tensions, easier financial conditions, and resilient corporate earnings. Revisions to previously reported job data have provided the Federal Reserve with greater flexibility to implement additional interest rate cuts. Corporate earnings growth, led by technology and AI-related sectors, has been strong, and the passage of the One Big Beautiful Bill Act is expected to provide an additional near-term tailwind toward improved profitability. The combination of looser monetary policy and solid earnings growth should create a constructive environment for equities in the near term. We highlight the constructive environment for equities in the near term.

Amid widespread concern over U.S. trade policy, the S&P 500® Index posted its worst quarterly return in nearly three years, declining 4.28%. After weeks of uncertainty and anticipation, the Trump administration implemented sweeping tariffs on nearly all imported goods, creating a complex and fluid equity market for U.S. investors. While the potential impact of prolonged trade disputes remains unknown, economists believe the odds of a near-term recession will remain low as long as the country’s labor market continues to grow. Against this backdrop of unpredictability and ongoing instability, we highlight opportunities for investors to adapt in a turbulent market and realize long-term growth by enduring temporary downturns with confidence.

In the fourth quarter, the S&P 500® rounded the corner on its second straight year of 20%-plus gains––reaching 24.99% for 2024 with a 2.39% return––marking its best two-year performance since 1997-1998. In response to the election of Donald Trump, investors have embraced the prospects of deregulation, reductions in corporate taxes, and a renewed focus on trade protectionism aimed at prioritizing domestic industries. With inflation data still well above the Federal Reserve’s 2% target rate, the coming year could put upward pressure on medium and long-term bond yields. In 2025, the interplay between asset classes will remain a defining characteristic of the global investment landscape, making a well-structured, long-term, and diversified asset allocation essential for investors hoping to navigate this evolving environment with confidence.