If You Told Me…
If you told me at the start of the second quarter to predict how markets would react to the headlines we were about to see…I would’ve guessed wrong.
Tariffs and a market panic? US Stocks finished positive, and foreign stocks far outperformed.
The US credit rating gets downgraded again? Bonds gained, and interest rates came down.
The US bombs Iran? Oil prices plummet.
An America First agenda picks up steam? The US dollar falls against most major currencies.
Almost nothing went the way investors might’ve expected.
Let’s Rewind: A Quarter of Chaos (and Resilience)
The second quarter of 2025 was one of the most eventful quarters in recent memory.
It started in April with what was dubbed “Liberation Day,” a surprise tariff bonanza from the administration that triggered a multi-week market drop. But just as the bond market was showing panic, Trump paused the tariffs and walked back the rollout. Markets snapped back with renewed strength.
By quarter-end, US stocks were not only up 11%, but they also turned positive for the year. Foreign stocks, especially in emerging markets, surged even more, up 12% for the quarter. Bonds held their ground, even as Washington’s fiscal dysfunction made headlines again.
Credit Downgrade? Shrug.
The US was downgraded this quarter, again. So were Maryland and DC.
And while that might sound like a big deal (and long-term, it is), the market barely noticed. Investors already knew the US has a deficit addiction. It’s not news.
What we are watching closely is the bond market’s reaction as we continue to run annual deficits of 6-7% of GDP. 30-year Treasury rates have ticked up slightly, but 2-, 5-, and 10-year yields are actually down. For now, markets still seem willing to fund Washington’s spending spree. The question is…for how long?
War, Oil, and Unexpected Calm
The Iran-Israel war flared up mid-quarter, adding to ongoing international conflicts in Ukraine and Gaza. Oil spiked more than 25% and then fell sharply. Energy markets remain volatile, but investors have stayed surprisingly calm through it all.
Meanwhile, One Big Bill
Congress passed the One Big Beautiful Bill Act—a sweeping set of tax changes that will reshape planning for the coming years. Some highlights include:
- 2017 tax cuts extended indefinitely
- Estate tax exemption raised to $15 million per person
- SALT deduction increased to $40k (phasing out for higher incomes)
- New temporary deductions for seniors, tips, overtime pay, and even auto loan interest
- “Trump accounts” introduced as a savings vehicle for children
- Slight tweaks to charitable giving rules beginning in 2026
We’re already mapping out how these changes might impact our clients and adjusting our strategies accordingly.
And Still No Fed Cut
The Fed held steady throughout. Despite all the chaos, inflation remains sticky, but not scary. Rate cuts remain “on the table”—but they haven’t arrived yet.
What We’re Doing
Through all this, investors benefited by staying the course. Throughout the quarter, we at Glassman Wealth explored our options and prepared to act if markets made extreme swings. In the end, a steady, balanced, and diversified approach worked, as it most often does.
- We continue to look for ways to reduce rate sensitivity without sacrificing yield.
- We’re evaluating opportunities in foreign stocks while the dollar remains under pressure.
- We’re modeling tax strategies early, well before year-end, to help clients stay ahead of the changes.
There’s still a lot of 2025 left. But this quarter reminded us, once again, that trying to predict markets based on headlines is a losing game.
That’s why we focus on what we can control, prepare for what we can’t, and help you stay one step ahead. In the meantime, thank you to our clients for your continued trust.
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