The S&P 500 hit a high of 6,147.43 on February 19th. The market had rallied since the 2024 elections with the consensus President Trump would deregulate the financial industry and foster economic growth through tax cuts. Instead, investors were hit repeatedly by tariff announcements, Department of Government Efficiency (DOGE) fiscal cuts, inflation concerns, and uncertain outlooks from companies that led to a bear market correction with the S&P 500 reaching 4,835.04 on April 7th, a decline of 21.3% from peak to trough. Since then, a V-shaped recovery ensued and the S&P 500 trades at 6,139.69 as I write on Thursday the 26th of June.
There were many factors that led to the V-shaped recovery: a 90-day pause, better than feared earnings, and hard economic data that portrays a resilient economy in the U.S., but there are factors as we enter the third quarter that could disturb the ongoing rally. I continue to watch for technical confirmations in the charts across the different asset classes, sectors, and industry groups and what I see concerns me while the economic outlook seems to support a soft patch and not a recession. In this article, I’ll be looking at what got the S&P 500 there and back again to record highs, and what may be in store for us in the third quarter. The S&P 500 has gone everywhere and nowhere at the same time. It’s been an incredible story so far in 2025 and there is more to come. Finally, I want to add what I’m doing for clients so you get a glimpse of the strategies I’m applying for retired investors who need income and low volatility and strategies for young professionals building their nest eggs.
How the Market Rebounded After April’s Tariff-Driven Correction
After a volatile April marked by sharp losses due to renewed tariff concerns, the stock market mounted an impressive rebound through mid-April, May and June. While investors were initially spooked by the potential fallout of reciprocal trade barriers between the U.S. and major partners, a combination of a 90-day pause on tariffs with a baseline 10% tariff in place, tariff exemptions, resilient economic data, and strong corporate fundamentals helped reestablish bullish momentum.
The rally’s first tailwind came from the de-escalation of trade tensions. April’s correction was driven in part by fears that tariffs could spiral into a full-blown trade war between the U.S. and…everybody, crimping global demand and corporate margins with supply-chain disruptions affecting all. But by mid-April, it became increasingly clear that several proposed tariffs were being reconsidered, delayed, or strategically scaled back. One of the largest rallies in recent times came on April 9th with President Trump announced a 90-day pause for countries that did not retaliate with the United States. Negotiations with key allies were reopened, and retaliation by affected countries appeared more measured than anticipated. The following week after the announcement of the 90-day pause, Treasury Secretary Bessent said he expected tensions with China to ease. A major trade deal was reached with the UK in early May, signaling a meaningful step toward reducing global trade tensions. This reversal of tone helped markets reprice trade risks downward, creating room for risk assets to recover, with China agreeing to reduced retaliatory tariffs on U.S. goods from 125% to 10% and initial 34% tariff for 90 days in the following week.
At the same time, inflation began to cool across key indicators. Consumer Price Index (CPI) and Personal Consumption Expenditures (PCE) data both suggested price pressures were moderating. Market-based measures of inflation expectations, such as breakeven rates, also declined. Importantly, this moderation in inflation gave Federal Reserve officials the cover to signal greater flexibility in their policy stance. This month’s Summary of Economic Projections from the Federal Reserve Bank signalled two rate cuts later this year. In the past two weeks, notable comments from Fed Governors Waller and Bowman hinted that rate cuts could come as soon as July if inflation continues to behave. Chair Powell later echoed these views with a more balanced tone during his Congressional testimony this week. This dovish pivot marked a stark contrast to the “higher for longer” rhetoric that dominated earlier in the year, helping to compress Treasury yields and revive investor appetite for longer-duration assets like growth and tech stocks. Finally, a Wall Street Journal report this week indicated President Trump would likely name Fed Chair Powell’s replacement by September or October that drove yields lower. The thinking is that Powell’s replacement would be more dovish given President Trump’s calls for the Fed to lower rates in recent weeks.
Corporate earnings also played a critical role in supporting the recovery. As first-quarter results rolled in, companies across several sectors—including semiconductors, consumer discretionary, and industrials—delivered strong earnings beats. In my last monthly big picture article, I mentioned that the blended growth rate was higher at the end of the earnings season at 12.9% as of May 23rd, versus the start of it at 7.1% on March 31st, according to FactSet. Even in sectors where revenue growth was soft, margin management and cost discipline reassured investors. Perhaps more importantly, forward guidance remained cautious but stopped short of signaling a deep slowdown. This undercut fears of an imminent recession and validated the elevated valuations seen in key sectors. Mega-cap names like NVIDIA, Microsoft, Alphabet, and Taiwan Semiconductor were particularly instrumental in this narrative. Taiwan Semiconductor had a modest beat and issued strong Q2 guidance, while NVIDIA continued its dominance in AI and data center infrastructure, regularly posting record-breaking numbers.
