Quarterly Market Review - Q2 2025

Welcome to the RPAG Quarterly Market Review for Q2 2025, where we discuss U.S. equity markets, international equities, the broad U.S. fixed income market, market valuations, and much more.

• Jeff Elvander, CFA, Chief Investment Officer

Summary

Global Equity markets posted strong returns over the quarter with both International equities and U.S. equities returning over 10%. Fixed income markets were also positive over the quarter. U.S. equities returned 11.0% (Russell 3000) with Information Technology and Telecommunication Services as the best performing sectors and Energy and Health Care as the worst performing sectors. In a reversal from Q1 2025, large cap growth outperformed large cap value by about 1400 basis points (17.8% for Russell 1000 Growth vs. 3.8% for Russell 1000 Value). International equities and Emerging Markets equities performed well over the quarter, returning 12.1% (MSCI EAFE) and 12.0% (MSCI Emerging Markets), respectively. The broad U.S. fixed income market returned 1.2% (Bloomberg Barclays Aggregate) over the quarter. The Fed held the Fed Funds Rate steady over the quarter, and the 10-year treasury rate remained largely unchanged from the previous quarter end. The unemployment rate ticked down slightly to 4.1% this quarter from 4.2% at the previous quarter end.

Quarterly and year-to-date returns of the following indices: U.S. Equity (Russell 3000 Index), Fixed Income (Bloomberg Barclays U.S. Aggregate Bond Index) and International Equity (MSCI ACWI ex U.S. Index).

U.S. Equity

• The broad U.S. equity market, as measured by the Russell 3000 Index, was up 11% for the quarter.
• The best performing U.S. equity index for the quarter was Russell 1000 Growth, returning a positive 17.8%.
• The worst performing U.S. equity index for the quarter was Russell 1000 Value, returning a positive 3.8%.

Over the last year, growth stocks outperformed value stocks by 3.50%.  For the trailing quarter, growth stocks outperformed value stocks by 14.00%.

The graph above is plotted using a rolling one-year time period. Growth stock performance is represented by the Russell 1000 Growth Index. Value stock performance is represented by the Russell 1000 Value Index.

International Equity

• Developed international equity returned a positive 12.1% in the last quarter (MSCI EAFE).
• Emerging market equity posted a positive 12% return (MSCI Emerging Markets Index).

Fixed Income

• The broad U.S. fixed income market returned a positive 1.2% (Bloomberg Barclays U.S. Aggregate) for the quarter.
• The best performing sector for the quarter was High Yield Corporate Bond, returning a positive 3.5%.
• The worst performing sector for the quarter was TIPS, returning a positive 0.5%.

Source: Bloomberg Barclays U.S. Indices

Tariff Turbulence

The talk of the markets in Q2 2025 was all about tariffs. The tariffs announced at the beginning of the quarter caused markets to decline sharply as the scale and magnitude were greater than expected. However, shortly after, much of the implementation was paused or walked back spurring a quick rebound in markets that erased losses and sent markets higher by the end of the quarter. The chart below shows the effective tariff rates on imports at the peak of their severity versus at the end of Q2 when the effective tariff rate was roughly cut in half. Although the news regarding the tariffs is constantly changing, the quarter provided an important reminder to investors about staying the course and not overreacting to news in the short-term.

Source: Goldman Sachs Investment Research, United States International Trade Commission, J.P. Morgan Asset Management. For illustrative purposes only. The estimated weighted average U.S. tariff rate includes the latest tariff announcements. Estimates about which goods are USMCA compliant come from Goldman Sachs Investment Research. Imports for consumption: goods brought into a country for direct use or sale in the domestic market. The estimate does not consider non-tariff barriers, such as value-added taxes. *Figures are based on 2024 import levels and assume no change in demand due to tariff increases. Forecasts, projections and other forward-looking statements are based upon current beliefs and expectations. They are for illustrative purposes only and serve as an indication of what may occur. Given the inherent uncertainties and risks associated with forecasts, projections or other forward-looking statements, actual events, results or performance may differ materially from those reflected or contemplated. Guide to the Markets – U.S. Data are as of June 30, 2025.

Download a copy of this market review document by clicking here, or contact us at the email address below.

________________________________________