MARKETPOINT: Resilience Through Turbulence
The second quarter of 2025 tested investor resolve like few periods in recent memory. Markets experienced dramatic swings as policy announcements sparked significant volatility, yet beneath the headlines lay a story of economic steadiness and the enduring value of disciplined investing. As we enter the second half of the year, we reflect on a quarter that reinforced fundamental investment principles while highlighting the importance of staying focused on long-term objectives.
Markets: Policy Whiplash and Sharp Recovery
The quarter began with what President Donald Trump called “Liberation Day”: sweeping reciprocal tariff announcements that sent shockwaves through global markets. The S&P 500 logged its worst two-day drop since March 2020, briefly entering bear market territory in early April. Just five trading days later, markets registered their best single day since October 2008 following the announcement of a 90-day tariff pause, illustrating how quickly sentiment can shift.
As the quarter went on, volatility was reintroduced by geopolitical tensions from the Israel-Iran conflict in June, briefly causing gyrations across the capital markets. Investor attention was also captured by the evolution of the “Big Beautiful Bill,” a sweeping budget reconciliation package featuring major tax cuts and spending increases, as market participants parsed every development. Despite these challenges and noisy headlines, global equities rallied broadly through much of the quarter, with major U.S. and international indices posting double-digit gains.
While the attention-grabbing headlines dominated financial media airtime, the market’s performance served as a powerful reminder of the importance of maintaining investment discipline during uncertainty.
Economic Foundations: Strength Amid Uncertainty
Despite policy-driven turbulence, the U.S. economy demonstrated resilience. Consumer spending remained robust, with May retail sales beating expectations and consumer confidence jumping by the most in four years. The labor market continued to show strength, with May and June payrolls exceeding forecasts, although jobless claims have begun to edge higher.
Inflation measures provided encouraging news, with recent Consumer Price Index (CPI) readings coming in below expectations. Year-over-year CPI inflation registered 2.4% in May, though Federal Reserve officials project this figure will rise to approximately 3.5% by the fourth quarter as the delayed tariff effects work through the economy.[1] This expectation has contributed to the Fed’s measured approach, maintaining the federal funds rate at 4.25% to 4.50% throughout the first half of 2025.
The Fed’s cautious stance reflects uncertainty about final federal policies on tariffs, immigration, and fiscal spending. According to their June Summary of Economic Projections, officials revised their 2025 growth forecast down from 2.1% to 1.7% while raising their inflation outlook from 2.5% to 2.8%.[2]
However, several indicators warrant attention. Consumer spending appears to be weakening in certain categories, with broad-based restaurant spending declining for a second consecutive month. The housing market has entered a steady decline across most regions as home prices posted consecutive month-over-month decreases, and homebuilder sentiment reached seven-month lows. Additionally, ADP reported a June decline of 33,000 in private-sector employment, with a heavy concentration in smaller companies with 50 or fewer employees.
Market Dynamics: Increasing Breadth and Opportunity
One of the quarter’s more significant developments was continued concentration among mega-cap technology stocks. The top 10 companies in the S&P 500 now represent 38.2% of the index’s total market value, up from 22% in 2022. These companies trade at 28.8 times forward earnings compared to 20.7 times for the remaining 490 stocks.[3]
There has been a welcome sign of the rally broadening beyond those usual suspects. The number of stocks in the S&P 500 closing above their 50-day moving average has climbed to levels last seen in the fall.
International markets presented compelling opportunities during the quarter, aided by dollar weakness and attractive valuations. Even after recent gains, non-U.S. stocks continue to trade at significant discounts to American-listed counterparts. The dollar’s 11% year-to-date decline has amplified these opportunities for U.S. investors.[4]
Strategic Adjustments to Portfolios
Throughout the first half of 2025, we made several strategic portfolio adjustments designed to position clients for long-term growth while managing near-term risks. We exited positions in several pharmaceutical companies due to patent cliff concerns and added to beaten-down names in managed care and obesity drug sectors, where we believe investors have overreacted to questionable regulatory headlines. Additionally, we increased clients’ international exposure, taking advantage of attractive overseas valuations and currency diversification opportunities.
