After a bumpy start to the year, markets made a powerful comeback in the second quarter of 2025. Stocks surged, inflation cooled slightly, and the economy showed signs of resilience—despite ongoing concerns around trade policy and interest rates.
Here’s what you need to know:
Markets Reached New Highs
The second quarter ended with a bang:
The S&P 500 climbed over 10%.
The Nasdaq, driven by AI and technology stocks, soared nearly 18%.
The Dow Jones gained about 5%.
This rally reversed a sharp decline earlier in the quarter caused by tariff fears. With tensions easing in late June, investor confidence returned, pushing the market to record highs.
Corporate Earnings: Still Solid
Company profits held up well:
Overall, earnings were up 5–6% year-over-year.
Technology and communication companies led the way.
More companies gave positive forward guidance than usual, suggesting continued optimism.
However, stock prices remain relatively expensive, meaning expectations are high. That leaves less room for error if corporate results begin to slip.
The Economy: Slow But Stable Growth
The U.S. economy grew about 1% in Q2—not great, but an improvement from the slight contraction in Q1. Economists now expect full-year 2025 growth around 1.4%, which signals a soft landing rather than a full-blown recession.
Consumer spending remains solid, and business investment has picked up slightly.
Jobs & Inflation: A Balancing Act
Unemployment held steady at 4.1–4.2%, but job creation has cooled.
Inflation has come down to about 3%, helping ease pressure on consumers.
That’s encouraging—but recent tariff announcements could reverse some of that progress. Higher costs on imported goods could lead to higher prices later in the year.
Trade Tensions Return
In April, fears about new tariffs caused a brief market pullback. But a temporary pause in trade restrictions sparked a late-quarter rally.
However, in early July, new tariffs (ranging from 25% to 40%) were announced. Economists estimate these could:
Trim 0.7% off U.S. economic growth
Add about 0.4% to the unemployment rate
It’s a story that will unfold over the second half of the year.
What's the Fed thinking?
The Federal Reserve held interest rates steady in June as inflation continued to cool. While the Fed is cautious, many believe the first rate cut could come as early as September.
Markets are watching inflation and job data closely for signals on what the Fed might do next.
What to Watch in Q3
Looking ahead, here are a few things to keep an eye on:
Company earnings – Can they keep beating expectations?
Inflation reports – Will prices stay under control despite new tariffs?
Jobs data – Is the labor market still strong?
The Fed’s next move – When will they finally cut rates?
Final Thoughts
Q2 ended on a high note:
✔️ Stocks recovered and hit new records
✔️ Inflation cooled a bit
✔️ The economy stayed on its feet
Still, it’s not all smooth sailing. Trade tensions, slowing job growth, and high market valuations could bring more volatility in the months ahead.
We’re keeping a close eye on all of it—and we’re here to help you stay informed, focused, and ready to adjust your strategy as needed.