Tariff Tranquility?
The second quarter of 2025 provided welcome relief from the tariff-induced turbulence of February and March. While concerns surrounding trade policy remain, investment markets are now operating on the assumption that the widespread tariffs initially announced will not go into effect. Smaller or specific targeted tariffs may persist, but the economic impact of those is far more manageable. As that realization took hold, US stocks rebounded in dramatic fashion and are now positive year-to-date with the S&P 500 closing at a new all-time high.
International stocks have enjoyed their strongest run in years, outperforming US equities by a wide margin throughout the first six months of the year. This outperformance is, in part, due to the decline in the value of the US dollar. The value of the dollar had strengthened as the world emerged from the COVID-19 pandemic but has fallen this year as a result of fiscal concerns and US trade policy.
The decline in the US dollar has also contributed to the rise in the price of gold. The precious metal has seen its value rise steadily over the past 18 months, reaching new all-time highs. While gold can be a diversifier within a portfolio, we caution against getting caught up in the recent hype. Gold is a non-productive asset, meaning it doesn’t generate earnings or produce anything tangible, such as dividends or interest. Its value is driven solely by market sentiment and demand. Historically its price has been more volatile than the broad stock market and it has had lower long-term returns.
When something experiences a rapid rise, whether gold, Bitcoin, or other assets, there is often a fear of missing out. This can result in buying when prices are inflated and potentially experiencing poor results in the future. Gold, in particular, has not fared well after experiencing a dramatic price increase. Historically, the following decade brought minimal growth or a decline in value. Due to those factors, we generally do not include gold as a default position in accounts. If it is of personal interest, please reach out and we can discuss if and how much may be appropriate to incorporate.
The “One Big Beautiful Bill Act” is currently working its way through Congress and includes tax-related provisions that could have broad implications. Tense divisions remain, so we hesitate to speculate on what exactly will be included when the final version of the bill emerges. It appears the extension of current tax rates has broad support, but everything else remains up for grabs.
Fixed income markets did not respond well to the initial version of the tax bill. The rise in government fiscal concerns and fears of a drastic expansion of federal debt prompted a negative reaction from bond markets. Worries about reduced state and local funding also impacted municipal bonds. Overall, the broad fixed income market remains positive year-to-date, with little gained or lost during the second quarter. As further details of the final tax bill become clear, we’ll be thoroughly reviewing and will share highlights that may be impactful.
As always, please let us know of any questions that arise. Happy Fourth of July!
The Pratt Wealth Management team
Best of Mankato
We’re honored to announce that Bryan Pratt was recognized in the Mankato Free Press “Best of Mankato” 2025 awards1 as First Place in the Financial Planner category. Thank you to everyone who voted!1
Tariff Concerns Plummet
Google searches for “tariffs” have fallen 87% from the record highs seen in early April.
All for Nothing
The first 100 trading days of 2025 were among the most volatile in stock market history (7th most volatile in the last 70+ years), with a spread of 23.3% between the lowest and highest closing prices for the S&P 500. As is often the case, investors who remained committed to their plan were rewarded as the volatility subsided and markets rebounded to reach new highs.
We’re Hiring
We are hiring for a full-time financial planning associate. This role supports our adviser team by building financial plans, reviewing portfolios, placing trades, and more. If you know of anyone that may be a fit, please have them reach out to us for more information.
View More of Our Q2 Newsletter
12025 BEST OF MANKATO Award, created by Mankato Free Press, published July 2025. Data based on voting period between Feb 1, 2025-April 30, 2025 Award winners determined by reader voting. One vote could be cast per day per person in each category. Award does not imply an endorsement, recommendation, or reflect the performance of the advisor. Click here for more award information.