Our fixed-income approach has emphasized shorter-duration securities and high-quality corporate bonds. With current yields in this higher-for-longer interest rate environment, we believe fixed-income allocations can provide reasonable returns while offering portfolio stability. Historical analysis suggests current yield levels have typically been associated with 5% annual returns over five-year periods.[5]
Looking Ahead: Opportunities and Risks
Several key factors will likely shape market dynamics in the second half. The looming global tariff deadline represents near-term risk, particularly given unresolved U.S.-EU tensions. Any further Middle East conflict escalation could disrupt oil supply chains and fuel inflation.
However, we see meaningful opportunities ahead. Policy clarity on tariffs and taxes will likely unlock capital spending delayed by uncertainty, enabling companies to provide more stable earnings guidance. The AI revolution remains early-stage, creating opportunities for companies effectively implementing these technologies.
The reconciliation bill could provide meaningful fiscal stimulus through lower income-tax withholding beginning in the third quarter and substantial tax refunds in 2026, supporting economic activity in the first half of next year. At the same time, investor caution remains as the nation’s fiscal policies continue to lack a meaningful strategy to address the ballooning national debt. The CBO estimates the legislative package could add roughly $4 trillion to deficits, contributing to Treasury market uncertainty.[6]
Our Commitment
The quarter’s volatility reminded us that short-term market movements, while attention-grabbing, rarely derail well-constructed long-term investment strategies. Historically, periods of uncertainty and corrections have created attractive entry points for patient investors, as valuations become more reasonable and overreactions lead to mispriced assets.
The dramatic market swings—from the worst two-day drop since March 2020 to the best single day since October 2008 within two weeks—underscore the futility of timing markets based on headlines. Our investment philosophy remains anchored in identifying high-quality companies with strong competitive positions, superior capital management, capable management teams, and reasonable valuations. We continue believing that maintaining appropriate diversification across sectors, geographies, and asset classes provides the best foundation for long-term wealth creation while managing downside risk.
[1] Federal Open Market Committee, “Summary of Economic Projections,” June 2025
[2] Federal Open Market Committee, “Summary of Economic Projections,” June 2025
[3] J.P. Morgan Asset Management, “Economic and Market Update U.S. 3Q 2025,” June 30, 2025
[4] J.P. Morgan Asset Management, “Economic and Market Update U.S. 3Q 2025,” June 30, 2025
[5] J.P. Morgan Asset Management, “Economic and Market Update U.S. 3Q 2025,” June 30, 2025
[6] Congressional Budget Office, “Information Concerning the Budgetary Effects of H.R. 1, as Passed by the Senate”, July 1, 2025
SPOTLIGHT ON BONDS: Navigating in a High-for-Longer Rate Environment
The Federal Reserve’s cautious approach to interest rates creates both challenges and opportunities for bond investors. While the Fed initially expected two rate cuts in 2025, uncertainty around fiscal policy has clouded that outlook.
This policy uncertainty has driven significant volatility in bond prices in the fixed-income markets. The MOVE index, which tracks Treasury volatility, spiked in April as investors reacted to rapid policy changes. Longer-term Treasury yields have risen above 5%—the highest level since 2007—as markets demand higher compensation for increased government spending and concerns about debt.[1]
Despite the volatility, today’s higher yields make a compelling case for holding high-quality bonds. Current yields should provide positive real returns over time. This fixed-income cushion can help soften portfolio declines during stock market swings. Past data offer helpful guidance for strategy. Investment-grade bonds historically beat cash by wide margins once cutting cycles started, averaging 6.0% returns compared to cash’s 2.9%. The current environment favors a smart approach: focus on high-quality bonds with shorter to medium-term maturities. US Treasuries, investment-grade corporate bonds, and municipal bonds offer attractive opportunities.
