July 2025
Second quarter market movements were driven largely by tariff announcements, though concerns about US government debt and geo-political developments also weighed on markets at times. April began with investors pushing stocks higher based on better-than-expected economic reports. On April 3 the Trump administration announced tariffs of at least 10% on all US imports and 25% on all foreign car parts and cars, triggering four consecutive sessions of stock declines. By the close on April 8, the S&P 500 was down more than 11% for the month and more than 18% from its February 19 all-time high. Stocks surged back on April 9 with the S&P 500 gaining more than 9% after the Trump administration announced a 90 day pause on tariffs with most countries with the notable exception of China. The stock market gave up most of these gains over the next seven sessions due to lingering trade concerns as well as comments from President Trump that he was considering firing Fed Chairman Powell. On April 22, stocks began a sustained rally after Treasury Secretary Bessent remarked that a trade deal with China was possible. Growing optimism that tariffs might be reduced combined with better-than-expected earnings reports from several companies propelled the S&P 500 to an overall gain of 8% over the final 7 trading sessions of the month. After all the market gyrations, the S&P 500 finished April with a modest decline of 0.7% for the month overall.
Stocks posted strong gains during May, helped along by the May 12 announcement of a bilateral deal to reduce US and Chinese tariffs and the May 27 announcement of a delay in implementing tariffs on imports from the European Union. The S&P 500 gained 6.3% for the month of May overall. The market rally continued into June. By June 12, the S&P 500 was up 2.3% for the month, approaching the all-time high it achieved on February 19. This rally was interrupted by Israel’s attacks on Iranian nuclear facilities and missile launchers on June 13, which triggered a 1.1% decline in the S&P 500. Although many commentators raised concerns that military exchanges between Israel and Iran during the following week might ignite a broader conflict, the US stock market took a wait and see attitude with the S&P 500 declining only 0.1% for the week overall. US stocks resumed their rally on June 23, following Iran’s limited response to US bombing of Iranian nuclear sites on June 21 and announcement of a cease fire agreement between Israel and Iran. The rally pushed the S&P 500 to a record high on June 27, up 4.5% for the month overall and 10.4% for the quarter.
Although the financial markets are likely to remain volatile due to ongoing tariff negotiations and military conflicts, we remain optimistic about the stock markets’ long-term prospects. The negative effect of today’s uncertainty about tariffs and their associated disruptions to supply chains is likely to be offset by the benefits of lighter business regulation and an extension of the 2017 tax cuts later in the year. It should be noted that stock valuations outside of the technology sector continue to be attractive. Market volatility also leads investors to rotate their portfolios toward stable stocks. For further details on each of these points, please see below.
The Economy:
- At 4.2% the US unemployment rate remains near historical lows and the economy continues to add new jobs each month – suggesting the labor market remains healthy.
- Although the Federal Reserve is unlikely to reduce the Fed Funds rate significantly during 2025, monetary policy overall remains supportive.
- Corporate earnings growth for 2025 is expected to exceed 6%.
Investment Valuations & Rotation Toward Stability:
- Investors continue to reassess the valuations of technology shares. Many stocks outside this sector have attractive valuations. This is a great environment for active stock managers, particularly ones that look for stocks with reasonable valuations.
- In volatile markets, investors tend to rotate toward stocks that have provided more stable returns in the past. Stocks that possess economic moats tend to have more stable returns and often benefit in these environments.
This report has been generated from information that Arbor Financial believes to be reliable and accurate. We do not represent or warrant the accuracy or completeness of the information contained in this report. As such, all calculations, estimates, and opinions included in this report constitute our best judgment as of this date and may be subject to change. Past performance does not guarantee future results.
Peter has more than 25 years of experience in the financial industry as a researcher, strategist, and portfolio manager. As a portfolio manager at Arbor, Peter performs quantitative analysis on current and prospective portfolios.
Peter is a CFA charter holder. He earned his PhD in Economics as well as dual Bachelors of Science degrees in Computer Science and Pure Mathematics from the University of California, Santa Barbara.
Before joining Arbor, Peter was a Founding Member of institutional money manager OakBrook Investments and worked there for 22 years serving in a variety of roles including portfolio manager, Director of Research, and co-Chief Investment Officer. Prior to forming OakBrook, Peter worked at ANB Investment Management & Trust Company as a strategist, portfolio manager, and Head of Research.
Peter has lived in Lisle, Illinois since 1997. Outside of work he enjoys sports car racing and is an active member of the Autobahn Country Club in Joliet, Illinois and the Sports Car Club America (SCCA).