Last week, my wife and I rode the gondola up Stone Mountain near Atlanta. There were about twenty-five people in the gondola, and just as it crested the mountain edge, it swung 5-6 feet forward and backward, and the riders screamed. That is how the markets felt over the past few weeks, when the market swung low between its February and June peaks. The real question is, where do the markets go from here?
There has been no shortage of market challenges in the first half of this year. There were tariff negotiations, a market correction, various Middle Eastern conflicts, a three-year low in the dollar, and a fight between President Trump and the Federal Reserve, all of which have the potential to negatively affect the markets.
The biggest shock to the market was the sudden drop that occurred when President Trump announced his plan to raise tariffs on nearly all US trading partners, which caused the S&P 500 to briefly decline by 20% from its peak. But after the proposed tariffs were paused, markets rebounded in one of the fastest recoveries in history to a new market high. The investors who stayed invested and continued adding to their portfolios through the volatility took advantage of market opportunities and are probably better off now than before the market correction.
Will the economy slow in the second half?
The market volatility concerning the tariff negotiations has lessened after some early trade deals have shown a pattern for how most tariffs will ultimately end. It is now believed that new tariff revenue will begin reducing the US deficit.
The second half is setting up to have some opportunities for these reasons.
- Consumer spending remains strong.
- The labor market remains healthy with unemployment at only 4.2%.
- The fact that inflation hasn’t spiked.
- A big increase in business spending.
When we see the combination of stable employment, moderating inflation, and trade-driven economic growth, it shows that the US economy is in transition, and not melting down.
Though many analysts have lowered their forecasts for this year, most still expect the US economy to continue growing. The economy appears to be slowing, but not yet entering a negative growth phase, because the underlying fundamentals of the US economy remain healthy.
Bottom Line
A significant indicator of how the second half unfolds will be the signing of a U.S.-China trade deal. This will be a substantial boost for the markets and the economy. Although Chinese exports to the US have fallen sharply in 2025, China remains one of the largest markets for US-made products.
Investing in the second half of 2025 will call for a steady hand. Although it may be as unpredictable as the first half, investors who remain diversified and prepared to take advantage of market opportunities as they materialize will be best positioned to capture potential upsides.
After we got off the gondola, a mother pushing a stroller looked at us and said, “If they think that’s scary, they should try a roller coaster.” The funny thing is that the gondola driver had warned us ahead of time that it would swing, but the crowd got scared anyway. Just like the market, we were warned that it would get bumpy due to the tariff negotiations, but we got anxious anyway. But here we are on the other side, safe and sound.
Have a blessed week!
Richard Baker
Opinions voiced above are for general information only & not intended as specific advice or recommendations for any person. All performance cited is historical & is no guarantee of future results. All indices are unmanaged and cannot be invested in directly.
The economic forecast outlined in this material may not develop as predicted & there can be no guarantee that the strategies promoted will be successful.
Fervent Wealth Management is a financial management and services entity in Springfield, Missouri.