With the first half of 2025 now behind us, we wanted to share our perspective on the key themes that have shaped markets over the past six months. From continued strength in technology to shifting Federal Reserve expectations and notable volatility in April, the first half has delivered both opportunities and reminders of why steady, long-term thinking remains essential.
At the start of 2025, we were watching three key areas: potential Federal Reserve rate cuts, opportunities in quality equities, and inevitable market adjustments with major policy changes. Six months in, each theme has reinforced our focus on quality investments and patient capital allocation.
We are following three key investment themes as we move into the months ahead:
Theme 1: Technology Leadership Continues
The stock market opened 2025 with solid momentum, led once again by mega-cap technology stocks riding the AI wave. Companies like Nvidia, Microsoft, and Apple drove optimism with strong earnings and continued innovation. The Nasdaq surged ahead, and the S&P 500 reached new highs by late March.
These technology giants continue to have outsized influence on market performance. As investor confidence in AI and productivity technology remains high, their strength has set the tone for broader markets. We're seeing AI reshape entire industries, creating opportunities across multiple sectors.
Theme 2: The Federal Reserve Stays Patient
Early in the year, Wall Street anticipated several interest rate cuts. However, the Federal Reserve held rates steady through midyear, citing sticky inflation, particularly in housing and services. Markets now expect only one or two cuts before year-end, a shift that created spring volatility.
Higher-for-longer rates can cool economic activity and borrowing. The Fed's measured approach has forced investors to adjust expectations. Current market expectations point to potential rate cuts beginning in September.
Theme 3: Volatility Returns, Then Recovery
April brought the year's sharpest pullback after the U.S. announced new tariffs on Chinese imports during "Liberation Day." The S&P 500 fell over 5% from its highs in weeks as trade tension fears escalated.
By May, however, markets rebounded strongly, helped by steady corporate earnings and easing policy rhetoric. The quick recovery demonstrated underlying strength while showing how sensitive markets remain to geopolitical risks.
Source: BlackRock, Morningstar as of 5/31/25. U.S. stocks are represented by the S&P 500 TR Index. *Represents partial time-period. Past performance does not guarantee or indicate future results. Index performance is for illustrative purposes only. You cannot invest directly in the index.
The second half will likely be shaped by whether inflation continues cooling enough for Fed rate cuts, corporate earnings strength amid higher borrowing costs, and ongoing trade policy developments.
Global tensions could still affect energy prices and supply chains, but the U.S. economy has remained resilient. We expect continued opportunities, though likely with more volatility as markets digest policy changes.
Despite volatile spring months, markets remain in positive territory year-to-date, with technology leading the way. Our approach emphasizes maintaining well-diversified portfolios while capitalizing on technological advancement across sectors.
We continue focusing on quality investments, particularly large-cap U.S. equities with reasonable valuations. The current rate environment also presents opportunities in high-quality fixed income as we potentially move toward more accommodative Fed policy.
Markets have shown their characteristic resilience in 2025, weathering uncertainty while delivering positive returns. Technology continues driving performance while reshaping how businesses operate across industries.
We believe periods of volatility often create some of the most compelling opportunities for patient, long-term investors. Our approach continues to emphasize quality companies and thoughtfully diversified portfolios, positioning us to navigate various market conditions while participating in sustainable growth.
We appreciate the opportunity to work with you and welcome any questions about your portfolio or our market perspective.