The first half of 2025 was busy and eventful, but for all that happened, markets ended the first half not far from where they started the year. The S&P 500 returned 6.1% through the end of June after being down by over 15% at one point in April. Long-term interest rates, as measured by the 30-year U.S. Treasury bond yield, ranged from 4.40% to 5.10% but ended the first half of the year right where it started, near 4.80%. If one did not follow the markets closely, it might seem as though little had changed.
Market Commentary 8/06/25
The S&P 500 Index returned 2.3% in July, pushing its year-to-date return to 8.4%. Large Cap Growth stocks led the gains, increasing by 3.7%, while Large Cap Value increased by just 0.6%.
Utilities was the top-performing sector, with the Technology, Industrials, and Energy sectors also outperforming the S&P 500. Defensive sectors underperformed, with Health Care, Consumer Staples, and Communication Services all trading lower.
International stocks underperformed the S&P 500 as the U.S. dollar strengthened. Developed Markets fell 2.1%, while Emerging Markets returned 0.7%.
Bonds posted a slight loss as Treasury yields increased. The U.S. Bond Aggregate declined 0.3%, with longer maturity Treasury bonds underperforming the index. Corporate bonds outperformed as credit spreads tightened, with investment-grade falling 0.1% and high-yield gaining 0.1%.
Strong Second Quarter Earnings & Trade Agreements Send Stocks to All-Time Highs
Stocks climbed to new highs in July, with the S&P 500 and Nasdaq both posting six consecutive record closes late in the month. Investor sentiment improved after better-than-expected second-quarter earnings and trade agreements with Japan and the EU, with tariff rates on the deals less severe than feared.
Market breadth improved early in the month as smaller companies outperformed the S&P 500. However, by the end of July, market leadership was top-heavy again, with the Magnificent 7 gaining over 5% after leading AI firms reported strong second-quarter earnings. Volatility remained subdued for most of July, and the VIX fell below 15, signaling investor confidence but also showing investor complacency.
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The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market value weighted index with each stock’s weight in the Index proportionate to its market value.
The CBOE Volatility Index® (VIX®) shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant to be forward looking and is calculated from both calls and puts. The VIX is a widely used measure of market risk and is often referred to as the “investor fear gauge.
The NASDAQ Composite Index measures the market value of all domestic and foreign common stocks, representing a wide array of more than 5,000 companies, listed on the NASDAQ Stock Market.
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