Jul 10 • 4 min read
Market Trends Shaping 2025
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With the second quarter officially behind us, today I'm sharing key updates and insights on:
In a world saturated with primarily negative "breaking news," it can be challenging to maintain the long-term perspective necessary for successful investing. I hope today's email provides a helpful perspective as you continue the pursuit of your retirement goals. 1.) The State of the ConsumerConsumer Sentiment Is Improving In June, consumer sentiment experienced its largest monthly increase in over 30 years. This notable improvement suggests that investors may believe the worst of the economic uncertainty is now behind us. However, the key lesson here is to reflect on this quarter’s impressive market performance in the context of how bleak consumer sentiment appeared just a few months ago. Recognizing this unexpected link can help us respond strategically when the rest of the world is panicking, often signaling an ideal opportunity to invest. The Housing Market Is in Shambles The combination of continued high interest rates and, presumably, economic uncertainty, has caused the housing market to become incredibly lopsided. As of May, there were almost 500,000 more sellers than buyers, which is the largest disparity since 2013. Given this imbalance, it wouldn't be surprising to see housing prices face some downward pressure over the coming months. Unemployment Remains Very Low Despite all the advertised turmoil, unemployment has remained remarkably stable. As of May, unemployment stood at 4.2%, which is within the narrow range of 4% and 4.2% that it has been in since May 2024. This could change at any time, but so far, the economic bark (the headlines) has been worse than the bite (the data). 2.) The State of the CompaniesEarnings Are Expected to Rise in 2025 Given all that’s happened this year, it’s somewhat surprising that earnings for the S&P 500 remain on track to grow by nearly 9% in 2025. If you've been wondering why the stock market has held up so well this year, much of its resilience can likely be credited to corporate America's continued ability to deliver strong earnings despite widespread uncertainty. Dividends Are Also Expected to Rise Historically, the total return from stocks—which includes both capital appreciation and dividends—has consistently been one of the most effective ways to combat inflation. With inflation currently hovering around 2%, dividends are positioned to once again provide meaningful support, as they're expected to grow by approximately 6% this year. 3.) The State of InvestingQ2 Was a Mirror Image of Q1 Do you remember the almost 20% market decline earlier this year? I’m guessing probably not since it was so short-lived. In a stunning reversal of fortune, we went from one of the worst two-month returns in history to one of the best two-month returns in history. Consider this our annual reminder of why staying the course is such an important concept in successful investing, in that its value is often the greatest when it feels the most foolish. The Dollar Is Declining (Again) It seems that whenever the dollar drops in value against other currencies, catastrophists begin throwing out predictions for the end of an era for the dollar. The truth is that the value of every currency is constantly in flux, depending on a wide variety of factors. But, as far as the dollar goes, Gurpreet Garewal of Goldman Sachs recently emphasized that: “...the dollar remains dominant in global foreign exchange reserves, and no alternative matches its scale and liquidity.” Thus, it appears that the dollar's status as the world’s reserve currency is secure for the time being, despite what you may hear on your news channel of choice. International Equities Continue to Outperform One notable shift in the investment landscape this year has been the relative outperformance of international equities compared to U.S. stocks. While this may not seem directly related at first glance, the recent decline in the dollar’s strength has provided a tailwind for international markets. If the dollar continues to weaken, international equities may sustain this advantage for some time. Of course, no one can predict exactly what the future holds. This uncertainty underscores why we consistently advocate—and always will—for intelligent diversification across our portfolios. Tariffs Remain the Great Unknown for the 2nd Half of 2025 The biggest news story of 2025 has unquestionably been the ever-changing nature of tariffs. Despite all the headlines, inflation has remained low, earnings have continued to rise, and the stock market is up. This is all good news, and yet, the uncertainty surrounding the potential impact of tariffs on inflation has caused the Fed to leave rates unchanged so far this year. Many folks would argue that the Fed is behind the curve, but we’ll have to wait and see how this ultimately plays out. Bottom LineAs the points above highlight, there's a great deal to be optimistic about over the long term, even if the short-term outlook remains uncertain and challenging. While nobody can predict exactly what's next, I have tremendous confidence in humanity's enduring ability to solve complex problems that today might seem insurmountable. Keeping this perspective top of mind is crucial because it's these larger trends that will likely have the greatest impact on us as investors over time. Why? Because humanity’s continual pursuit of progress and improvement is ultimately what drives markets. This has always been true and always will be. My hope is that this review helps us all maintain focus on the bigger picture. 📚 What I've Been Reading
Thank you for reading! Please reply to this email with comments, questions, and/or feedback. Stay wealthy, Taylor Schulte, CFP® |