The AI narrative itself became another major catalyst. Despite concerns over concentration in the tech trade, the continued momentum in artificial intelligence helped maintain investor enthusiasm. Semiconductor names such as AMD, Broadcom, and NVIDIA surged to new highs, reinforcing the idea that secular growth in AI spending could support earnings growth even in a mixed economic environment. Microsoft and Alphabet, as platform leaders, were likewise boosted by strong cloud and AI adoption trends. This segment of the market, which has come to dominate cap-weighted indices, pulled broader averages higher even as smaller-cap names lagged.
A push for change by executive orders in nuclear energy and drone technology was a catalyst for investment in these areas for my growth clients this month. On May 23, 2025, two executive orders were issued to modernize and expand the U.S. nuclear energy sector. The first reforms the Nuclear Regulatory Commission (NRC) to accelerate licensing, reduce bureaucratic barriers, and support innovation, aiming to quadruple U.S. nuclear capacity from 100 GW in 2024 to 400 GW by 2050. The second establishes a national strategy to deploy advanced nuclear technologies for defense and critical infrastructure, requiring the Department of Defense to operate a domestic military reactor by 2028 and directing the Department of Energy to power AI data centers with nuclear energy. It also calls for the repurposing of nuclear fuel, promotes international cooperation, and leverages multilateral development banks to support U.S. nuclear energy.
June 6, a trio of executive orders addressed advancements in aviation and drone technology. One reestablishes U.S. leadership in supersonic flight, mandating the FAA to lift the decades-old ban on overland supersonic travel within 180 days and revise outdated noise and safety regulations. Another focuses on restoring American airspace sovereignty, forming a federal task force to address drone-related threats, improve drone surveillance and tracking technologies, and strengthen legal enforcement against dangerous or criminal drone usage. A third order aims to unleash American drone dominance by promoting domestic drone manufacturing, streamlining Beyond Visual Line of Sight (BVLOS) operations, accelerating AI-based waiver approvals, and establishing an eVTOL pilot program. It also directs the Department of Defense to prioritize the procurement of U.S.-made drones to bolster national industry competitiveness.
Geopolitical risk, which had flared up dramatically in June with the outbreak of military conflict between Iran, Israel, and the U.S., also began to recede as the scope of the attacks seemed limited. It began on June 13th as Israel launched attacks on key Iranian military and nuclear facilities that triggered retaliatory missile strikes from Iran on military sites and cities in Israel. Oil jumped from a previous close of $68 a barrel to almost $73 that day. After President Trump had said there would be two week window for diplomacy, the U.S. launched B-2 bombers to strike three nuclear sites just last weekend. The initial shock of U.S.-led strikes on Iranian nuclear sites quickly gave way to relief as markets learned the events were tightly managed and contained. Iran’s retaliatory missile strike on a U.S. base in Qatar was intercepted without casualties, and a ceasefire was announced shortly thereafter. This prevented a sustained spike in oil prices, with crude actually falling to the mid-$60s over subsequent sessions. That decline in energy costs further supported cyclical sectors and consumer sentiment.
As the rally progressed, investors began rotating into broader parts of the market. What began as a tech-led rebound started to show signs of breadth improvement in late June. Cyclical sectors like energy, industrials, and materials saw renewed inflows, supported by firming commodity prices and better-than-expected earnings reports. Stocks like Steel Dynamics and Worthington Steel posted impressive gains, and even some lagging sectors like financials and real estate began to stabilize as interest rate expectations shifted lower. This broadening of participation gave the market a more balanced tone and signaled that the rally was not merely a narrow melt-up but potentially the start of a more sustainable bull phase.
Lastly, economic data supported the emerging “soft landing” narrative. Durable goods orders surprised to the upside in May, particularly nondefense capital goods excluding aircraft—a core proxy for business investment—which rebounded 1.7% following a decline in April. Labor market indicators remained mixed but stable: initial jobless claims remained low, while continuing claims ticked higher, suggesting a more competitive job search environment rather than outright layoffs. Meanwhile, Q1 GDP was revised downward to -0.5%, but investors largely brushed off the report as backward-looking, focusing instead on signs that the second quarter was shaping up more positively.
