2025 Q2 Market Commentary

Returns of the S&P 5002025 Q2 Market Commentary

Markets began 2025 on a strong footing, with the S&P 500 reaching a new all-time high on February 19th, up 4% for the year. However, optimism
faded as renewed concerns over trade, debt, and mixed policy signals from Washington set in. Comments from the White House suggesting that
short-term economic pain might be acceptable for long-term gains contributed to investor unease, prompting profit-taking. By March, the S&P
500 had declined 10%, marking the fastest correction since 1950.

Three Key Themes Shaping Today’s Market

1. Markets begin the Quarter “Tariff-ied”
The Trump administration’s April 2nd "Liberation Day" tariffs ignited fears of a global trade war. However, historical parallels reveal such
announcements often serve as negotiation tactics rather than final policy. During the 2018 trade disputes, similar posturing preceded negotiated
resolutions, with the S&P 500 ultimately gaining 31.5% in the following year.

2. Sentiment vs. Reality: Positive Economic Fundamentals
Consumer confidence surveys hit recessionary levels in March, with 45% of investors expecting further declines. Yet hard data tells a different
story:
     - Spending resilience: Retail sales grew 1.8% in Q1 despite tariff fears.
     - Labor strength: There are 1.1 job openings for every unemployed American.
     - Corporate health: 78% of S&P 500 companies beat Q1 earnings estimates.

This disconnect mirrors patterns seen before 2023’s 24% market rebound, suggesting excessive pessimism may itself be a bullish signal. Current
volatility reflects algorithmic trading reacting to headlines, creating opportunities for disciplined investors to acquire quality assets at discounted
prices.

3. Historical Context
Stocks tend to experience a 10% or greater drawdown roughly every 18 months. The last correction occurred in the fall of 2023, so by historical
standards, this pullback is part of the natural rhythm of market cycles. That doesn’t make it enjoyable, but it does make it expected. Since 1950,
this was tied for the 6th fastest 10% correction on record (20 days). Similar corrections resulted in positive returns over the following 12 months
100% of the time with an average return of 20%.

Bottom Line: The Importance of Patience
Reacting to every headline can lead to costly mistakes. Missing just a few of the best trading days can significantly reduce returns. For example, a
hypothetical $10,000 investment in the S&P 500 from 2005 to 2024 would have grown to $71,750 if fully invested, but missing the 10 best days
reduced it to $32,871. While Q2 may bring more turbulence, remember time in the market beats timing the market.

In today’s market, patience is essential. Staying disciplined and avoiding impulsive decisions can help investors navigate volatility and remain
positioned for long-term success. Economic fundamentals are stable and corporate earnings remain strong. A mild correction, while
uncomfortable, is part of the investment journey.

We remain cautiously optimistic. Headlines often miss the full picture, while the data continues to reflect underlying strength. As always, we’re
closely tracking developments in fiscal policy, trade, and consumer sentiment, and we’ll make thoughtful adjustments as needed. In the
meantime, we continue to encourage clients to stay diversified, remain disciplined, and keep their focus on long-term goals. If you have concerns
or would like to review your portfolio's positioning, please don't hesitate to reach out.