U.S. equities finished Q2 on a strong note, with the S&P 500 closing at a new all-time high, an impressive turnaround after a volatile start to the quarter. Markets were initially rattled in early April following the announcement of Trump’s tariff plan. Between April 2nd and April 8th, the S&P 500 fell more than 12%, marking its worst four-day decline since March 2020. Investor sentiment quickly reversed, however, after the White House signaled a willingness to revisit the policy and implemented a 90-day pause on the most severe measures. This triggered a sharp rebound on April 9, with the S&P 500 surging 9.5%—its biggest one-day gain since 2008—and the NASDAQ jumping 12.2%, its largest single-day increase since 2001.
The positive momentum carried through the end of the quarter as easing trade tensions (trade deals/negotiations with the UK, Vietnam, China, India, South Korea, and the European Union) and resilient corporate earnings (in Q2 of 2025 approximately 78% of S&P 500 companies beat Wall Street EPS estimates) supported a risk-on appetite. By quarter-end, the S&P 500 had surged over 24% from its April lows, reflecting renewed investor confidence and broad strength across global equity markets.
The second quarter saw a rotation out of defensive sectors, as investors favored areas with stronger growth prospects. Information Technology led the market with an impressive 24% gain, closely followed by Communication Services—both buoyed by solid earnings and renewed investor optimism. In contrast, Energy lagged due to supply surpluses, OPEC+ production hikes, and geopolitical tensions, while Health Care underperformed amid regulatory pressures and mixed earnings. The broader market rally was further supported by rebounds in Industrials and Consumer Discretionary, which recovered from earlier softness.
Like U.S. equities, both developed (MSCI EAFE +12.0%) and emerging markets (MSCI EM +12.2%) posted strong gains in the second quarter. International equity strength was fueled by a weaker U.S. Dollar, attractive valuations overseas, and growth tailwinds (fiscal policy, easing trade tensions). While international equities—both developed and emerging—led U.S. equities in Q1, that outperformance faded in Q2.
The S&P Goldman Sachs Commodity Index (S&P GSCI) declined in the second quarter (-4.4%), driven primarily by weakness in Energy and Agriculture.
Energy was a notable drag as oil prices remained under pressure despite a brief surge triggered by heightened geopolitical tensions in the Middle East, which raised concerns about potential disruptions to shipping routes. However, the rally was short-lived due to persistent oversupply in the market. Additionally, OPEC+ announced a further increase in oil production set for July, marking the third such boost in recent months.
Agricultural commodities also posted losses for the quarter, with cocoa and soybeans among the few gainers. Meanwhile, livestock, industrial and precious metals, closed higher for the quarter. Most notably, Platinum advanced a little over 36% for the quarter—driven by supply shortages, increased Chinese demand, and industrial tailwinds. Investor demand for precious metals remained strong amid ongoing uncertainty from trade disputes and geopolitical risks, reinforcing their appeal as a “safe-haven” asset class.
The Bloomberg US Aggregate Total Return Index was positive in Q2, albeit global bonds outperformed domestics. The bulk of strength in US Treasuries occurred in the front-end and belly of the yield curve, bolstered by stabilizing inflation data. Investment Grade AAA credit and Agency MBS spreads were rangebound over the quarter amidst sticky mortgage rates and an uncertain corporate investment outlook while High Yield credit spreads tightened materially. Bets on rate cuts were front-loaded, easing from roughly four implied 2025 cuts to just over two and a half by quarter end as equities rebounded from Liberation Day fears and jobs / inflation data painted conflicting pictures. The Federal Reserve held its target rate constant over the quarter.
Global fixed income outperformed domestics, driven in part by a weakening US Dollar (Bloomberg US Dollar Spot Index -6.60% Q2), dovishness of European central banks (European Central Bank cut twice in Q2, UK cut once), and relative outperformance in European duration amidst a US debt downgrade by Moody’s and uncertain economic outlook (US 30Y +20bps, UK 30Y flat, Germany 30Y +1bp, Italy 30Y -25bps, France 30Y -3bps, Greece 30Y -14bps).
The US Treasury yield curve twist-steepened in Q2 as front-end and belly yields fell while longer tenors sold off. The shift in curve shape exceeded last quarter’s 3M forward rates, with 2s10s and 2s30s steepening by 11bps and 30bps more than forwards implied. When compared to last quarter, the rally in US front-end / belly yields was relatively muted, as Q1 saw a -36bp decline in the 2Y yield (vs. a -16bp decline in Q2). Despite the strong rebound in equities, fixed income continued to catch a bid this quarter.
Both measures of inflation showed stabilization in Q2, with CPI and PCE coming down from a high of 3.000% January CPI and 2.676% February PCE to 2.355% and 2.342% respectively in May. Federal Reserve Chair Jerome Powell remained cautious in interpreting the data, asserting that more time is needed to understand tariff impacts on prices. Despite the hawkish rhetoric, the market interpreted the benign inflation prints positively, reflected in falling front-end yields.
On the other side of the Fed’s dual-mandate is the labor market, which has defied analyst expectations with its resilience. The rate of new jobs added, absent of revisions, has been rangebound over 2025 (+143k January, +147k June).
Rate cut bets eased on the quarter amidst the competing inflation and labor narratives as well as a shifting landscape of global trade expectations. As the curve shape flattened on the quarter, Fed Funds Futures implied approximately one and a half fewer cuts for 2025 off the peak of roughly four cuts. As of the end of the quarter, roughly two and a half cuts are priced in for the end of the year.
In the week following April’s Liberation Day announcement of reciprocal tariffs, Investment Grade AAA credit and Agency MBS spreads rose 20bps before gradually drifting lower over the quarter. Sticky mortgage rates and rising term premiums were a factor in MBS spreads remaining elevated in Q2 (Agency MBS CC +3bps Q2, Freddie Mac Enhanced Primary Mortgage Market Survey US 30 Year Fixed +12bps Q2). As risk-on equity indices rebounded following the 90-day tariff reprieve, High Yield credit spreads outperformed AAA products as EPS beats were constructive despite corporate earnings reflecting lower guidance and sidelined investments.
Disclaimer
The content in this note is for informational purposes only and is not a recommendation to purchase securities or investment advice. Unless otherwise specified, the data in this note is sourced from Bloomberg. We do not represent that the information in this note is correct, complete, or accurate. This note reflects the views of Secure Asset Management, LLC on the date it was written and may change without notice. CC refers to “Current Coupon,” MBS refer to “Mortgage-backed securities,” CPI refers to the “Consumer Price Index,” PCE refers to “Personal Consumption Expenditures,” YoY refers to “Year over Year,” TTM refers to “Trailing Twelve Month.” Unless otherwise stated, performance numbers are total return and assume dividend reinvestment. Unless otherwise stated, Q1 is the period starting 12/31/2024 and ending 03/31/2025, Q2 refers to the period starting 03/31/2025 ending 06/30/2025, YTD refers to the period starting 12/31/2024 ending 06/30/2025. Unless otherwise specified, yield changes in US treasuries are derived from Bloomberg’s Mid YTM closes in the Graph Curves function, and forward rates are calculated using Bloomberg’s Forward Curve Analysis function. Indices are unmanaged and cannot be directly invested into and past performance is not indicative of future results. Change in Nonfarm Payrolls revisions data may differ from previous Newsletters as revisions are released by the Bureau of Labor Statistics (BLS) twice following each month’s print and can be revised in the BLS annual benchmarking revision, which targets two years of trailing data. Secure asset management does not register as a commodities firm and as such, advisors may not recommend commodities or cryptocurrency outside of packaged products.
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