Quarterly Market Update

The second quarter of 2025 was nothing short of a roller coaster experience for investors. On April 2nd, or “Liberation Day”, President Trump announced new increased tariffs for essentially all global trading partners.

Although investors knew that increasing tariffs was likely part to be a part of Trump’s agenda, the increased rates announced on April 2nd blew expectations out of the water and brought the average effective US tariff rate to roughly ~22.5% from historically low levels of ~2%.

The size and scope of the tariff increases spooked global markets as investors contemplated the tariffs impact on global growth and potential impact to company’s profit margins. Over the course of the following week, the S&P 500 fell close to 19% and the 10-year Treasury yield jumped above 4.5%. On April 9th, the Trump administration announced they would postpone tariff implementation by 90 days, allowing for countries to negotiate directly with the US to avoid tariffs coming into effect.

Following this announcement, we saw a swift market reversal that resulted in positive returns across asset classes for the full quarter.

We did see some divergence in performance across sectors, style and geographies. Following the sharp drawdown in early April, the US growth sector, and more particularly megacap information technology names led the rally.

The continued momentum and investment into AI benefitted companies putting substantial capital expenditures into the technology’s development. Outside the US, growth did outperform value, a reversal from Q1 performance. Sectors such as European defense and financials continued to perform well as they stand to benefit from increased European fiscal spending.

Emerging markets also performed well, driven by both a weaker dollar and some increased optimism regarding US-China trade policy.

Global fixed income had a volatile but generally positive quarter. The 10-year Treasury yield did swing rather dramatically, reaching a high of close to 4.6% before settling near 4.2% by quarter end.

The 30-yr UST yield did climb throughout the quarter as investors contemplated the possible $3.4 trillion deficit impact of President Trump’s proposed “One Big Beautiful Bill” and the return of term premium. Additionally, Federal Reserve Chairman, Jerome Powell, continued to share a “wait and see” approach regarding potential Fed rate cuts.

This data dependent language, paired with continued tariff uncertainty, resulted in the market estimating fewer Fed cuts for later this year relative to the beginning of the year. Post tariff delay announcements, corporate spreads tightened, and investors also benefitted from attractive income opportunities.

Uncertainty continues to be a major consideration for global markets. The US has announced very few trade deals with global partners and has investors guessing what the potential impacts to businesses and global growth will be in the short and long term.

On the other hand, there are some areas of opportunity that continue to shine through the volatility. Quality companies across the globe continue to outperform and as AI transitions from a build out phase to an implementation phase, more areas of global markets are beginning to see positive impact.

Additionally, we do expect the Fed to be close to continuing their cutting cycle near the end of the year, given no large policy or macro shocks, which could continue to boost equity markets.

Given all the global considerations, it is important to highlight how portfolio allocations must reflect long-term conviction, flexibility and diversification. As investors navigate the current market environment, it is essential to avoid the volatility noise and understand that a diversified asset allocation with a focus on risk-adjusted returns can help protect capital through various market cycles.

A multi-asset and dynamic portfolio, that is driven by research and risk management, is extremely important in times like these.