At first glance, the initial months of 2025 have presented obstacles for market participants. Between trade tensions and market volatility, along with Middle Eastern conflicts and national debt concerns, investors might perceive financial markets as navigating from crisis to crisis. Media coverage frequently emphasizes negative developments, potentially magnifying the perception of market distress.
Nevertheless, the adage about capitalizing on crisis situations holds true. While typically applied in political discourse, this concept translates effectively to investment strategy and wealth management. Looking beyond surface-level news often uncovers valuable prospects for market participants. Although the early part of the year saw corrections across major indices including the S&P 500 and Dow, plus a Nasdaq bear market, it simultaneously delivered one of history’s most rapid recoveries.
This combination created conditions that favored investors who concentrated on portfolio allocation and maintained comprehensive market views. Though uncertainty definitely remains uncomfortable, risk and return represent two facets of the same investment reality. If maintaining investment discipline and seeing beyond immediate headlines were simple, universal participation would likely reduce future return potential.
These principles remain relevant as we navigate continued uncertainty entering the year’s second half. The following presents five essential perspectives to help investors manage current markets and position portfolios for potential opportunities, independent of any upcoming headlines in the short-term.
1.) Market resilience continues as we enter the year’s latter half
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Market participants have grown familiar with volatility patterns in recent years. This year continues that trend to a greater level, with many concerned about prolonged trade conflicts potentially triggering global economic recession, not to mention the ongoing geopolitical conflicts with Ukraine-Russia and Israel-Iran.
Though tariff concerns persist throughout the economy, recent trade agreements have reduced the probability of worst-case outcomes. The referenced chart above demonstrates how markets delivered substantially stronger second-quarter performance compared to the first quarter due to these developments.
Moving ahead, markets will remain responsive to evolving trade negotiations. The 90-day suspension periods for most nations conclude in July, while the reported Chinese agreement hasn’t fully crystallized. The current administration has demonstrated its commitment to achieving new agreements, similar to its 2018 and 2019 approach. Whatever the specific results, average import tariff levels have increased meaningfully this year. While increased tariffs through mid-June have yet to show higher inflation (which has remained low – most recently 2.4%), the potential for an impact to consumer price levels and business profit margins remains.
Investors should consider these factors as we enter the second half of the year. While rapid market recovery never carries guarantees, the essential focus should remain on fundamental trends. Markets operate with forward-looking perspectives and demonstrate adaptability to evolving circumstances.
2.) Geopolitical concerns currently drive news coverage
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Geopolitical tensions have heightened, especially regarding the Israel-Iran situation that now includes U.S. military involvement. This naturally generates investor anxiety since such developments differ from typical business and economic reporting. Fortunately, historical analysis offers valuable insights into how markets typically respond to geopolitical disruptions.
The referenced chart above demonstrates that markets have generally rebounded from geopolitical shocks over time, usually within months of initial disruption. Even major events like wars showed limited lasting effects on diversified portfolios. This observation doesn’t diminish the human and social costs of conflicts, but serves as a reminder that dramatic portfolio adjustments based on geopolitics rarely prove beneficial.
What proved more significant during historical periods were underlying market and economic patterns. The Gulf War occurred during the extended 1990s bull market powered by technology innovation. Conversely, the Afghanistan conflict began following the dot-com collapse and spanned multiple economic cycles.
Looking back even further, the American economy remained weakened by the Great Depression when World War II commenced. Military production stimulated industrial activity and drove markets higher. The Vietnam conflict, however, aligned with a difficult stagflation period.
Current market concerns regarding the Iran situation focus on oil supply interruptions. The Strait of Hormuz south of Iran represents a crucial passage for over one-fifth of global oil transportation. Any disruption to production or key supply routes could spike oil prices, intensifying inflation.
Nevertheless, oil prices have maintained a relatively narrow trading range despite conflict escalation. Brent crude pricing has only returned to January levels. While the situation continues developing, maintaining balanced perspectives on geopolitical impacts remains important.
3.) Economic data & conditions still appear robust
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The most encouraging development over recent years has been U.S. economic durability. What has been most surprising for investors is employment market strength, even as inflation has declined toward more typical historical ranges. The accompanying chart above indicates most inflation measurements are at or below 3%.
