Taking Stock: Executive Summary June 30, 2025

Q2 In Review:

Kicking off with President Trump’s April 2nd “Liberation Day” tariff announcement, Q2 began with equity markets plummeting, as fears of spiking inflation and the specter of a potential trade war sent stocks free falling by more than 19% from their February high. However, markets quickly recovered as tariff rhetoric eased and talks with trading partners progressed -- the Dow, S&P and Nasdaq all ended in positive territory, not only for the quarter but YTD, with the rally wiping out Q1’s losses and closing the second quarter at or near record highs.  

While economic data ended the quarter mixed, and the full impact of tariffs is uncertain, the U.S. economy remains on relatively solid ground, with GDP bouncing back, the labor market showing continued resilience with a stronger than expected June U.S. job report and corporate earnings holding up better than expected with the administration’s dramatic policy change. 

Recent Economic Data:

Gross Domestic Product (GDP). The GDPNow model estimate for real GDP growth in Q2 2025 is 2.6% (seasonally adjusted annual rate as of July 3, 2025).  This is a significant increase from the first quarter, where the GDP decreased at an annual rate of 0.5%, primarily due to an increase in imports and decrease in government spending.  (A growth rate between 2% and 3% is commonly considered “normal.”)  

Unemployment. Total non-farm payroll employment rose by 147,000 in June, surpassing FactSet’s prediction of 115,000.  Unemployment is little changed from May, at 4.1%, a rate considered historically low.

Consumer Confidence. The Conference Board Consumer Confidence Index, an indication of consumer attitudes and buying intentions, decreased 5.4 points to 93.0 in June, after steep gains in May, ending Q2 near March’s four-year low of 92.9.  (1985 benchmark: 100) 

Consumer Price Index (CPI). The CPI for All Urban Consumers (CPI-U), a measure of inflation which shows “cost of living” fluctuations, increased 0.1 % in May on a seasonally adjusted basis. Over the last 12 months, the all-items index increased 2.4% before seasonal adjustments. Contrary to the tariff-induced spike many predicted, this reflects a decrease from 2.8% for the twelve months ending in March.  It’s possible; however, that prices may yet be impacted as pre-tariff inventories are depleted. 

Earnings. For Q2, the estimated (year-over-year) earnings growth rate for the S&P 500 is 5.0%.  Like stock prices, earnings predictions also plummeted following April’s tariff announcement, falling from 9.4% on March 31; however, predictions improved after Trump suspended big tariffs (as high as 145% for China) to provide time for negotiations.  FactSet analysts project earnings growth of 7.3%  in Q3 and 6.4 % in Q4.

Housing. With elevated mortgage rates and record-high home values, housing demand remains stifled.  Housing starts have yet to return to their peak levels prior to the 2008/2009 financial crisis, and May housing starts fell 4.6% compared to May 2024. We don’t anticipate a significant upturn until rates drop.  The HMI Builder’s Confidence index, which depicts builder’s sentiment on a scale of 0 to 100, fell two points in June to 32. (Less than 50 is an indication that most builders do not feel confident about the near-term housing market outlook.) 

Looking Ahead:

With 2025’s roller-coaster of a first half behind us, we enter Q3 with markets at or close to record highs. The U.S. remains on relatively solid economic footing … tempered with a dose of domestic and geopolitical uncertainty.  As trade tensions, geopolitical conflict and ambiguous economic policy change collide, it’s likely to be another volatile quarter. Meanwhile, the Fed faces its continued rate balancing act, and while we are not fortune tellers, we don’t expect more than a 0.25% rate cut during 2025.  

On the domestic front, shortly after quarter end, Trump’s Big Beautiful Bill was signed into law, with its roughly $4.5 trillion in tax cuts and spending package expected to spur economic growth. Tariffs are here to stay; however, we anticipate that sound and fluid economic analysis will limit extremes and maintain focus on the administration’s goals of reducing the trade deficit and rebuilding U.S. manufacturing … which, in turn, will theoretically help to mitigate the negative economic impact of a potential trade war (namely spiking inflation and reduced GDP).  And the Congressional Budget Office expects that tariff income will help to offset tax cuts included in the new bill – potentially giving the U.S. economy a shot in the arm while at the same time reducing the budget deficit. Only time will tell. 

Geopolitical headwinds, such as renewed Middle East tensions, will likely add to volatility (or worse if oil supply is impacted); however, according to a recent J.P. Morgan study analyzing more than 80 years of data, geopolitically driven fluctuations rarely have a long-term impact on U.S. markets. 

There are a lot of variables and a lot of change in the mix, but we continue to go back to the basics, reiterating what we have said time and time again. Ignore the noise and continue your path. Maintain a portfolio tailored to your goals, needs, risk tolerance, and time horizon, mitigating downside risk by concentrating on fundamentals and investing in quality companies in a diversified portfolio. Stay the course.  

We hope that you and your family enjoyed a safe and happy Fourth of July weekend, celebrating our great nation and the freedom which is so uniquely American.  

“Freedom is the window through which pours the sunlight of human spirit and human dignity. ”  

                                                                                                                     - Herbert Hoover

We are committed to providing you with the highest standard of care in keeping with our corporate mission of 

Building Relationships … Enhancing Lives.

Executive Summary Sources:

https://www.morningstar.com/markets/13-charts-q2s-major-market-rebound

https://www.atlantafed.org/cqer/research/gdpnow

https://www.bea.gov/news/2025/gross-domestic-product-1st-quarter-2025-third-estimate-gdp-industry-and-corporate-profits

https://www.bls.gov/news.release/pdf/empsit.pdf

https://insight.factset.com/total-nonfarm-payrolls-for-june-2025-are-projected-to-rise-by-115000

https://www.conference-board.org/topics/consumer-confidence

https://www.reuters.com/markets/us/us-consumer-confidence-deteriorates-further-march-2025-03-25/

https://www.bls.gov/news.release/pdf/cpi.pdf

https://www.census.gov/construction/nrc/pdf/newresconst.pdf

https://www.businessinsider.com/us-underbuilding-housing-over-the-past-decade-2020-9

https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_070325.pdf

https://www.reuters.com/markets/wealth/six-questions-facing-us-stock-investors-2025s-second-half-kicks-off-2025-07-01/

https://www.whitehouse.gov/articles/2025/07/president-trumps-one-big-beautiful-bill-is-now-the-law/ 

https://www.bankrate.com/investing/how-geopolitical-events-impact-stock-market/

https://privatebank.jpmorgan.com/nam/en/insights/markets-and-investing/how-do-geopolitical-shocks-impact-markets

https://www.morningstar.com/indexes/dji/!dji/performance

https://www.morningstar.com/indexes/xnas/@cco/performance

https://www.morningstar.com/indexes/spi/spx/performance

https://finance.yahoo.com/quote/%5EDJI/history?p=%5EDJI

https://finance.yahoo.com/quote/%5EIXIC/history?p=%5EIXIC

https://finance.yahoo.com/quote/%5EGSPC/history?p=%5EGSPC

Past performance is not indicative of future results.

The views expressed represent the opinion of Asset Management Financial Solutions, Inc. (“AMFS”) and are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and AMFS’s view as of the time of these statements.  Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties.