By Michael Nedreski

Our Q2 market update reveals a patchwork of economic growth and market fluctuations. GDP growth forecasts were lowered amid worries about the labor market and ongoing uncertainty surrounding the Administration’s tariff policies, which shifted frequently in deadlines, rates, and the scope of affected imports. (1)

This uncertainty fueled increased volatility across financial markets. Following the “Liberation Day” tariff announcement on April 2nd, (2) equity markets experienced a sharp decline but gradually recovered through May and June, eventually surpassing previous highs. Meanwhile, international markets showed strong performance, outpacing other sectors. Geopolitical tensions from the Israel/Iran conflict and U.S. strikes on Iran’s nuclear facilities briefly unsettled markets, especially in oil and natural resources, but a swift ceasefire helped ease investor concerns.

Q2 Performance Review

• U.S. equity markets experienced a free-fall after April 2nd (Liberation Day) when double-digit tariffs across the board were announced by the Trump Administration, taking businesses and investors by surprise. These shockwaves were a reason the S&P 500 and Nasdaq fell over 13 percent and the Dow fell nearly 11 percent from April 2nd through April 8th. U.S. equity markets recovered somewhat by May and then began an upward trend to exceed the previous highs (set in mid-February) by the end of June. 
• International markets also fell in April, but recovered sooner and quicker than the U.S., with emerging markets and Asia leading the way.
• In the bond market, Treasury yields were volatile as well, due to concerns over potential inflationary pressures by the pending Trump tariff policies. 10-year Treasury yields rose to 4.80% early in the year, then were mixed through the rest of the quarter and had fallen to 4.39% as of June 27th. 

• Pullbacks in growth expectations and amended Fed rate cuts lead to lower yields later in the quarter, particularly for lower-duration issues. The yield curve steepened as the difference between 2- and 10-year yields increased above 0.5%. The bond market is also reacting negatively to the estimated trillions in additional national debt in the proposed legislation winding its way through Congress during the second quarter. The U.S. dollar has experienced its largest six-month decline since 1973, falling over 10% against other major currencies.

Sector and Asset Class Performance

• U.S. stock markets reversed their April slide and ended the quarter with new highs. The S&P 500 gained 10.57% since March 31st and advanced 24.5% since the April 8th low. (3) The Dow advancement was more modest, clocking in at just under 5%. Hardest hit in April was the Nasdaq Composite, but the tech-heavy index came roaring back, gaining 33% since the April 8 low and ending the quarter with an 18% gain overall.
• After leading stock indices downward in the first quarter, global growth stocks (powered once again by the Magnificent 7 Big Tech stocks) led the way for market advances in Q2 with a 17.7% gain in the quarter. (4)
• Surprisingly, dividend stocks proved their resiliency in tough conditions, rising 6.5% as of June 20th. (5) Value stocks lagged growth for the quarter, but still maintains the top spot for U.S. stock year-to-date.
• International bonds are the stars of the fixed-income market with U.S. Treasuries and bonds affected by the weakened dollar. Global inflation-linked bonds and investment-grade bonds led all other sectors with 4.7% and 4.4% gains, respectively. U.S. high-yield bonds gained 3.3% for the quarter while range-bound U.S. Treasuries barely budged.
• International markets continued their gains with emerging markets advancing 12.2% in the quarter. Easing trade tensions between the U.S. and China, along with the weaker dollar, helped EM gains, with Asia as the top-performing region.
• For the quarter, technology, industrials, consumer discretionary, and consumer staples were top-performing sectors. Energy (oil) and healthcare were laggards, each posting more than 6% in losses. (6)

Federal Reserve and Economic Analysis

Market expectations for the Federal Reserve (FOMC) to cut rates have fluctuated. The Fed continues to believe that inflation, while currently under control, has the potential to strengthen on the back of lingering tariff influences. The FOMC believes tariff pressures on prices have not yet worked their way into the U.S. economy and wavering Administration policy regarding tariffs with various countries is causing business and consumer uncertainty. 

Currently, Fed Chairman Jerome Powell expressed caution regarding expectations for interest rate cuts, despite continued public criticism by the Administration, and in its June meeting, the Fed maintained its “wait and see” monetary policy, with a target range for the Fed Funds Rate still at 4.24% to 4.5%. The Fed still projects two 0.25% rate cuts later in 2025, based on updated economic projections, and downgraded its economic outlook for 2025.

The Fed is closely monitoring the impact of tariff policy and its effects on the economy. Q1’s surprising 0.3% contraction in GDP surprised investors and the financial markets, and as of its June meeting, the Fed is projecting a somewhat lower GDP forecast for the year with potentially higher inflation and higher unemployment. (7)

Investment Strategy

The uncertainty of the U.S. government’s trade and tariff policies, the falling dollar, and the pending effects of tariff inflation on economic growth (including how the Fed will respond) suggests that caution and wide diversification remain watchwords for investors. Slowing economic growth and pressure from the White House to lower rates may suggest that interest rate cuts could materialize, however, the Fed’s concern about inflation should remind everyone of the adage “Don’t fight the Fed.”

Now that tech has regained the losses of Q1 and value continues to build gains, across-the-board allocations in stocks may be a good choice for most. With international markets leading global advances, some overweight in emerging markets and inflation-linked global bonds may be considered. Fixed-income investors may look to an allocation toward high-yield and inflation-mitigating bond investments to combat any potential inflation that could creep into the economy, if tariff pressures appear in supply costs and consumer pricing.

Overall, although the economy appears resilient, there appears to be enough contradictory evidence over which direction it will take that wide diversification and investment-risk management may be wise through Q3 and the summer months.

How Does the Q2 Market Update Impact Your Finances?

Navigating the ups and downs of today’s dynamic economy can feel overwhelming. If recent market shifts or economic changes have you rethinking your financial strategy, it’s a great time for a thorough review.

At White Oak Wealth Partners, we’re ready to help. Reach out to our team for experienced guidance to keep your investments aligned with your long-term goals and risk tolerance, helping you confidently pursue your ideal future.

To get started, contact us by calling 814-835-4551, emailing MICHAEL.NEDRESKI@LPL.COM, or scheduling an appointment here.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. 

About Michael

Michael Nedreski is Founder and Independent Wealth Coach at White Oak Wealth Partners, a specialized financial lifestyle and wealth management firm serving entrepreneurs, business owners, executives, and their families. Mike has 30-plus years of experience in the financial services industry and is committed to serving his clients through holistic financial planning, disciplined investment strategies, and proactive personal service. 

A native of Erie, Pennsylvania, Mike began his career in the financial services industry in 1988. He has earned the Chartered Retirement Planning CounselorSM (CRPC®) designation conferred by College for Financial Planning (188-LPL). Mike is also an active member of the Financial Services Institute (FSI) and Financial Planning Association (FPA).

When not working, Mike enjoys spending time with his wife, Amy, and their children. He volunteers in his community and at his church and his children’s schools. An outdoors enthusiast, Mike loves hunting, fishing, golfing, and spending time near or on the water. He also enjoys working out and watching some of his favorite sports teams, the Pittsburgh Pirates and the Cleveland Browns. To learn more about Michael, connect with him on LinkedIn.

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(1) Bea.gov, 2025, June 26

(2) USA Today, 2025, April 15

(3) CNN Business, 2025, June 30

(4) J.P. Morgan, 2025, July 1

(5) Morningstar, 2025, June 20

(6) Select Sector SPDRs, 2025

(7) CNBC, 2025, June 18