2025 Second Quarter Investment Report
- justin8855
- Aug 21
- 4 min read
Investors Emboldened by a More Flexible Trade Policy
The second quarter got off to a volatile start following the announcement of new U.S. trade policy on April 2nd. While markets initially dipped into bear market territory, investors were encouraged by signs the tariff rollout appeared more flexible than the worst case scenarios priced in. The idea that tariffs were not set in stone and that the Trump administration was sensitive to weakness in both stock and bond markets emboldened investors throughout the quarter.
For the second quarter, the S&P 500 was up +10.9%, US Small Cap was up +8.5%, International Developed was up +11.3% and Emerging Markets were up +9.5%.
On the fixed income side, bond yields across the yield curve barely moved but did provide balance to equity driven portfolios. Short term Treasury bonds gained +1.1% while intermediate Treasury bonds gained +1.4%.
Exposure to international equities and growth related sectors such as technology had a large impact on portfolio returns. Growth stocks in particular rebounded significantly after a poor first quarter, benefiting mainly from positive sentiment surrounding both trade policy and Artificial Intelligence.
On the other hand, Real Estate Investment Trusts (REITs), the Telecom sector and Utilities struggled a bit. These equity sectors are often viewed as bond proxies due to their stable cash flows and higher yields, making them more sensitive to Federal Reserve policy and changes in market interest rates.
Looking ahead, the outlook appears more balanced than earlier in the year. The U.S. economy is showing resilience in the face of greater than usual uncertainty, while inflation continues to settle down. Should the labor market soften further, we may see the Federal Reserve begin to cut the Fed Funds rate later this year.
Globally, a weak dollar and diverging central bank monetary policy could continue to support international equites on a relative basis. However, there is a lot of uncertainty out there regarding both trade negotiations and fiscal policy. With this in mind, remaining flexible to changes as they occur will be important.
As always, we are reminded that the most successful investors are committed to a long term market outlook and plan. Financial markets can move unpredictably in the short run driven by emotions and news headlines. However, over time it is a disciplined approach based on thoughtful asset allocation, patience, and steady hands that drives positive results. Vigilance and flexibility will continue to be key as we navigate 2025 together.
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Enclosed are your investment reports for the last quarter. Please feel free to contact me if you would like to discuss our investment strategy for the upcoming quarter. Thank you for your continued trust and confidence.
Sincerely,
Justin Kobe, CFA
Founder, Portfolio Manager & Adviser
Pacificus Capital Management
A referral is the best compliment.
Feel free to forward this email to friends and colleagues.
Sources:
The Wall Street Journal: https://www.wsj.com/market-data?mod=nav_top_subsection
J.P. Morgan Asset Management https://am.jpmorgan.com/us/en/asset-management/liq/insights/market-
International índices: https://www.msci.com/real-time-index-data-search
Treasury market rates: http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/
__________________________________________________________________________________Advisory services through Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC. Cambridge and Pacificus Capital Management are not affiliated. Material discussed is meant for general illustration and/or informational purposes only, and it is not to be construed as investment, tax, or legal advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon when coordinated with individual professional advice. These are the opinions of Justin Kobe and not necessarily those of Cambridge Investment Research, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.
Investing in the bond market is subject to risks, including market, interest rate, issuer credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies is impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and the current low interest rate environment increases this risk. Current reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Diversification and asset allocation strategies do not assure profit or protect against loss.
Indices mentioned are unmanaged and cannot be invested into directly. The S&P 500 Index is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. The Russell 2000 Index is a stock market index that measures the performance of the 2,000 smaller companies included in the Russell 3000 Index. The MSCI EAFE Index is designed to represent the performance of large and mid-cap securities across 21 developed markets, including countries in Europe, Australasia and the Far East, excluding the U.S. and Canada. The Index is available for a number of regions, market segments/sizes and covers approximately 85% of the free float-adjusted market capitalization in each of the 21 countries. The MSCI Emerging Markets Index is a market capitalization weighted index comprised of over 800 companies’ representative of the market structure of the emerging countries in Europe, Latin America, Africa, Middle East, and Asia. Prior to January 1, 2002, the returns of the MSCI Emerging Markets Index were presented before application of withholding taxes.
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