Market Review
Three months have passed since so-called Liberation Day when the threat of the U.S. slapping the rest of the world with massive tariffs caused the S&P 500 to tumble by a combined 10.5%. April 3rd and 4th marked the biggest two-day drop since the onset of the COVID-19 pandemic in March 2020.
US stock market volatility spiked to 52.3 on April 8th, as measured by the VIX Index. For context, the previous two times the VIX closed above 50 were the early days of the global pandemic on March 16, 2020, when it closed at 82.7, and during the height of the global financial crisis on November 20, 2008, when it closed at 80.9.
With all the volatility and uncertainty in April, it’s remarkable that the market not only recovered but posted a strong second quarter. After the reciprocal tariffs were initially paused for 90 days in April (now extended to August 1st) and the China tariffs were also paused for 90 days in mid-May, U.S. markets rallied and recovered their losses to the point where the S&P 500 was up 10.94% for the quarter and 6.2% YTD through 6/30/2025. Even with this strong showing, International Developed and Emerging Markets continued to outpace the U.S. equity markets in 2025 with 19.92% and 15.57% YTD returns respectively.
In May, Moody’s became the last of the three major credit ratings agencies to downgrade its AAA credit rating for the United States, citing growing debt levels over the past decade and the likelihood of continued significant deficit spending in the years ahead. The Congressional Budget Office estimates that the recently-passed One Big Beautiful Bill will add about $4 trillion to the deficit, likely contributing to this downgrade.
The Federal Reserve held interest rates steady during the second quarter, citing concerns about the inflationary impact of tariffs and elevated levels of uncertainty. Until the effects of current and future tariffs become clearer, the Fed is signaling that it will take a wait-and-see approach to avoid acting prematurely. Depending on what ends up happening with tariffs, we may see inflation continue to stay above the Fed’s 2% target, which could continue the pause of interest rate reductions.
2025 has provided a model example so far illustrating the power of diversification across U.S. and international equity markets. It has also demonstrated convincing validation of the advice to “stay the course” and not act precipitously on short-term market fluctuations. It’s anyone’s guess what the rest of 2025 will bring, but these two cornerstones of Milestone’s investment philosophy will continue to govern our approach.
Closing Thoughts
Finally, as you enjoy your summer, stay alert to scams on WhatsApp and other social media platforms offering investment advice on small stocks. We’ve noticed a recent uptick in investors getting scammed into buying stock of small Chinese companies listed on U.S. exchanges in what is called a “pump and dump” scheme. The scammers will buy the majority of the shares in a close-to-worthless Chinese company, manipulate the price to go higher, hype it on social media to get investors to buy it and then as the price is increasing and people are buying, they dump their own shares to cash out on the highly inflated price of a worthless company. As you are well aware, there are many scams out there these days. Don’t let yourself fall victim.
The following table summarizes the performance of major asset classes through 06/30/2025:
Note: Return data obtained from Dimensional Fund Advisors database. Returns include dividends and reinvestments.
Regards,
The Milestone Team
Reminders
Please contact us if your financial goals or circumstances have changed or if we can address your needs. Also, please let us know as soon as possible about any change to your contact information.
SEC regulations require us to remind you to compare our reports with the statements provided by the independent custodian that holds your accounts (Fidelity). Please let us know if there are any discrepancies, or if you are not receiving separate statements (or notification of their online availability) directly from the custodian. Please remember that past performance does not predict future results.
Disclaimer: This is not to be considered investment, tax, or financial advice. Please review your personal situation with your tax and/or financial advisor. Milestone Financial Planning, LLC (Milestone) is a fee-only financial planning firm and registered investment advisor in Bedford, NH. Milestone works with clients on a long-term, ongoing basis. Our fees are based on the assets that we manage and may include an annual financial planning subscription fee. Clients receive financial planning, tax planning, retirement planning, and investment management services and have unlimited access to our advisors. We receive no commissions or referral fees. We put our client’s interests first. If you need assistance with your investments or financial planning, please reach out to one of our fee-only advisors. Advisory services are only offered to clients or prospective clients where Milestone and its representatives are properly licensed or exempt from licensure. Past performance shown is not indicative of future results, which could differ substantially.
