Market Viewpoints
Summer 2025
By Keith Bonjour, CFP®
Senior Vice President, Portfolio Manager
After a turbulent start to the quarter, with U.S. stock indexes pulling back by over 10%, equities managed to rebound, reaching or nearing all-time highs. The tariffs announced in early April were broader and more substantial than the market had anticipated, triggering a significant pullback at the beginning of the quarter.
However, as the quarter progressed, several new developments helped stabilize investor sentiment. These included a reduction in tariff rates, an agreement in principle with China, and a 90-day tariff pause—all of which contributed to easing market concerns.
Global stocks outperformed U.S. markets, aided by a considerable weakening of the U.S. dollar early in the year. The bond market also remained positive through the first half of the year. Policy uncertainty is expected to continue contributing to market volatility, as it did in the second quarter. President Trump extended the tariff deadline to August 1 to allow more time for negotiations with countries that have yet to reach agreements with the U.S. Many questions remain about the potential impact of these tariffs on economic growth and inflation in the second half of the year.
This uncertainty has led the Federal Reserve to adopt a “wait and see” approach, keeping the federal funds rate steady so far this year. While markets anticipate a few rate cuts over the next year, the timing and number of cuts remain uncertain and will depend on future data related to unemployment, inflation, and economic growth.
Federal Reserve officials have noted that the full impact of tariffs has not yet been felt by the U.S. economy, and inflation may begin to rise in the second half of the year. The Fed has emphasized its commitment to patience, making decisions on a meeting-by-meeting basis as more economic data becomes available.
Congress recently passed the “Big, Beautiful Bill,” which makes permanent the 2017 tax cuts that were set to expire at the end of the year. The bill increases the standard deduction to $15,750 for single filers and $31,500 for those married filing jointly, with both amounts indexed annually for inflation. The estate tax exemption was also raised to $15 million for single filers and $30 million for married couples, also indexed for inflation.
Additional provisions include an increase in the child tax credit to $2,200 per qualifying child and a new senior “bonus” deduction of $6,000 for individuals aged 65 and older with a modified adjusted gross income of $75,000 or less (or $150,000 or less for married couples).
The bill also introduces temporary deductions for tip income and overtime pay for qualifying individuals from 2025 to 2028. However, these measures are expected to add to the already significant national debt.
We remain mindful of the risks facing the market this year, including further fallout from tariffs, slower global economic growth, rising inflation, weaker corporate earnings, and a softening labor market.
We recommend staying the course with your investment objectives, keeping in mind that markets move in cycles and that both stock and bond markets tend to deliver higher positive returns over longer time periods. Please reach out to us if you anticipate any short-term cash needs so we can proactively manage distributions and help protect against potential short-term market volatility.
We appreciate the trust you’ve placed in us and will continue to make prudent investment decisions as we navigate the markets ahead.