2025 Second Quarter Commentary Report
Market Review
Global Market Performance
U.S. stocks turned positive for the year, despite sharp market swings driven by shifting consumer sentiment, tariff policy and geopolitical tensions. Major U.S. stock indexes reached new highs by the end of the quarter. International and emerging markets continued to outperform U.S. stocks by the widest margin in more than 30 years. Real estate equities faced headwinds but still posted gains for the quarter.
Market Returns (Q2 2025)
U.S. Stocks: +10.99%
International Developed Stocks: +12.05%
Emerging Markets Stocks: +11.99%
Global Real Estate Stocks: +2.74%
Bond Markets
Bonds had a volatile quarter but finished in positive territory. The Federal Reserve kept interest rates steady amid concerns about tariffs and their potential impact on inflation. In May, the U.S. lost its last AAA credit rating due to concerns about long-term fiscal health, pushing long-term rates slightly higher. However, rates on short and intermediate-term bonds fell as inflation eased. Many foreign central banks continued cutting rates.
Bond Returns (Q2 2025)
U.S. Bond Market: +1.21%
Global Bonds (excluding the U.S.): +1.93%
This past quarter reinforced the importance of sticking with our investment plans. A key part of our approach is regularly rebalancing portfolios when allocations drift too far from their targets. Recently, this has meant trimming some stock positions and adding to bonds.
We focus on managing portfolios in a tax-efficient way by using dividends to rebalance and trading in tax-deferred accounts where possible. Still, some may have slightly higher-than-average capital gains this year. Our priority remains maintaining appropriate risk levels and making the most of favorable market conditions. As the saying goes, make hay while the sun is shining.
In the same vein, it’s generally advisable for governments to save when times are good so they can spend when times are bad. The U.S. has become quite adept at spending when times are bad but not very good at saving when times are good. Yesterday’s solutions have a way of becoming today’s problems. It looks as though decades of deficit spending are finally catching up with us and impacting the markets.
Economists often refer to the budget deficit and the trade deficit as the "twin deficits" because they are closely linked. A growing budget deficit increases the need for foreign investment in U.S. debt, which requires foreign countries to acquire more U.S. dollars (hence our reserve currency status). To obtain these dollars, they sell more goods to the U.S. than they buy, contributing to the trade deficit. It will be interesting to see how this relationship holds up as the U.S. attempts to reduce the trade deficit through tariffs while at the same time increasing the budget deficit through the newly passed tax bill.
Planning Perspective
The recently signed tax bill includes several key changes that may impact your tax return. Here are just a few highlights:
Permanent Tax Rates & Deductions: The tax rates from the 2017 Tax Cuts and Jobs Act (TCJA) are now permanent. The standard deduction from the TCJA has also been made permanent and slightly increased.
State and Local Tax (SALT) Deduction: The cap on SALT deductions has been raised from $10,000 to $40,000 for households earning less than $500,000. This deduction will revert back to $10,000 in 2030.
Estate & Gift Tax Exemption: The exemption for Gift, Estate, and Generation-Skipping Transfer Taxes will increase to $15 million starting in 2026 per individual.
Enhanced Deduction for Seniors: Individuals aged 65 and older can claim a temporary additional deduction of $6,000 ($12,000 for couples). This deduction begins to phase out at incomes above $75,000 for individuals and $150,000 for couples and will expire in 2028.
Personal Perspective
Early one morning last winter I was soundly asleep when I felt something ever so slightly move my right hand. As my eyelids slowly opened, there I saw my two kids holding back the giggles and stealthily holding the coveted iPad up to my thumb, trying to unlock it. We just changed the password to cut down on screen time. While I admire the creativity and coordination of their secret mission, it reminded me that cyber security risks know no bounds.
It is simply a fact of life now that just about all our information is out there on the dark web for purchase.(2) Since there’s only so much we can do to protect ourselves, I decided to purchase identity fraud insurance through our auto and umbrella provider. Many others provide similar services. Thankfully, I’ve never had to file a claim, so I can’t speak to that process. The coverage costs $100 per year and includes up to $1 million in protection for my entire family. So far, I’ve been pleased with the service. Each month, I receive a report showing credit changes and any alerts. They also notify me if our information appears on the dark web and will show where it was found. The coverage even includes monitoring for home title fraud. While it may seem like just another insurance product, it provides me with great peace of mind.
Additionally, Schwab offers a Security Guarantee that covers any losses from unauthorized activity in your Schwab accounts. Note it does not apply if you’ve shared your login credentials with someone who commits fraud. The guarantee is automatic, and no action is needed to activate it. You can find more details here.(3)
As always, it’s important to use strong passwords and be cautious of suspicious emails or texts. Scammers are even impersonating custodians like Schwab. If you are unsure about the legitimacy of any communication, feel free to contact us. I know I’ll be keeping one eye open for two little hooligans creeping around my bedroom at 6 o’clock in the morning…
Thank you for trusting us with your financial future. It’s a responsibility we take passionately. We’re especially honored when clients extend that trust by introducing us to family, friends, and colleagues. If you know someone who could benefit from the same care and guidance, we’d be grateful for the opportunity to help. Your continued support means the world to us, and we’re truly thankful to have you as a client.
Sincerely,
Myles B. Brandt, M.S., CFP®
(1) Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio.
Market segment (index representation) as follows: US Stock Market (Russell 3000 Index), International Developed Stocks (MSCI World ex USA Index [net dividends]), Emerging Markets (MSCI Emerging Markets Index [net dividends]), Global Real Estate (S&P Global REIT Index [net dividends]), US Bond Market (Bloomberg US Aggregate Bond Index), and Global Bond Market ex US (Bloomberg Global Aggregate ex-USD Bond Index [hedged to USD]). S&P data © 2025 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. MSCI data © MSCI 2025, all
rights reserved. Bloomberg data provided by Bloomberg.
(2) https://www.youtube.com/watch?v=xQSlvl4NPLM