Quarterly Market Update 6.30.2025
Greetings from your 401(k) investment advisor, Scott Campbell.
Before getting into the numbers for U.S. markets for the second quarter of this year let’s review last quarter shall we. The media was sounding the alarms. Tariffs were going to drive inflation through the roof, our economy into recession and crash the stock market.
Looking back, the stock market was doing great last year, especially leading up to the election. Investors were feeling very positive about a pro-growth Trump administration. Immediately following the election however, the market turned negative. The market continued to underperform through the end of the year and into this year. On “Liberation Day” in April when the tariffs took effect the market dropped again.
And the media went into overdrive about the negative future ahead caused by Trump’s tariffs.
But low and behold, the stock market has turned around. As I stated last quarter, the media’s negativity was totally overblown and very inaccurate.
In the second quarter of this year the U.S. stock market was up 11.08%. And now up 5.70% for the year. A tremendous quarter has put us back on track for the year.
The market in the second quarter returned to setting records every time the market closes on a high. The stock market surpassed the level it was at the day before “liberation day” when the tariffs kicked in and surpassed the previous record highs recorded before the election. We are back in the black baby.
Bonds returned to their recent behavior with short term bonds producing the highest returns for the quarter, followed by intermediate term bonds and long term bonds produced a negative return for the second quarter. Year to date short term bonds returned almost 3%, intermediate term bonds return 3.75% and long term bonds returned 3.38%.
The other problem with the media, aside from blowing the negativity totally out of proportion - have you heard the mainstream media mention they were wrong or even that the market has completely recovered. Yea, I don’t think so.
It is very important to note that when the market was down in the fourth quarter last year and the first quarter this year, as long as you were saving in the 401(k), you bought great stocks at discounted prices. Now that the market has recovered all those cheap stocks aren’t so cheap. The difference between the discounted price you bought, and the current record setting value is your profit. And it is only going to go up from here. That period of time was a terrific example of buying low and is referred to as a buying opportunity. Not exactly how the media described it.
Let’s talk about the tariffs. Inflation is dropping. Many prices are dropping because energy prices are dropping. High energy prices increase the price of almost everything. Eggs are once again affordable. Great for me because I need to eat a high protein breakfast.
Tariffs are used to level trading with countries around the world. Because they put tariffs and limits on U.S. products exported to their countries. To protect their domestic products. Either by not allowing U.S. products or by adding a tariff making the U.S. product more expensive and noncompetitive.
The one, most important fact that is often not mentioned in the tariff discussion: the U.S. is the best marketplace in the world. Simply put, we have the most consumers with money. And we are proven spenders. All the world wants to sell their products here.
Trump is retaliating with tariffs on foreign exports to this country, making their products more expensive here. Which means less sales.
Trump is also using tariffs to negotiate equal trading deals with foreign countries. So, the tariffs they add are the same as the tariffs we add or eliminate the tariffs all together. Trump, being the master negotiator, adds and lowers, threatens and delays tariffs to encourage trade deals.
Trump has announced tariffs will be increased again shortly on countries that are not willing to negotiate. So, be prepared for tariffs to be applied, the market to drop, negotiations to take place, a deal will be struck, and the market will recover.
Same old song.
The tariffs have produced actual gains. Companies around the world have pledged to investment upwards of $2 trillion in the U.S. building new manufacturing plants and expanding their operations. All to avoid tariffs.
That is the main purpose of tariffs – to increase and expand manufacturing in the U.S.
The tariffs have brought in over $98 billion in revenue to the U.S. Treasury. To be honest, when Trump first announced tariffs during his first term as President, I was very doubtful about how the revenue from Tariffs was going to be collected. I was skeptical that it could be done at all. I was clearly wrong. Tariffs are collected and deposited into the U.S. Treasury.
Up until the early part of last century tariffs were the primary source of revenue for the U.S. government. They have been used by both parties since the founding of the country.
I would suggest that most of the apposition to tariffs is really opposition to Trump.
Another area of contention for the opposition to Trump is the opposition to DOGE.
If you have been listening to me for any length of time you know my primary concern with federal government is the debt. The U.S. is over $37 trillion in debt. The annual interest on the debt is over $1 trillion. The debt is unsustainable. All responsible people understand and agree. The only responsible thing to do is to cut spending.
The U.S. federal government simply does not have the money to do a lot of the things they are currently spending on. They spend way too much money.
Unfortunately, Elon Musk was only able to cut a small percentage of the total amount of spending that needs to be cut. But DOGE will continue to operate. And will hopefully continue to produce results. I am, at least, comforted that cutting spending is finally a topic of discussion in the political class.
Trump’s big, beautiful bill passed into law. First off, it isn’t perfect. Anyone who expects perfection from the government needs get some fresh air. It’s never going to happen.
But the bill makes permanent the tax cuts Trump implemented his first term. For the record, every tax bracket was reduced. All taxpayers got a reduction in taxes. And if the big, beautiful bill had not passed every taxpayer would have been hit with a tax increase. Which would have definitely caused a recession.
On a side note, the cuts to Medicaid are simple. Removing illegal aliens and those fit to work from receiving benefits are the cuts. No one in need will be cut. I think it is terrible, given the debt, that people would mischaracterize these important fiscal steps. Plus, entitlements – welfare – are the biggest expenditure of the government. To really cut spending these programs need to be analyzed. We all know and have seen real life examples of people gaming the system. The fraud, waste and abuse must be identified and eliminated.
Another aspect of the Trump agenda investors were excited about was deregulation. This has been addressed in earnest. All attention has been focused on tariffs, DOGE and the big, beautiful bill. So, most of this work has gone on unnoticed because is not exciting to report. Deregulation in the financial services industry is already boosting stocks in that sector. And more is coming from the administration on this. There is no question that reducing regulation boosts growth. Reducing the overhead on companies is good for growth and most agree we have enough regulations.
The big tech stocks that drove the market upwards last year and downwards the end of last year and the first quarter this year are back to record setting levels. NVIDIA set a record today. We are at the beginning of the earnings announcement season for the first quarter. Remember corporate profits or earnings are what really drives the stock market. Earnings are expected to be good which is good for the stock market.
Current readings on inflation shows it is dropping. Prices are dropping. The economy is doing fine. The market is going in the right direction.
Where does the market go from here? Hard to tell. Especially since the normal seasonal trends are out. The U.S. market normally does very well in the first quarter. This first quarter dropped 5%. Summers the market doesn’t do much. The economy is at its slowest in the summer.
The second quarter was phenomenal. The economy and market are doing fine. Enjoy the summer and please reach out if you have any questions or need help.
