• Economy – Fiscal policy ambiguity weighs on growth outlook and puts Fed in difficult position
  • The final estimate of Q1 2025 GDP showed the economy contracting -0.5% from the previous quarter, largely due to a sharp increase in net imports as companies attempted to front run tariffs.
  • Trade policy announcements jolted market participants in early April with high tariff rates on a slew of countries before the administration paused or walked-back reciprocal tariffs. Another tariff “deadline” approaches early in Q3 with little further clarity.
  • The U.S. Federal Reserve has held rates steady at higher levels than many developed countries as they await possible upward pressure on inflation from tariffs.
• Equity – Stocks shook off multiple headwinds and a volatile April to post a strong quarter
  • After a quick correction in early April, the S&P 500 finished Q2 up +10.94% and is now up +6.20% for the year. Earnings estimates for the rest of the year have fallen but still show expectations for single-digit growth.
  • U.S. Small and Mid Cap stocks have lagged so far this year but also enjoyed strong quarters overall. The Russell 2000 and Russell 2500 indexes rose +8.50% and +8.59%, respectively, in Q2.
  • International and Emerging Market stocks continued a run of outperformance relative to the U.S. The MSCI ACWI ex USA index, which includes Emerging Markets, was up +12.03% for the quarter and is now up +17.90% year-to-date through June.
• Fixed Income – Bond markets wrestled with federal debt/deficit projections and tariff impacts
  • The 10-year Treasury yield took a ride from approximately 4.0% to 4.6% before settling back near 4.2%, where it began the quarter.
  • The Bloomberg U.S. Agg Bond Index ground out a +1.21% gain in Q2 as corporate bond spreads remained tight.
• Risks/Other Considerations
  • Recession risk is back on the market’s radar as the impact of tariffs, immigration policy, and relatively restrictive monetary policy begin to trickle into hard economic data.
  • Geopolitical events have historically not had major long-term impact on markets but could be a catalyst for disruption in specific cases if, say, energy markets are meaningfully impacted.

• Market Index Review
• Q2 2025: Tariffs and Geopolitics Dominate the Headlines 
• Tariff Talk Receding, But Uncertainty Lingers  
• After a Volatile April, Equity Markets Regained Footing  
• One Big (Not So?) Beautiful Bill Act 
• Deficits and Debt: How Much is Too Much? 
• Economic Growth Projections Mixed  
• Earnings Growth Still Solid Despite Lowered Estimates  
• U.S. Equity Valuations: A Tale of Two Capitalizations 
• Valuations Across Geographies 
• Geopolitical Events and Their Affect on the Markets 
• Energy Markets Update  
• “The Only Thing We Have to Fear is Fear Itself” 
• Fed Funds Expectations and Yields  
• U.S. Becoming an Outlier When it Comes to Interest Rates 
• Appendix: Private Equity Distributions Still Slow 

Sources:

• Morningstar
• ACG
• Federal Reserve
• Factset
• Hedgeye
• Google
• Apollo
• Bank of America
• Bloomberg
• Standard & Poor’s
• Morgan Stanley Capital International
• CBO
• Joint Committee on Taxation
• Committee For a Responsible Budget
• Deutsche Bank
• Congressional Budget Office
• Atlanta Federal Reserve
• Charles Schwab
• LSEG Datastream
• Ed Yardeni
• Capital Group
• FTSE
• InterContinental Exchange
• U.S. Energy Information Administration
• Department of Energy
• Piper Sandler
• Bureau of Labor Statistics
• University of Michigan
• The Leuthold Group 
• New York Federal Reserve 
• FactSet
• Pitchbook
• Citigroup