June 18, 2025
Filed under: General
As we have been meeting with clients and even as I am involved in nonprofit boards & their investment and financial committees, I am noticing something interesting. In short, for many investors, the market volatility has led them to believe that investments are down this year. As indicated in Davis Gardner’s investment column, we are actually positive year-to-date on the US and international stock markets, as well as the US bond market. But there has been so much happening in terms of both economic and political headlines, that it seems financial markets MUST not be performing well.
The deeper story is underneath the hood as we look at where the top performance is coming from.
As our clients, and others, receive their June investments statements, they MAY be surprised, assuming performance holds. The vast amount of the positive portfolio returns are coming from Europe, and international and emerging market stocks. Why? The EU has been cutting rates and also agreeing to invest more in their own defense, boosting defense-related stocks and the markets in general. A recession MAY be around the corner, but it appears that the European Central Bank is willing to do what it takes (lower rates) to buffer any impact.
Meanwhile, the US has faced much more uncertainty economically and politically and that’s showing in the YTD market returns. It has been 14 years since we last saw this turn, so it’s easy to think the US is always the best bet. In fact, the last run of better performance for international stocks lasted the 8 years prior to 2011. Does this mean you should jump into international stock investments with both feet? We don’t think so, but we do think our clients should have a decent amount of international stock exposure depending on their risk tolerance and timeline.
We have also seen the global bond market perform well – with the JPM Global Aggregate Bond Index up 5.7% through June 6th. That’s significant for less than half a year. So, between bonds and international stocks, returns are running in the mid-single digits YTD. For many of our clients, that’s the return estimate we are using in our planning software for a whole year. While the political and economic situation seems uncertain on many fronts, investments are positive but volatile.
Of course, the real question is where we go from here? The 90-day extension to the reciprocal trade tariffs will come up on July 9th with some other extensions happening as well.
Meanwhile, inflation has not effectively shown much impact from tariffs… yet. We have seen some wild trade balance changes as businesses have stocked up on inventory during the “pause”, but the rubber is about to hit the road as businesses must decide whether to roll the dice for Back-To- School and December holidays and order stock now, not knowing what the true cost will be and whether they can pass that along to consumers. As we have said before, we are in a bit of the “eye of the storm” for now, and July/August/September may start to give us a better sense of where the economy and markets will go from here.
This is a good time to reassess your risk tolerance and position and take any cash needed for the rest of the year. We are still able to get pretty competitive rates on money market accounts and our more defensive & conservative strategies are holding up as well, so we have options for getting some kind of return on those assets.
Finally, where the real focus and attention may be for some is how to navigate the myriad of unprecedented political efforts that are underway. Political sides have been taken and it’s pretty clear who some of the losers will be in this effort. It is a good time to give generously to your preferred charities – they need it. As a Board Member for a couple of organizations, I know these are challenging times. Please let us know how we can best support you as we navigate what’s ahead.
Take good care!
lisa