Market Review
Three months have passed since so-called Liberation Day when the threat of the U.S. slapping the rest of the world with massive tariffs caused the S&P 500 to tumble by a combined 10.5%. April 3rd and 4th marked the biggest two-day drop since the onset of the COVID-19 pandemic in March 2020.
US stock market volatility spiked to 52.3 on April 8th, as measured by the VIX Index. For context, the previous two times the VIX closed above 50 were the early days of the global pandemic on March 16, 2020, when it closed at 82.7, and during the height of the global financial crisis on November 20, 2008, when it closed at 80.9.
With all the volatility and uncertainty in April, it’s remarkable that the market not only recovered but posted a strong second quarter. After the reciprocal tariffs were initially paused for 90 days in April (now extended to August 1st) and the China tariffs were also paused for 90 days in mid-May, U.S. markets rallied and recovered their losses to the point where the S&P 500 was up 10.94% for the quarter and 6.2% YTD through 6/30/2025. Even with this strong showing, International Developed and Emerging Markets continued to outpace the U.S. equity markets in 2025 with 19.92% and 15.57% YTD returns respectively.
In May, Moody’s became the last of the three major credit ratings agencies to downgrade its AAA credit rating for the United States, citing growing debt levels over the past decade and the likelihood of continued significant deficit spending in the years ahead. The Congressional Budget Office estimates that the recently-passed One Big Beautiful Bill will add about $4 trillion to the deficit, likely contributing to this downgrade.
The Federal Reserve held interest rates steady during the second quarter, citing concerns about the inflationary impact of tariffs and elevated levels of uncertainty. Until the effects of current and future tariffs become clearer, the Fed is signaling that it will take a wait-and-see approach to avoid acting prematurely. Depending on what ends up happening with tariffs, we may see inflation continue to stay above the Fed’s 2% target, which could continue the pause of interest rate reductions.
2025 has provided a model example so far illustrating the power of diversification across U.S. and international equity markets. It has also demonstrated convincing validation of the advice to “stay the course” and not act precipitously on short-term market fluctuations. It’s anyone’s guess what the rest of 2025 will bring, but these two cornerstones of Milestone’s investment philosophy will continue to govern our approach.
Closing Thoughts
Finally, as you enjoy your summer, stay alert to scams on WhatsApp and other social media platforms offering investment advice on small stocks. We’ve noticed a recent uptick in investors getting scammed into buying stock of small Chinese companies listed on U.S. exchanges in what is called a “pump and dump” scheme. The scammers will buy the majority of the shares in a close-to-worthless Chinese company, manipulate the price to go higher, hype it on social media to get investors to buy it and then as the price is increasing and people are buying, they dump their own shares to cash out on the highly inflated price of a worthless company. As you are well aware, there are many scams out there these days. Don’t let yourself fall victim.
The following table summarizes the performance of major asset classes through 06/30/2025:
Note: Return data obtained from Dimensional Fund Advisors database. Returns include dividends and reinvestments.
Regards,
The Milestone Team
Reminders
Please contact us if your financial goals or circumstances have changed or if we can address your needs. Also, please let us know as soon as possible about any change to your contact information.
SEC regulations require us to remind you to compare our reports with the statements provided by the independent custodian that holds your accounts (Fidelity). Please let us know if there are any discrepancies, or if you are not receiving separate statements (or notification of their online availability) directly from the custodian. Please remember that past performance does not predict future results.
Disclaimer: This is not to be considered investment, tax, or financial advice. Please review your personal situation with your tax and/or financial advisor. Milestone Financial Planning, LLC (Milestone) is a fee-only financial planning firm and registered investment advisor in Bedford, NH. Milestone works with clients on a long-term, ongoing basis. Our fees are based on the assets that we manage and may include an annual financial planning subscription fee. Clients receive financial planning, tax planning, retirement planning, and investment management services and have unlimited access to our advisors. We receive no commissions or referral fees. We put our client’s interests first. If you need assistance with your investments or financial planning, please reach out to one of our fee-only advisors. Advisory services are only offered to clients or prospective clients where Milestone and its representatives are properly licensed or exempt from licensure. Past performance shown is not indicative of future results, which could differ substantially.
Share:
Signup below to receive blog and event updates.
Related articles
2025 Q3 Market Commentary
2025 SQ2 Market Commentary
2025 SQ1 Market Commentary