Consumer sentiment weakened in June, but that only reinforced the possibility of Fed policy support. The Conference Board’s Consumer Confidence Index fell sharply, and housing market data remained soft, with new home sales plunging 13.7% in May and home price appreciation decelerating. However, rising inventory levels hinted at a more balanced market ahead. Lower mortgage rates—driven by falling Treasury yields—could potentially reinvigorate buyer demand in the months to come.
Key Takeaway – The post-April rally was fueled by a blend of trade war de-escalation, a shift toward dovish Fed commentary, cooling inflation, resilient corporate earnings, and renewed investor enthusiasm around AI. As the Fed signaled openness to easing, and trade tensions eased, markets responded with a powerful move back to record highs. Broader participation by cyclicals and small caps added credibility to the move, as did supportive data pointing to a soft landing rather than a hard economic downturn.
What’s Ahead for Q3?
There was a lot that happened in Q2 for investors to address. A lot of that was summarized in the first part of this article. Some of the catalysts like fiscal spending and passage of the “One Big, Beautiful Bill”, a possible rate cut, pauses in the reciprocal tariffs set to expire, and the continuation of geopolitical conflict are still up in the air for Q3. From a valuation standpoint, the S&P 500 is trading at a premium to its 10-year average of 18.4 according to FactSet on a forward and trailing 12-month basis, which leaves the market susceptible to negative headline risk. Given the multiple expansion over the past few months, it will be harder to sustain this pace given high valuations for the mega-cap stocks. It will be again important to turn to the earnings season as investors react to earnings news from companies. Per usual, it’s not the news but how investors react to it. Are prices set for perfection? We’ll know once earnings are provided, and investors react. Headline risk and earnings disappointment potentially run high in Q3.
Big and Beautiful or Borrowed Beyond Belief Bill?
President Trump’s much-anticipated “Big, Beautiful Bill” is making headlines for its sheer size and ambition with a deadline set for July 4th for its passage. The Congressional Budget Office that the bill passed by the House of Representatives on May 22 would increase the deficit by $2.4 trillion over the next ten years; however, the legislation aims to supercharge the U.S. economy through sweeping infrastructure investments, tax incentives, and industrial policy focused on energy, defense, and manufacturing. Supporters argue that this level of fiscal injection could reenergize domestic growth, create millions of jobs, and provide a competitive edge in strategic sectors—all while capitalizing on a moment of relative economic resilience.
The scale of the spending package is also raising alarms among market watchers and fiscal hawks. With the national debt already exceeding $37 trillion, concerns are mounting that such an aggressive expansion of government outlays could push the U.S. further into unsustainable fiscal territory. These fears are beginning to stir the bond market, where so-called “bond vigilantes” and Sovereign Investment Reserves may sell off Treasuries in protest of loose fiscal discipline, potentially driving yields sharply higher. Rising interest rates could not only choke off growth but also increase debt-servicing costs, setting up a possible feedback loop that undermines the very benefits the bill is designed to deliver. Whether this bill becomes a catalyst for renewed prosperity or a trigger for fiscal reckoning may ultimately hinge on how markets—and the Federal Reserve—respond in the months ahead.
Key Takeaway – The Big, Beautiful Bill may help some industries by spending and deregulation, while bond vigilantes may interrupt the recent decline in rates.
A July Rate Cut
There is growing market anticipation that the Federal Reserve could deliver a rate cut at its July meeting, as recent economic data increasingly point toward a cooling economy and slower inflationary pressures. Although Fed Chair Powell and other policymakers have maintained a cautious tone, several Fed governors—including Governor Waller and Governor Bowman—have signaled an openness to easing if inflation continues to trend downward. Fed funds futures markets have taken notice, with the implied probability of a 25-basis-point cut in July rising to over 21% from just 12% a week ago, according to the CME FedWatch Tool. Meanwhile, falling Treasury yields—particularly the 2-year yield, which dropped to 3.79%—are reflecting a combination of soft economic data and safe-haven demand tied to geopolitical uncertainty.
Evidence of slower growth has accumulated throughout May and June, casting doubt on the strength of the economic recovery and setting the stage for a rate cut. The third estimate for Q1 GDP was revised downward to -0.5%, primarily due to weaker consumer spending and exports. More recently, consumer confidence dropped sharply, with The Conference Board’s index falling to 93.0 in June from 98.4 in May, highlighting growing pessimism around business conditions and job prospects. Labor market data also sent mixed signals: while initial jobless claims remain relatively low at 236,000—suggesting layoffs are not spiking—continuing claims have climbed to nearly 2 million, their highest level since 2021, indicating that it’s becoming harder for displaced workers to find new jobs. Businesses may not be aggressively downsizing, but they’re certainly cautious about hiring, a trend that could suppress wage growth and consumer spending in the months ahead.