Most investors recognize that today’s bond market offers attractive entry points after more than a decade of near-zero rates. While long-term interest rates may continue to fluctuate due to policy uncertainty, the combination of higher yields and eventual Fed rate cuts creates a favorable environment for patient investors.
[1] J.P. Morgan Asset Management, “What do upcoming rate cuts mean for fixed income investing?”
IN MEMORY: Wally Obermeyer (1956-2025)
With heavy hearts we share the passing of Wally Obermeyer, Obermeyer Wealth Partners’ longtime leader and co-founder, on May 23, 2025, after a courageous battle with cancer.
Wally created Obermeyer Asset Management almost 30 years ago with a clear purpose: to serve clients with honesty, insight, and unwavering dedication. Over the decades, this vision underpinned a firm rooted in trust and integrity—one that now serves families across generations and across the country. His influence continues to shape our values, our culture, and the care we bring to every client relationship.
Beyond his leadership in the investment world, Wally was deeply committed to his community. He served on numerous boards and was a passionate supporter of education, conservation, and the arts.
In the final 18 months of his life, Wally and his family chose not to be defined or diminished by illness but to live each day with intention, presence, and love. The Obermeyers also worked closely with our leadership team to prepare for this transition, ensuring the firm remains strong and independent, setting us up to continue to serve our clients and their future generations with the same care and loyalty that we do today.
“He was an incredible leader, mentor, and friend,” President Ali Flynn Phillips says. “We are committed to fulfilling his legacy by helping wonderful families preserve their wealth and providing careers for our incredible team for decades to come.”
FIRM UPDATES
NEW TEAM MEMBERS
We are delighted to welcome two new employees to our growing team.
Ryan Collopy, Wealth Advisor: Ryan manages client relationships and assists with the firm’s financial planning efforts in our Vail office. He previously worked for a Family Office working with public equites and multiple privately owned businesses. A Massachusetts native, Ryan started his financial career in Boston as an investment specialist for Baystate Financial, where he provided advisors with key investment recommendations and portfolio analysis for their clients.
Owen Wilson, Director, Investments: Owen is an experienced investment professional specializing in public equity analysis and portfolio management; he advises on strategic asset allocation, security selection, and the implementation of investment strategies tailored to client needs. Before joining Obermeyer, Owen was Vice President at Bessemer Trust in New York, where he focused on small and mid-cap equity investments. He holds a Bachelor of Science in Finance and a Master of Accounting from Tulane University.
RETIREMENT
G. Tod Wood, Vice President, Investments, announced his retirement from the firm this spring. Tod brought decades of experience and expertise to his work on behalf of our clients. While we will miss his thoughtful and intelligent presence on a day-to-day basis, we are grateful for his service and are excited for his next chapter!
OBERMEYER IN STEAMBOAT: “POP-UP” OFFICE
We’re excited to be spending more time in Steamboat Springs over the coming months. Our pop-up office offers a convenient space to meet, review your financial plans, or simply catch up in person. If you’re in town, we’d love to see you.
FORBES 2025 TOP WEALTH ADVISORS AND BEST-IN-STATE ADVISORS
Forbes’ annual Top Wealth Advisors listing highlights professionals who demonstrate skill in “managing uncertainty” and navigating complex market landscapes. Obermeyer Wealth was among the nation’s Top 250 advisory teams recognized.
Obermeyer Wealth team members were also featured in Forbes’ 2025 Best-in-State Advisors ranking for top advisors in Colorado. The list includes President Ali Flynn Phillips, Senior Vice President Dana Nightingale, and Vice Presidents Brian Brady and Brooke Gais.
“These recognitions reflect the dedication of our entire team who work collaboratively each day to deliver thoughtful wealth management solutions to our clients,” Ali said. “While individual names appear on these lists, our approach has always been about bringing together diverse expertise to serve our clients’ unique needs.”
The ranking is compiled using interviews and a combination of quantitative and qualitative data. To view complete rankings for each award, visit the Forbes’ website. For information on ranking methodology, visit our website.
