Even though it’s only been half a year, it feels like several years’ worth of events have occurred in 2025. Despite a lot of doom and gloom with current events, most of my clients have been pleasantly surprised during our mid-year reviews. Many come into our meetings expecting to assess the damage but instead learn that their investments are doing quite well!
Currently, we find ourselves in a complex financial landscape shaped by shifting trade policies, evolving Federal Reserve strategies, and global economic uncertainties. Despite early-year volatility, markets have shown resilience, and the second half of the year presents both opportunities and risks. It is times like these when it really helps to have a financial planner guiding you through the choppy waters. It also helps to have a plan to stick to. If you are investing without a plan, it’s hard to know what to do when we see the volatility that we’ve seen so far this year. Just recently, many people without plans or professionals on their side overreacted to the early year volatility, moved their money to the sidelines, and then immediately missed out on the speedy recovery.
There’s a lot going on in the world: wars, trade wars, political uncertainty, deportations, and more. These issues are important, complex, and often divisive. While, of course, my team and I have our feelings and opinions on many of these issues, I’m going to steer clear of most of that for now. In this particular article, I’m going to focus on our areas of expertise which are: markets, the economy, and your financial plan.
Top Financial Headlines of 2025 (So Far)
1. Tariff Turbulence and Trade Policy Shifts
The first half of 2025 was marked by significant volatility due to the Trump administration’s reciprocal tariffs. However, with delays, negotiations, and legal rulings, the fear around these tariffs has died down a bit and markets have recovered. It still might be some time before we see the true effect of these tariffs on the economy.
2. Federal Reserve Holds Steady—For Now
The Fed has maintained a cautious stance, holding interest rates steady amid mixed economic signals. However, expectations are growing for potential rate cuts in the fall, especially if inflation continues to moderate and growth slows.
3. Legislative Gridlock and Fiscal Policy
The “One Big Beautiful Bill Act” remains in limbo, with pro-consumer tax cuts and business incentives hanging in the balance. Investors are watching closely, as the bill’s passage could significantly influence market sentiment and economic growth.
4. Conflict in the Middle East
Tensions and military action have flared up recently in the Middle East. There’s a lot of uncertainty here and a greater war seems possible. So far, however, we have not seen a major economic or market impact from this conflict. There is certainly fear that the world’s oil supply could be affected, which could reverse some of the important progress we have made on inflation.
Stock Market Performance: A Resilient Rebound
US Large Cap Stocks: Despite a sharp selloff in the spring—driven by tariff fears and earnings downgrades, the S&P 500 has rebounded and is now positive for this year. As of July 1st, 2025, the S&P 500 is up 3.65%. One key trend is that tech stocks have outperformed, supported by strong earnings and innovation in AI and automation.
International Stocks: With U.S. valuations stretched, investors are increasingly looking to international markets, particularly in Asia and Europe, for growth and value opportunities. In recent years Large Cap US stocks have led the way. This year, international stocks are leading the way. As of July 1st, 2025, the MSCI EAFE is up 17.11%.
Small and Mid Cap Stocks: While smaller US stocks still contain great opportunity and valuations. They have lagged behind large companies and international companies this year. This is most likely due to the outsized perceived impact tariffs could have on less established companies.
Bond Market Update: Boring again (in a good way)
After a few years of turbulence, the bond market in 2025 has returned to a more predictable and stable rhythm—something many investors are welcoming with open arms. In a world where “boring” often means “reliable,” fixed income is once again playing its traditional role as a steadying force in diversified portfolios.
10-Year Treasury: A Return to Normalcy: The 10-year U.S. Treasury yield has hovered around 4.5% for much of the year, reflecting a balance between cooling inflation and cautious optimism about economic growth.
Bloomberg U.S. Aggregate Bond Index: Quietly Climbing: The Bloomberg U.S. Aggregate Bond Index—a broad benchmark for investment-grade bonds—has posted a year-to-date return of up 3.22% (as of 7/1/25).
Why “Boring” Is Beautiful: In an environment where equity markets remain sensitive to geopolitical headlines and policy shifts, bonds are once again offering what they do best: predictable income, lower volatility, and portfolio diversification. For long-term investors, this return to form is not just comforting—it’s strategic.
Economic Outlook for the Second Half of 2025
Looking ahead, the economic landscape remains uncertain but not without promise:
Moderate GDP Growth Expected: U.S. GDP is projected to grow at 1.6% in 2025, with a slight slowdown to 1.3% in 2026.
Fed Policy Pivot Possible: If inflation continues to ease, the Fed may begin cutting rates in late 2025, potentially boosting both equities and bonds.
Global Growth Convergence: As tariff tensions ease, growth in Europe and Asia may continue to catch up to the U.S., creating opportunities for globally diversified portfolios.
We expect a bumpy ride: While much of the market and economic outlook for the rest of 2025 is positive, there is still a ton of geopolitical risk out there: the Middle East, Ukraine/Russia, trade wars with China, and an unpredictable administration. All these things could contribute to volatility in both directions for the second half of 2025.
Conclusion: Create a Plan & Stick To it.
In a world full of economic headlines, political shifts, and market noise, having a solid financial plan is more valuable than ever. The first half of 2025 reminded us that uncertainty is a constant—but uncertainty doesn’t have to mean instability.
Now is the perfect time to create or revisit your financial plan. Why? Because when you have a clear strategy tailored to your goals, risk tolerance, and time horizon, you’re better equipped to navigate whatever the markets throw your way. A good plan acts like a compass—it doesn’t eliminate the storms, but it keeps you pointed in the right direction.
And once your plan is in place? Stick to it. The most successful investors aren’t the ones who react to every headline—they’re the ones who stay disciplined, make informed adjustments when necessary, and keep their eyes on the long term.
Review Your Financial Plan Today
Have you completed your mid-year financial checkup yet? Whether you're planning for retirement, saving for a major purchase, or simply looking to optimize your portfolio, a CERTIFIED FINANCIAL PLANNER®, like myself, can help you align your strategy with today’s market realities. Schedule a consultation today to ensure your financial goals stay on track for 2025 and beyond.
The views stated in this letter are not necessarily the opinion of Cetera Investment Services LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
Investors should consider their financial ability to continue to purchase through periods of low price levels. A diversified portfolio does not assure a profit or protect against loss in a declining market. Additional risks are associated with international investing, such as currency fluctuations, political and economic stability, and differences in accounting standards. Small-cap funds may be subject to a higher degree of market risk than large-cap funds or more established companies' securities. Furthermore, the illiquidity of the small-cap market may adversely affect the value of an investment so that shares, when redeemed, may be worth more or less than their original cost.
Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing. S&P 500 – A capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. MSCI EAFE – Designed to measure the equity market performance of developed markets (Europe, Australasia, Far East) excluding the U.S. and Canada. The Index is market-capitalization weighted. Bloomberg U.S. Aggregate Bond – The Bloomberg U.S. Agg Total Return Value Unhedged, also known as "Bloomberg U.S. Aggregate Bond Index," formerly known as the "Barclays Capital U.S. Aggregate Bond Index," and prior to that, the “Lehman Aggregate Bond Index,” is a broad-based flagship benchmark that measure the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).