This quarter’s headlines, from conflict in the Middle East to President Trump’s ongoing trade war, sparked significant market turbulence. Between February and April, the S&P 500 came dangerously close to a bear market (falling ~18%) before rebounding at one of the fastest clips in history, reaching new all-time highs by late June. Retail investors returned in record volume, and meme stocks and unprofitable tech names went from being cut in half to partying like it’s the speculative mania of 2021 all over again.
“Speculation is most dangerous when it looks easiest.” – Warren Buffett
You might be wondering why the market crashed and recovered so quickly, as if the concerns that caused the correction no longer matter. To put things in context, it’s important to look at valuations. At near-record levels, with the S&P 500 trading at 22x forward earnings versus a 30-year average of 17x, U.S. equities appear to be pricing in a “Goldilocks” scenario of resilient growth and low inflation.
Source: Capital Group 2025 Midyear Outlook
The dominant theme of the second quarter was persistent uncertainty, and markets hate uncertainty. President Trump’s tariffs, now at the highest average level since the 1930s, have been one of the biggest wildcards. Tariffs are effectively taxes on imported goods. The United States is the world’s largest importer, so the market became concerned about slower growth, reduced consumer spending, and rising input costs. The good news? We may be past peak tariff uncertainty, with actual rates coming in lower than initially announced. The bad news? Tariffs are likely to remain in place, and as we saw during COVID, global supply chains can’t be rebuilt overnight.
Consumers are communicating that they are concerned about their economic future. In June, consumer confidence fell to one of its lowest levels in the past five years and declined in six of the last seven months. Despite that, households remain well-positioned to absorb economic shocks. Wages are still rising, and household debt payments relative to disposable income remain near 50-year lows. The labor market, which has been as good as it gets in the last couple years, is still strong. However, it may be showing signs of softening. It’s not yet an outright recession signal, but it’s a trend worth watching through the end of the year.
Source: Bespoke Investment Group
Corporations also have a potential buffer with profit margins still at record highs. On recent earnings calls, many corporate leaders expressed reluctance to raise prices until there's more clarity on where tariffs will ultimately land. One of the key questions for the rest of the year is whether companies will absorb these new costs (slowing earnings growth) or begin passing them on to consumers. And if they do, will consumers keep spending?
If companies ultimately decide to raise prices, inflation may pick up again after moderating from the post-covid surge. Supply chain realignments, immigration constraints, and global fragmentation are all structural forces that could also contribute to stickier inflation. These dynamics and the uncertain effects of tariffs may be part of the reason the Fed has been cautious about cutting rates. Ultimately, signs of tariff-related inflation and slowing growth have been early and uneven, making the next six months a critical juncture in determining which direction the economy ultimately goes.
Source: Ycharts – Performance is Total Return and YTD (year to date) performance is from 12/31/24 to 7/9/25 - Gold Miners: VanEck Gold Miners ETF (GDX); Gold (Physical): SPDR Gold Shares (GLD); Europe: Vanguard European Stock Index Fund ETF (VGK); Emerging Markets: Vanguard Emerging Markets Stock Index Fund ETF (VWO); Global Equities: iShares MSCI ACWI ETF (ACWI); Japan: iShares MSCI Japan ETF (EWJ); S&P 500 (Large Cap U.S.): SPDR S&P 500 ETF Trust (SPY); U.S. Aggregate Bond: iShares Core US Aggregate Bond ETF (AGG)
Zooming out to the rest of the world, the first half of 2025 has been encouraging for globally diversified investors. Despite chaotic geopolitical headlines, global equities have outperformed expectations, helped in large part by a 10% drop in the U.S. dollar (one of the sharpest first half declines in the past 50 years). Valuations abroad remain relatively attractive, and earnings growth outside the U.S. is beginning to catch up. This could set the stage for a long-awaited broadening of market leadership beyond the “Magnificent 7” tech stocks. (Fun Fact: NVIDIA recently became the first company to reach a $4 trillion market cap - now worth more than Apple and Tesla combined. That $4 trillion figure is equal to 3.6% of global GDP, larger than the entire equity markets of the U. K., France, or Germany individually. For perspective, at the height of the Dot-Com bubble in 2000, Cisco peaked at just 1.6% of global GDP.)
Source: Financial Times
International markets aren’t the only bright spot. Gold has quietly been one of the best-performing asset classes this year. Gold mining stocks are soaring, with record profit margins, yet investor flows remain tepid. The largest gold mining ETF (GDX) is up over 40% in the past 12 months, yet incredibly the fund has seen nearly $4B in outflows, which is a head scratching dynamic to say the least. Meanwhile, central banks continue to accumulate gold at a record pace, reinforcing its role as a global reserve asset and continuing to provide a fundamental demand tailwind moving forward.
International equities and gold aren’t the only diversifiers to consider. The broader commodities universe has long provided a hedge against both inflation and geopolitical risk, and today they also offer exposure to the global infrastructure buildout tied to rising energy demands, including those driven by artificial intelligence. Despite recent volatility, commodity prices remain only slightly above long-term averages and have helped tame inflation in recent years. However, with major supply chain shifts and renewed demand for hard assets, that calm may not last.
Barry Investment Advisors (“BIA”) is an SEC registered investment adviser. The opinions expressed by BIA on this blog are their own. All statements and opinions expressed are based upon information considered reliable although it should not be relied upon as such. Any statements or opinions are subject to change without notice.
Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed.
Information expressed does not take into account your specific situation or objectives, and is not intended as recommendations appropriate for any individual. Readers are encouraged to seek advice from a qualified tax, legal, or investment adviser to determine whether any information presented may be suitable for their specific situation. Past performance is not indicative of future performance.