If you only read the headlines, you might think the first half of 2025 was a disaster for investors. Between geopolitical flare-ups, polarizing policy shifts, and a dramatic market drop in April, there was no shortage of reasons to panic. But the markets told a different story—one of resilience, recovery, and opportunity. Despite the noise, the S&P 500 posted a stronger-than-expected gain, and inflation continued to cool. It’s a powerful reminder that tuning out the drama and staying focused on long-term strategy can pay off.

Alive and Kicking

The first half of 2025 is in the books. While it may not have unfolded exactly as envisioned, we’re on pace for a pretty good year in the equity markets. In fact, the S&P 500 returned 6.2% over the first six months, slightly above the historical average for the first half of the year.

The market’s resilience is notable, especially given how much uncertainty investors were forced to absorb. After all, equity markets briefly dipped into bear market territory during the post “Liberation Day” sell-off. Since then, markets have powered through wave after wave of unsettling headline, from erratic new tariff policies and DOGE-related government spending cuts, to rising debt levels, mass deportations, and escalating geopolitical tensions. Through it all, markets have shown a surprising ability to “climb the wall of worry.” 

Against All Odds

The U.S. economy grew at about a 1% annual rate during the first half of the year. This is markedly slower than historical averages, but not surprising given the extremely high policy uncertainty. Because of this uncertainty, many companies and consumers have delayed big spending decisions until gaining more clarity on trade policies.

Adding to the uncertainty is the distortion in headline growth numbers like GDP. Many companies rushed to import goods in March ahead of increased tariffs. Since imports count as a negative in GDP growth calculations, that made growth look weaker in the first quarter than it really was. We expect those effects to even out over the next couple of quarters.

Under the surface, the core parts of the economy – consumer spending and business investment – held up well. Consumers continued to spend thanks to steady real wage growth. Wage growth has outpaced inflation since mid-2023. That’s helped households strengthen their balance sheets and continue to spend. On the business side, much of the investment came from large technology companies that continue to expand their AI capabilities.

But there are signs of slowing ahead. Employers have delayed hiring, causing the number of unemployed to rise to levels that typically signal a softening labor market. If delayed economic activity turns into canceled activity, we could see growth decline more meaningfully.

Running Up That Hill

Inflation has continued to cool in 2025, despite worries that tariffs would push prices higher. Much of the improvement came from lower energy prices. Even when excluding food and energy, we’ve seen encouraging signs, especially in services inflation.

Shelter costs, which are a big part of service inflation, have started to decline, following the decline in the broader housing market. This trend could continue
through the rest of the year and may help offset some of the expected increases in goods prices from new tariffs.

Businesses have already sold much of the non-tariffed inventory built up in the pre-tariff import binge. This implies higher prices are in store for the future.

Under Pressure

The Federal Reserve has kept interest rates steady since December 2024. They believe current rates are modestly restrictive to economic growth. This is helping inflation, currently at 2.7%, to slowly decline to its 2.0% inflation target.

Because economic growth and inflation have both remained relatively stable, the Fed hasn’t felt the need to lower interest rates yet. In their view, inflation is still elevated, and employment remains sound. However, they do expect a slowdown later this year and have forecasted two rate cuts by year-end. Their ability to cut rates if they need to is important – and reassuring – for the financial markets.

Don't Stop Believing

The key lesson from the first half of 2025 is that staying invested through uncertainty is often the best course. This can be a very challenging thing to do, especially in a highly divisive political environment. During the early phase of the Trump administration, several policies have taken shape: higher tariffs and tighter immigration rules. These policies tend to be stagflationary (they tend to increase inflation and decrease growth).

However, other policies such as tax cuts and increased government spending (from the recently passed spending bill), as well as potential deregulation later this year, could support future economic growth.

While risks remain – from continued policy volatility to slowing growth and rising inflation – we also see long-term investment opportunities. Areas like international
markets, high-quality growth companies (especially large technology firms), and tax-advantaged municipal bonds may offer attractive potential going forward.

Stay Focused and Informed

The first half of the year offered a compelling case study in investor discipline. Volatility, uncertainty, and shifting headlines are inevitable, but they don’t have to derail your financial goals. By maintaining a long-term perspective and staying aligned with a well-built plan, you can navigate even the rockiest of landscapes with confidence.

Have questions about how to position your portfolio for the second half of 2025 and beyond? Contact us today to schedule a conversation. We’re here to help you stay grounded, informed, and one step ahead.

Johnathon Opet, CFP® is a financial advisor located at EmVision Capital Advisors, 251 W. Garfield Rd. ​Suite 155 Aurora, OH 44202. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at (330) 954-3770 or at info@emvisioncapital.com.

Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Advisor. Fixed insurance products and services are separate from and not offered through Commonwealth Financial Network®.

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This is for informational purposes only, is not a solicitation, and should not be considered investment, legal or tax advice. The information in this report has been drawn from sources believed to be reliable, but its accuracy is not guaranteed, and is subject to change. Investors seeking more information should contact their financial advisor. Financial advisors may seek more information by contacting AssetMark at 800-664-5345.

Important Information
This is for informational purposes only, is not a solicitation, and should not be considered investment, legal or tax
advice. The information in this report has been drawn from sources believed to be reliable, but its accuracy is not
guaranteed, and is subject to change. Investors seeking more information should contact their financial advisor.
Financial advisors may seek more information by contacting AssetMark at 800-664-5345.

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