Markets saw sharp volatility in Q2 before rebounding to new highs. Brian T. Jones, CFP® (Chairman), Kevin E. Donovan, CFA (Portfolio Research Director) and, Parker G. Trasborg, CFP® (Senior Vice President) break down what drove the turnaround, where performance stands year-to-date, and what to watch for in the second half of 2025.
Introduction
Parker G. Trasborg:
Thanks for tuning in for our July, 2025 market update. My name is Parker Trasborg and I’m a Senior Vice President with CJM Wealth Advisers. Today I’m joined as always by our Portfolio Research Director, Kevin Donovan, and we also have our Chairman Brian Jones. We wanted to spend a couple minutes to discuss markets for the second quarter in the first half of 2025.
Kevin, it was certainly a volatile quarter. The S&P hit very close to a bear market. I’m not sure if it did intraday or not in early April before finishing the quarter on June 30th at a new all-time high, can you just go a little bit more in depth on what happened throughout the quarter?
Q2 2025 Market Recap and S&P 500 Performance
Kevin E. Donovan:
Sure. Well, it turned out to be a great quarter at the end, but it certainly didn’t start out that way. As you can see from the first chart we have up here. So in the first couple of days of the quarter, the markets went down dramatically. So we had the announcement of tariffs, which were much more broad and much higher than expected by the market. So we had a big sell off and the markets were down 11% in just a couple of days. Now, from its highs in February, the market was down almost 19%, so it just avoided that bear market based on the closing prices. But soon after that, as the worst of the tariffs started to be walked back a bit, the markets began to recover and they recovered pretty quickly from this big decline by early May, the S&P 500.
The purple line you see there was back to break even for the quarter, and by the end of the quarter, s SP 500 was up 10.5%. So a really strong recovery, and as you mentioned, it was at a record high at the last day of the quarter, pretty much equaling the performance of the international index, which was also up 10 and a half percent. Continuing its strong performance this year, the Dow Jones Industrial is only up 5%. Some of that difference in performance between the S&P 500 and the Dow two of the biggest stocks in the S&P were up dramatically higher. So Nvidia was up over 40% and Microsoft was up over 30% in just the second quarter alone. So that accounts for a lot of that outperformance and then bonds. The green line there was up about 1.2%.
Recovery from April Lows and Year-to-Date Market Overview
So if you want to see just how dramatic that recovery was in the S&P 500, our next chart shows since that April 8th low, what the performance of the S&P was.
And you can see the SP 500 jumps 25% off of that low to the closing of the quarter on June 30th. So very dramatic recovery in US stocks. Year to date, things will look quite that great. If you remember in the first quarter, the S&P was down about four and a half percent.
So for the year we’re up about five and a half percent. On the S&P 500, the Dow is up about 3.6 and bonds are up about 4%, which is a pretty good six month performance. For bonds to have a steady return that’s at about 4% in the first six months is pretty good. International stocks are way outperforming this year. They’re up 17% after a long period of underperformance, so it’s good to see that international is back, but we were positive year to date of about five and a half percent in the market.
Investor Psychology and the Importance of Long-Term Focus
Parker G. Trasborg:
That’s great, Kevin. I think it was really a remarkable turnaround from the deep dive we saw with the tear of uncertainty and then the walk back on that, and it really does drive home. The markets hate uncertainty and they don’t like to be surprised, which is what happened in early April.
Kevin E. Donovan:
I was just going to add the first reaction of a market to bad news is usually an overreaction, and that’s what we saw in early April, and we saw a nice recovery since then. So don’t invest based on headlines, based on long-term projections and long-term outlooks.
Second Half 2025 Outlook: Consumer Spending and Corporate Earnings
Parker G. Trasborg:
Right. And Brian here, as we dive into the second half of the year, what do you see as the drivers over the next six months?
Brian T. Jones:
Well, I thought, great question, Parker. I think you and Kevin did a really good job hitting high points, which is really, it is been a volatile first six months of the year. I think the volatility continues throughout the summer and definitely into the fall. But the two main things that we need to be keeping attention and paying attention to it is really what’s the consumer doing. This is a service-based economy, and as long as the consumer continues to spend, they continue to travel, eat out, rent cars. That bodes well for a lot of these corporate earnings. And the second thing I’m going to be looking at here and starts here in the next week or so, is corporate earnings. I realize that’s looking in the rear view of the mirror, but corporate earnings are a very strong indicator as to where companies are and their expectations are for the future. And if we start to see signs that earnings are wavering a little bit, I think that’s going to be problematic. But from what I’m reading so far, the earnings are probably going to coming a little stronger than I expected, and I think that does bode well for prices here as we heading into the end of the year. But we’ll see how it goes this summer. But I continue to expect a lot of volatility here throughout the balance of the year.
Closing Thoughts: Stick to the Fundamentals
Parker G. Trasborg:
So the volatility will continue, and as we always say, earnings are what ultimately drive markets higher, so ignore the day-to-day headlines. I know it can be very difficult, especially here in the DC area with everything going on, but ignoring that and just keeping tuned to what company’s earnings are posting up is really the way to go for the long-term performance.
Brian, Kevin, thank you very much for your insight. Viewers, thank you so much for taking some time to join us today. We hope you all have a very happy 4th of July holiday and a nice summer, and we will see you next time. Thank you.
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