What a difference a few months can make.
Returns for the S&P 500 Index of U.S. stocks came in at 10.5% for the second quarter, an outcome few might have expected after a swift 15% decline that started with major U.S. tariff announcements on April 2. Those losses were virtually erased just a month later, and by quarter-end, the index had rallied 28% from the April low and entered positive territory for the year, up 6%.
World markets felt the tariff reverberations to varying degrees, yet international stocks broadly led the U.S. in the first half, particularly when taking into account the U.S. dollar decline of 11% year-todate. Europe stood out (up 24% in USD terms through June), as did emerging markets (16%).
All is not said and done as tariff negotiations ― and equity volatility ― continue. But markets have likely anticipated, realized and digested the greatest pains on this front, as the outer bounds of the negotiation have been set. Other U.S. policy priorities, such as corporate tax reform and deregulation in industries such as tech and financials, could be positive catalysts for U.S. stocks should the Trump administration and investors focus their attention here.
U.S. policy changes have raised important questions about how companies and consumers may adapt to a shifting landscape. Our systematic analysis indicates that the economy has shown resilience, even amid ongoing adjustments.
Rather than reacting to each data point in isolation, investors appear to be increasingly focused on the broader trajectory of macroeconomic and policy developments. Our gauge of investor risk tolerance revealed a rebound beginning in May, eventually returning to levels seen in February. This resurgence in sentiment may reflect growing confidence in the evolving policy environment ― potentially laying the groundwork for continued investor enthusiasm.