Housing data further underscores the fragile state of the economy. New home sales fell 13.7% in May, the weakest level since October 2024, and existing home sales remain subdued despite a rise in inventory. Affordability remains a key challenge, as high mortgage rates and home prices continue to discourage buyers. Meanwhile, April’s S&P Case-Shiller Home Price Index showed slowing price growth at just 3.4% year-over-year, below expectations. Durable goods orders painted a slightly more optimistic picture, jumping 16.4% in May—primarily due to volatile aircraft orders—but the more telling core capital goods orders (excluding aircraft) rebounded modestly at 1.7%, after falling in April, suggesting businesses are still wary about long-term investment.
Recent data shows a clear trend of cooling inflation, providing some relief to policymakers and markets alike. The Consumer Price Index (CPI) for May rose just 0.1% month-over-month, while the year-over-year rate slowed to 2.4%. Core CPI, which excludes food and energy, also moderated, rising 0.1% month-over-month and 2.8% year-over-year—its slowest pace since early 2021. The Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge, followed suit with a year-over-year increase of 2.1% in April, inching closer to the Fed’s 2% target. We will get the next release of the PCE Price index this Friday, but overall, a deceleration in price pressures is strengthening the case for the Federal Reserve to consider cutting interest rates as soon as July, particularly in light of softening growth indicators elsewhere in the economy.
Key Takeaway – Taken together, these signals paint a picture of an economy that is not in crisis, but is clearly losing momentum. With inflation cooling and consumer sentiment weakening, the Fed is under increasing pressure to respond. While policymakers remain data-dependent, the possibility of a July rate cut is becoming more plausible, particularly if upcoming reports on inflation, jobs, and retail activity confirm the trend of deceleration. Whether the Fed acts next month or not, the door to rate cuts is certainly open with expectations for two rate cuts in the second half—and markets are watching closely.
Tariff Pause Expiration Approaches: Reset or Repercussion?
The expiration of reciprocal tariffs on July 9th marks a potentially pivotal moment in U.S. trade policy, as the Trump administration signals a shift toward more unilateral and high-stakes deal-making. President Trump has made it clear that the current tariff structure—initially designed to enforce balanced trade terms with key partners—is no longer a long-term fixture. While opportunities are still there for negotiation with key trade partners, because it’s impossible to negotiate with every nation, he has extended what officials are calling a “take it or leave it” offer to smaller countries, laying out new terms that reflect his “America First” strategy more aggressively than in past negotiations. These terms reportedly demand deeper concessions on market access, strategic goods, and supply chain security, particularly in sectors like semiconductors, autos, and pharmaceuticals.
As the reciprocal tariff framework pause expires, countries that once benefited from exemptions or symmetrical rates may find themselves facing elevated U.S. tariffs unless new agreements are reached. The Trump administration appears ready to reset the playing field with trading partners unwilling to align with its updated terms. The risk, however, is that rather than bringing countries to the table, the strategy could trigger a new round of global trade friction, especially if U.S. allies retaliate. With World Trade Organization mechanisms weakened and multilateral channels strained, July 9th may usher in a more fragmented and volatile trade environment.
For U.S. businesses and markets, the expiration raises uncertainty at a delicate time. While some domestic manufacturers may benefit from higher tariff protection, others reliant on international supply chains could face rising input costs and potential disruptions. The expiration also intersects with broader inflation and interest rate concerns—particularly if retaliatory tariffs or slowed trade flows increase consumer prices or dampen global growth. Investors and policy analysts are watching closely to see if Trump’s negotiating gambit yields breakthroughs—or if it leads to renewed tariff escalation reminiscent of 2018.
Key Takeaway – Ultimately, July 9th is more than just a technical deadline; it could be remembered as a point at which the U.S. either resets its trade agenda with updated, enforceable deals—or reopens a cycle of uncertainty in global commerce like investors experienced in March and April. What follows may depend less on economic logic than on political calculus in Washington and the willingness of key trade partners to re-engage under new terms.
