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Second Quarter Market Recap: Trade Policies, Global Events, and Record Highs
The second quarter of 2025 showed how strong markets can be, even when there's uncertainty. From new trade policies announced by the White House in April to rising tensions between Israel and Iran in June, investors had to deal with many challenges. But the stock market bounced back quickly and reached new record highs by the end of the quarter.
Overall, it was a good quarter for stocks, and bonds also did well. For people investing for the long term, these events remind us that while news headlines can cause short-term ups and downs, staying focused on the big picture is key to reaching your financial goals.
| MTD% | YTD% | |
| Dow Jones Industrial Average | +4.49% | +5.51% |
| NASDAQ | +6.57% | +5.48% |
| S&P 500 | +5.09% | +6.20% |
| Russell 2000 | +5.44% | -1.79% |
| MSCI World ex-USA** | +3.45% | +18.32% |
| MSCI Emerging Markets | +6.14% | +15.57% |
| Bloomberg U.S. Agg Bond | +1.54% | +4.02% |
Source: The Wall Street Journal, Dimensional Returns
MTD returns: May 31, 2025–June 30, 2025
YTD returns: December 31, 2024–June 31, 2025
**in US dollars
Markets Bounced Back to Record Highs
Even with big swings in prices, the stock market recovered quickly once the worst fears about trade policies and global tensions didn't happen. The quarter started with worry after new tariffs were announced on April 2. But as the government worked on trade deals with other countries, investors felt better. The Middle East conflict had a similar pattern - markets stayed strong and hit new highs after Israel and Iran agreed to a ceasefire.
The stock market gains were widespread across different types of investments. International stocks continue to do well in 2025, especially as the dollar got weaker. Small company stocks haven't done as well because they're more affected by trade policies. Technology stocks had a strong recovery and helped push markets to new highs.
The Dollar Got Weaker
The U.S. dollar lost value during the second quarter despite trade policy pressures. A weaker dollar can hurt consumers by making imports more expensive, but it helps U.S. businesses sell their products overseas since foreign buyers find them cheaper.
The Federal Reserve kept interest rates steady throughout the quarter. Fed officials now expect inflation to reach 3% in 2025 before falling to 2.1% by 2027. They also think economic growth will slow this year to 1.4%. These changes reflect concerns that tariffs could increase inflation and slow growth.
Bonds Helped Balance Portfolios
While stocks reached new highs, the ups and downs during the quarter were challenging for many investors. Bonds helped provide stability during this time. Different types of bonds all provided balance and are positive for the year.
Budget discussions in Washington have brought attention to America's debt situation. The national debt now exceeds $36 trillion, or about $106,000 per American. However, history shows that agreements are usually reached, markets stabilize, and economic growth continues.
The bottom line? The second quarter showed both market swings and strength as investors dealt with policy changes and global events. For investors, keeping perspective and focusing on a balanced mix of investments remains the best way to reach long-term goals.
