After a volatile start to the year, the stock market staged a strong rebound over the last three months. The dramatic shift in sentiment across Q1 & Q2 created two distinctly different market environments. In this letter, we recap the second quarter and look ahead to the second half of 2025.

This year, earnings have been in the spotlight as policy uncertainty around tariffs and global trade clouds the outlook. With the Q2 earnings season starting in mid-July, it’s a good time to see how companies performed in Q1.

The defining story of 2025 has been changing trade policy. Markets have weathered two months of policy-driven volatility, only to end up roughly where they started. After a nearly 20% decline from late February to early April, the S&P 500 has rebounded and is within 4% of its all-time high.

Soft and hard economic data are back in the news as trade policy changes. Soft data, such as surveys, measures sentiment, expectations, intentions, and how respondents feel about the economy. In contrast, hard data measures actual results and activity, such as production, spending, and job growth.

Stocks declined in early April after the White House unveiled sweeping tariffs, with the S&P 500 falling over -10% in the first week.

On April 2nd, the Trump administration unveiled a sweeping set of tariffs. A baseline 10% tariff applies to all imports from all countries unless specific exemptions are granted. Additional “reciprocal tariffs” target approximately 60 countries deemed the worst offenders.