The second quarter of 2025 delivered a complex set of developments that defied typical market expectations. The quarter started with trade tensions rising from United States' tariff announcements, and it ended with an unexpected US bombing of Iran. These shifting dynamics led to stark differences in asset performance and kept investors on their toes.
On the trade front, April 8th known as “Liberation Day” was expected to bring clarity and relief to the market. Instead, it sparked significant volatility. Equity markets declined meaningfully on the days following the announcement, while the average stock in the NASDAQ technology index fell an eye-catching -44%. This reaction underscored investor concerns about the true impacts of shifting tariffs on global supply chains, inflation, and how this escalation might end. However, after the initial announcement, the US began negotiating with its trade partners and delayed the implementation of unsustainable levels of tariffs. This caused the market to quickly rebound, and the S&P 500 ended the quarter at a new all-time high.
Despite all the trade news, one of the most significant headlines in the quarter may have been the United States’ unexpected bombing campaign in Iran. Due to a lack of progress made on nuclear negotiations, the US took advantage of a weakened Iran and bombed three prominent nuclear sites without return fire. Historically, such events tend to drive oil prices higher, prompt declines in interest rates, and pressure equities lower due to heightened uncertainty. However, this time markets responded quite differently. Oil prices fell by -10%, possibly releasing some of the built-up pressure from before the bombing campaign. Interest rates moved modestly lower, and equities rose. All of this suggests investors warmed to the idea of how a weakened Iran would not hinder longer-term economic resilience.
Outside of geopolitics, we saw pronounced dispersion of performance across stocks and sectors during the quarter. The “Magnificent Seven” — a shorthand for several mega-cap tech and consumer names — exemplified this. The best performer in this group was Nvidia, which gained +24% during the quarter primarily due to continued optimism around artificial intelligence. The worst performing stock was Apple, which declined -20% on uncertainty around how tariffs would impact its foreign suppliers. Each of these stocks trades well above market valuations, which makes them vulnerable to surprises such as geopolitical risk.
JFG Outlook
As we look ahead to the second half of the year, we’re closely watching developments in Washington. The Senate and House are deep in negotiations over what’s been dubbed the “Big Beautiful Bill,” which among many provisions, proposes raising the debt ceiling by $5 trillion. While the bill includes many incentives that should benefit the US economy, the sheer size of the proposed debt expansion raises valid concerns about longer-term fiscal health of the United States. However, despite fiscal concerns there are many benefits to American taxpayers. Once the bill’s details are finalized, we will provide a dedicated update outlining what it may mean for your portfolio and financial plan.
In the meantime, equity markets overall remain expensive, with valuations around 22 times earnings—well above historical averages. Credit spreads also remain historically tight, meaning investors are still not being heavily compensated for taking on additional credit risk. Taken together, this environment calls for a thoughtful balance of pursuing opportunity while managing potential downside. During the month of April, when markets fell -19%, we took advantage of the pullback to add to portfolios. Markets don’t typically rebound as sharply as they did in April, but as future opportunities arise we will once again be ready to act.
Through all the ups and downs, our commitment remains the same: helping you navigate investment volatility to achieve your life-long goals.
Thank you for your continued trust in Juno Financial Group.
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