July 25, 2025

In the second quarter, both domestic and international markets, as represented by the S&P 500 and All Country World Index (ACWI), reached new highs. For the second quarter the S&P 500 returned +10.9%. The S&P Developed BMI returned 11.9% and the ICE BofA US Corporate, Government, and Mortgage Index returned +1.0%.

During the quarter rates, as measured by the 10 Year Treasury, started the quarter at 4.24%. It moved higher through the first half of the quarter, peaking at 4.60% mid-May. Then drifted lower over the remainder of the quarter to end back at 4.23%. The Federal Reserve remains on hold after pausing rate cuts early in the year while awaiting further clarity on the impact of tariffs on growth and inflation.

At the beginning of the year, consensus U.S. Real GDP Growth forecasts for this year were in the +2.0-2.5% range and there was minimal expectation of recession. Now, consensus forecasts for this year have been reduced by 1%, and we expect full year U.S. 2025 GDP growth of 1.0-1.5% as well with a much greater risk of recession. Expectations are for slowing growth as well internationally.  As investors come to grips with the adverse consequences of rising tariffs and their impact on economic growth and inflation, we expect to see continued volatility across markets. Ultimately bilateral trade agreements may be reached between the U.S. and various countries which may mitigate, to some the degree, the impact of these initial tariff announcements.