Additionally, the most recent GDP data showed a 0.2% economic contraction during the year’s first quarter. However, detailed analysis reveals this primarily resulted from trade factors as businesses accumulated imported inventory ahead of potential tariffs. Consumer expenditure, representing the largest economic growth component, maintained steady expansion, supporting overall economic activity. Without trade disruptions, GDP growth would likely have remained positive.
One concern likely to resurface during the year’s second half involves expanding national debt from ongoing government expenditure and deficits. This prompted Moody’s May downgrade of U.S. debt, following similar actions from other rating agencies including Standard & Poor’s in 2011 and Fitch in 2023.
National debt creates substantial long-term economic challenges, particularly given the absence of apparent long-term solutions. However, avoiding portfolio overreactions remains crucial once again. Historical evidence shows that making investment decisions based on Washington fiscal policy would have been detrimental. Instead, these periods often create opportunities across both equity and fixed income markets.
4.) International equity asset classes have delivered strong results thus far
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The primary challenge with market recovery is that U.S. equity valuations have returned to expensive levels. However, the elevated valuation environment has generated opportunities in other market segments. International equities, smaller companies, and value-focused sectors frequently trade at more attractive price multiples, offering potential opportunities for patient investors. Fixed income markets also present compelling prospects, with yields staying above long-term averages across most bond sectors.
Among 2025’s most notable developments has been strong international equity performance, with developed and emerging markets achieving double-digit returns, based on MSCI EAFE and MSCI EM indices. This has been partially driven by U.S. dollar weakening. When the dollar declines, foreign currency-denominated assets gain value for U.S. investors.
This reminds us for the year’s second half that market leadership shifts over time. Maintaining exposure across different regions can both improve portfolio results and potentially reduce risk through diversification. While historical performance doesn’t ensure future outcomes, current conditions highlight why investors often benefit from patient, long-term strategies that capture opportunities across global markets.
5.) Advantages of sustaining long-term investment perspectives & strategy
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The year’s first half patterns reflect challenges investors have encountered throughout history. They demonstrate that extending investment timeframes can enhance portfolio results, even during the most difficult market environments.
The accompanying chart above illustrates that while annual returns can fluctuate dramatically – with equities ranging from significant losses to substantial gains in individual years – this volatility has historically moderated over extended periods. Over 10-year and longer horizons, outcome ranges narrow considerably, explaining why stocks and bonds have traditionally formed long-term portfolio foundations.
This historical context reinforces the importance of maintaining commitment to well-designed portfolios with a long-term focus despite short-term worries. This will become even more critical as new developments challenge markets in coming months.
The bottom line? The first half of 2025 emphasizes the importance of maintaining a long-term focus and a well-diversified portfolio. Investors who preserve discipline and concentrate on enduring principles are well-equipped to navigate the second half of 2025 and continue progress towards their financial goals.
Investment Advisor Representative of Sanctuary Advisors, LLC. Advisory services offered through Sanctuary Advisors, LLC., a SEC Registered Investment Advisor. Tenet Wealth Partners is a DBA of Sanctuary Advisors, LLC.
The information provided in this communication was sourced by Tenet Wealth Partners through public information and public channels and is in no way proprietary to Tenet Wealth Partners, nor is the information provided Tenet Wealth Partner’s position, recommendation or investment advice.
This material is provided for informational/educational purposes only. This material is not intended to constitute legal, tax, investment or financial advice. Investments are subject to risk, including but not limited to market and interest rate fluctuations.
Any performance data represents past performance which is no guarantee of future results. Prices/yields/figures mentioned herein are as of the date noted unless indicated otherwise. All figures subject to market fluctuation and change. Additional information available upon request.
About The Author
Kevan Melchiorre, CFP®Co-Founder & Managing Partner
Kevan Melchiorre co-founded Tenet Wealth Partners in 2021 with a focus on delivering a premier client experience, supported by an innovative and fully integrated approach to wealth planning. As a CERTIFIED FINANCIAL PLANNER® practitioner with over 16 years of wealth management experience, Kevan partners with affluent individuals, families, and institutions to help align their capital […]
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