July 2025: 
Issue Du Jour and the Resilient Markets

“Chaos is a friend of mine.”
~ Bob Dylan
    • Despite a turbulent first half of the year, most major asset classes around the world are in positive territory.
    • Trade policy has taken center stage, creating ongoing uncertainty for businesses of all sizes, investors, and consumers alike.
    • Moody’s downgraded the U.S. credit rating due to concerns over fiscal discipline as Congress contemplated and eventually passed a sweeping tax and spending package at the quarter-end.
    • The Federal Reserve (the “Fed”) is taking a wait-and-see approach, watching to see how the economy evolves before it changes its current monetary policy stance.

Summer is in full swing and remarkably, 2025 has crossed the halfway mark. The experience for investors in 2025 has so far resembled a blockbuster summer movie – equal parts thrilling and bewildering – inspiring the need for occasional deep breathing. Investors have adapted to plot twists along the way as economic data, surprise policy announcements, and global events have confounded economists and market watchers alike. The challenges have been as significant as the uncertainty they’ve created, including supply chain hiccups, inflation spikes, war and geopolitical strife, and policy outlook changes. Markets are continuing to demonstrate resilience, as they did throughout the chaotic first half of 2025. As of the end of the second quarter (which ended on June 30), most major markets and most major asset classes around the world were in positive territory. 

The chart below shows the equity market performance for the 1st half of 2025 for major markets and equity asset classes, as well as the quarterly performance. This data illustrates the value of diversification. 

International markets have performed very well in 2025 (even during the challenging month of April) and continue to provide portfolio strength. Of course, we don’t know yet how assets will perform, which is why it’s essential to have a diversified portfolio ahead of actually “needing one.” The chart below highlights the outperformance of international markets in 2025 vs. the S&P 500. It’s been some time since we’ve seen sustained outperformance, but 2025 serves as a reminder of why diversification generally works for long-term investors.

Furthering this point, performance across the globe has been a stark reminder of this. The U.S. markets, which have made the top of the leaderboard in recent years, are now dropping lower.

The bond market followed suit - dropping lower and performed well in the face of global uncertainty. 

After Iranian missiles targeted U.S. military bases in the Middle East, government layoffs, and tariff uncertainty, many investors have wondered how U.S. markets have shown such resilience this year. Some of the usual headwinds persist: inflation uncertainty, Fed policy, geopolitical tensions, and mixed economic data. New challenges emerged, including escalating trade tensions and a new tax and spending bill out of Washington that’s expected to add trillions to an already ballooning debt load. Markets often react to short-term noise, but over time, corporate profits can have a major impact on prices. Profits continue to be a bright spot and a source of comfort for investors, as seen in the graph below. 

The Fed remains a quiet driver of market activity as well. Opinions vary as to whether the Fed is driving markets or vice versa, and in early July Fed Chair Jerome Powell said, “In effect, we went on hold when we saw the size of the tariffs*.” The Fed serves a dual mandate, focusing on full employment as well as stable prices. Labor markets remain strong enough (although they may be weakening in real time) but the inflation picture remains murky as supply chain disruptions and tariffs could derail progress toward the stable prices mandate, as shown in the graph below: 

CONCLUSION

Entering the back half of 2025, one thing is certain: investors should expect uncertainty. Great movies usually have a great plot twist, and we expect 2025 will as well. Markets may not like the unknown, but until a reliable time machine exists, we anticipate that this will be the normal course of business. In the meantime, we hope you’re enjoying summer fun with your family and friends (and watching an actual Blockbuster movie!) As always, please reach out to your Choreo Advisor with any questions or comments. 

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*Bloomberg, Katrice Eborn “Powell Says Tariffs Put Federal Reserve on Hold”.


Disclosures

The performance numbers displayed herein may have been adversely or favorably impacted by events and economic conditions that will not prevail in the future. Past performance does not indicate future results and investors may experience a loss. The indices discussed are unmanaged and do not incur management fees, transaction costs or other expenses associated with investable products. It is not possible to directly invest in an index. 

Opinions are expressed as of the date indicated, are subject to change and are based on sources considered reasonable by Choreo.