Nuclear Crossfire: Tehran, Tel Aviv, and Tensions in Between
Despite President Trump’s announcement of a ceasefire just two days ago, the geopolitical situation in the Middle East remains tense following the U.S. bombing of three Iranian nuclear facilities over the weekend. The strikes, which targeted suspected underground enrichment sites, were framed by U.S. officials as necessary to deter further Iranian nuclear development, but they have raised serious questions about whether the ceasefire was ever more than a rhetorical pause. While the administration insists that the military action was defensive and narrowly targeted, Tehran views the move as a direct violation of sovereign territory and a betrayal of diplomatic engagement.
The risk of Iranian retaliation now looms large. Iranian officials have publicly condemned the strikes and have hinted that a response is inevitable. Intelligence sources report that Iran has already mobilized regional proxies and signaled potential cyber or missile-based reprisals, particularly aimed at U.S. military installations in the region, such as those in Qatar or Iraq. While some observers believe Iran may opt for a limited and symbolic counterstrike to avoid full-scale escalation, others fear a broader asymmetric campaign that could destabilize oil markets, endanger shipping lanes, or provoke Israeli countermeasures.
Adding to the complexity is the diplomatic confusion surrounding the ceasefire. Trump’s declaration, which was initially welcomed by markets and international observers, now appears undermined by the military action. This dual-track strategy—public de-escalation combined with covert or preemptive operations—raises uncertainty about the U.S.’s endgame in the region. Is Washington seeking a lasting deterrent or simply managing the conflict in short, tactical bursts? Without clarity, the chances for miscalculation rise, especially in a region as volatile as the Middle East.
Key Takeaway – Markets have so far remained surprisingly resilient, pricing in the assumption that any escalation will remain contained. But with crude oil prices already volatile and defense posturing intensifying, any retaliation from Iran could swiftly change that calculus, reviving fears of a broader regional conflict. The coming days will be critical in determining whether diplomacy can hold or whether the next phase of this long-running standoff is already underway.
What Is Ryan Doing for Clients?
This month I updated my clients on my mid-year portfolio holdings. As we reach the midpoint of 2025, I continue to position client portfolios to reflect both long-term opportunity and near-term uncertainty in an increasingly complex investment landscape. Rather than rely on outdated models or passive exposure alone, we’re aligning our strategies with what I believe are durable, forward-looking themes. These include technological innovation—especially artificial intelligence and robotics—energy transformation, renewed interest in precious metals, and macroeconomic shifts that highlight the value of financial technology, healthcare, and infrastructure.
The sharp correction earlier this year provided an opportunity to selectively deploy capital into sectors and themes where innovation and necessity intersect. We’re focusing on areas with secular tailwinds—like AI hardware and software, energy resilience, and medical advancements—that are less dependent on the economic cycle and more tied to structural change. At the same time, we remain mindful of downside risks, such as debt sustainability, inflationary pressures, and rising geopolitical tensions. That’s why, in certain portfolios, we’re blending growth-oriented positions with inflation-sensitive assets and more defensive sectors, depending on the client’s stage of life and risk profile.
Importantly, every decision is tailored to the individual. For retirees, preserving income and limiting volatility remains the top priority, with allocations more weighted toward yield and capital protection. For working professionals and younger clients, we’re leaning into long-term innovation and global trends that could deliver compounding returns over the coming years. Regardless of risk profile, I continue to monitor the market closely and make tactical adjustments where warranted—whether due to changes in valuations, global events, or new regulatory tailwinds.
This approach is rooted in conviction but grounded in prudence. The world is changing fast, and I want to make sure client portfolios are aligned with these changes.
Summary
The S&P 500 has staged a remarkable “There and Back Again” V-shaped recovery in 2025, rebounding from its April lows driven by tariff fears to near record highs by late June. This turnaround was fueled by easing trade tensions, a pause in reciprocal tariffs, softening inflation data, and a more dovish tone from the Federal Reserve, with growing expectations of a rate cut in July. Strong corporate earnings, especially from AI-related sectors, also bolstered sentiment. Executive orders supporting nuclear and drone technology further contributed to optimism in specific industries. However, risks remain heading into Q3, including elevated valuations, the uncertain passage of President Trump’s “Big, Beautiful Bill,” and the potential expiration of the tariff pause on July 9. Geopolitical tensions, particularly in the Middle East, and signs of a slowing economy underscore the fragile balance between continued market gains and possible headwinds ahead.
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Advisory services offered through Financial Sense® Advisors, Inc., a registered investment adviser. Securities offered through Financial Sense® Securities, Inc., Member FINRA/SIPC. DBA Financial Sense® Wealth Management. Investing involves risk, including the loss of principal. Past performance is not indicative of future results.