It’s almost half-time and the opening act of 2025 packed enough drama to fill an entire cycle: a tariff surprise that quickly wiped trillions off global equity values, a relief rally that pushed the S&P back above 6,000, a Federal Reserve on pause, and a U-turn in the U.S. dollar, marked by weakness since the beginning of the year. Here’s the mid-year scorecard—what moved, why it mattered, and where the pieces sit as the third quarter kicks off (on Tuesday).
Stocks: From Tariff Tantrum to Record Territory
The plunge. Early April looked a lot like late 2018 or March 2020. Washington’s “surprise” round of tariffs triggered a two-session, 12 percent decline in the S&P 500 and pushed the VIX above 60. Small-caps and high-flying tech names were hit hardest; at one point, the Nasdaq was down more than 20 percent from its peak, and the Russell 2000 was nearly 1.5 times that.
The pause—and the snap-back. About ninety days later, the worry meter had reversed its course: a tariff cease-fire, steady payroll growth, and still-solid corporate earnings rekindled risk appetite. By the end of June, the S&P 500 showed a solid five-percent gain for the year and had broken all-time highs past the 6,150 mark. Eight of the nine major global indices were green.
U.S. lag, overseas lead. The bigger story sits beyond U.S. borders. A weaker dollar and better-than-expected European data sent the STOXX Europe 50 up more than seven percent through June, while Germany’s market surged in the high teens on the back of a €500 billion infrastructure program. Hong Kong’s Hang Seng topped the global charts with gains of nearly 20 percent. Japan was the lone outlier, down roughly four percent as growth sputtered.
Value finally gets a turn. Rising policy uncertainty and a backup in rates clipped the wings of long-duration growth stocks and gave value the best relative start to a year in a decade. Even after tech’s May/June rebound, value indices were up mid-single digits, in line with growth. Energy, utilities, and consumer staples wore the defensive crown; the once untouchable “Magnificent Seven” tech cohort looked merely mortal.
Market breadth improving. While a handful of mega-caps led the comeback, equal-weight funds held their own after a couple of years of underperformance. Small-caps remain the excluded group: the Russell 2000 finished June roughly flat, leaving plenty of room for a catch-up move if leadership broadens to smaller names in the second half.
Bonds: A Tale of Two Curves
Q1 rally. Defensive flows after the tariff shock pushed 10-year Treasury yields from 4.6 percent to about 4.2 percent by late March, helped by speculation that the Fed might ease its restrictive stance.
Q2 reversal. Better growth data and fresh talk of deficit-financed tax cuts turned buyers into sellers. Thirty-year yields tacked on roughly 70 basis points in eight weeks, hitting the five-percent neighborhood for the first time since 2007. Two-year notes, anchored by steady Fed policy, slipped below four percent, leaving a flatter—but no longer sharply inverted—curve.
Return math. For investors, short-term paper was a safe harbor. Six-month Treasury bills continued to yield rates above four percent, while long-bond prices fell by nearly ten percent as duration took effect. The Bloomberg U.S. Aggregate Index finished the half roughly where it started—up a hair if you reinvested coupons, down a hair if you didn’t.
Credit calm (mostly). Investment-grade and high-yield spreads widened briefly during April’s panic, then tightened right back as the equity rally took hold. This measure is used in the bond market to gauge the level of stress and concern regarding defaults.
Currencies: Dollar Takes a Spill
Few would have predicted the greenback’s worst first-half performance since the Reagan years, but that’s what a combo of trade-war optics and yawning fiscal deficits delivered. The DXY index sagged about ten percent through June; the Swedish krona, Swiss franc, and euro all gained double digits. Even the yen—despite the Bank of Japan’s ultra-easy stance—added close to ten percent.
Commodities and Alt-Assets: Gold and Bitcoin Shine
Gold took the inflation insurance baton and sprinted—a 30 percent jump to north of $3,400 an ounce at the high, carving fresh records along the way. Central bank demand and dollar weakness kept the bid strong even after equities healed.
Oil told a different story: crude flirted with sub-$60 levels during March’s recession scare, clawed back into the mid-$60s by quarter-end, and finished down roughly ten percent year-to-date. Surprisingly, the military action between Israel, Iran, and the United States, which briefly spiked oil, has already come down to the levels seen before it began.
Crypto claimed the headline crown. Bitcoin broke the six-figure barrier at last, tagging nearly $112,000 in late May before settling closer to the century mark. Regulatory clouds have yet to rain on digital-asset enthusiasm, while crypto-adjacent equities have ridden the wave.
What the First Half Teaches
- Policy risk cuts both ways. April’s tariff surprise showed how quickly markets can price in worst-case scenarios; an equally swift pause reversed most of the damage. Stay humble about predicting political outcomes.
- Diversification worked—again. Non-U.S. stocks, value sectors, short-term bonds, and gold all added ballast when U.S. growth equities stumbled. After two years of one-way mega-cap leadership, a broader opportunity set reemerged.
- Cash isn’t trash when it yields four percent. With the Fed on hold and the back end of the curve whipping around, T-bill ladders were quiet heroes in the first half.
- Long duration remains a two-edged sword. Early safe-haven rallies can evaporate if fiscal concerns resurface. The 30-year Treasury is proof: down double digits in price even as recession odds have fallen.
Bottom Line
Investors who avoided the temptation to de-risk at April’s lows are sitting on respectable mid-year returns. The macro narrative—trade policy, Fed timing, and fiscal discipline—will write the back-half script. History reminds us that second halves often look nothing like first halves, so balance remains the operative word. Maintain diversification, respect volatility, and keep an eye on the policy calendar: 2025’s opening six months showed how quickly the plot can twist.
Markets / Economy
- Markets moved sharply higher on the ceasefire between Israel and Iran, as well as some dovish tariff news. The S&P finished the week up 3.4%, the Nasdaq was up 4.2%, and the small-cap Russell 2000 was up 3.0%.
- U.S. personal income fell by 0.4% MoM to $25.7 trillion in May, following a downwardly revised 0.7% rise in April and worse than the market forecast of a 0.3% increase. This marked the first decrease since September 2021.
- Core PCE prices (the Federal Reserve’s chosen gauge of underlying inflation in the U.S. economy) went up 0.2% from the previous month in May. Versus last year, it was up 2.7%.
- The U.S. economy contracted at an annualized rate of 0.5% in Q1 2025, a sharper decline than the second estimate of a 0.2% drop. This was the first quarterly contraction in three years, driven by significant downward revisions to consumer spending and exports.
Stocks
- U.S. equities were in positive territory. Communication Services and Technology were the top performers, while Energy and Real Estate lagged. Growth stocks outperformed value stocks, and large-cap stocks outperformed small-cap stocks.
- International equities closed higher for the week. Emerging markets fared better than developed markets.
Bonds
- The 10-year Treasury bond yield decreased nine basis points to 4.28% during the week.
- Global bond markets were in positive territory this week.
- High-yield bonds led for the week, followed by corporate bonds and government bonds.
