Welcome to the first edition of the RiverFront Group Market update. In this, our goal is to provide insightful data and timely updates on what’s happened so far this year in both the stock and bond markets, as well as review some of the variables that impacted investment markets over the past six months.
We’re officially halfway through 2025 and so far, it’s been a year of growth for both stocks and bonds. Through June 30th, the S&P 500 gained 5.50% and reached new record highs towards the end of the month. The Dow Jones Industrial Average and Nasdaq Composite also posted solid gains of 3.64% and 5.48%, respectively. After a challenging March and April that saw the S&P 500 decline nearly 19%, the markets rebounded strongly in May and June, fueled by robust earnings expectations and renewed investor confidence. While the tariff announcements in April dramatically increased volatility, their subsequent postponement stabilized investor sentiment and allowed for equity price growth to reemerge.
Turning to the bond market, interest rates experienced considerable fluctuation. The yield on the 10-year US Treasury peaked at 4.78% in mid-January before dropping to a low of 4.01% in early April and then settling near 4.38% by late June. As a reminder, the yield of bonds increases when their prices decrease, and vice versa. These movements reflected shifting expectations regarding economic growth, inflation, and the Federal Reserve’s policy outlook. Our preferred measure of bond performance in the US is the Bloomberg US Aggregate Bond index, which has grown 2.37% this year through June 30th.
The volatility within these two major asset classes, and the difference in performance between them, is a great example of why we continue to stress the importance of diversification and maintaining risk adjusted portfolio allocations, as well as executing targeted rebalancing, something we completed in February and May of this year. We will continue to review and manage accounts to help ensure portfolios remain aligned with their intended risk levels and do not become overly concentrated in any single direction.
Regarding the broader economy, the US saw its first quarterly contraction in three years, with GDP shrinking at a 0.5% annualized rate in the first quarter. This was largely due to a surge in imports ahead of new tariffs, along with a slowdown in consumer and business spending. Inflation remained above the Federal Reserve’s 2% target, prompting the Fed to keep interest rates steady during the first half of the year. Many expect rate cuts to come later in 2025, provided inflation continues to moderate and economic growth shows further signs of slowing. The labor market remained resilient, with the unemployment rate falling to 4.1% in June, though gains were uneven across sectors and some early signs of weakness have emerged due to evolving economic policies.
Overall, the first half of 2025 in the markets has been volatile yet rewarding. As we enter the second half of the year, we remain attentive to key factors—including Federal Reserve policy decisions, public policy changes, inflation trends, and changes in trade dynamics. Our investment process is grounded in discipline and diversification, and we take active steps to rebalance portfolios to keep risk in line with each client’s long-term objectives. Acknowledging that markets can change swiftly, our philosophy is to stay prepared for a full range of scenarios by continually monitoring and refining our strategy while adhering to time-tested methodologies that have helped us serve clients for over four decades. Our goal is to support your long-term financial goals, regardless of whether markets are rising or falling. As always, we welcome your questions and are here to ensure your investment approach remains well-suited to your needs. Thank you for your continued trust in RiverFront Group. We look forward to connecting with you soon.
All the Best,
Karl Knuths
Investment Specialist