TD Wealth® Insights: Emphasizing the 3 Ps: Plan, Portfolio, and Patience

The second quarter saw equities closing higher, but the time period was marked by high volatility. The early part of the quarter was mainly driven by tariff news and investor reactions to the “Liberation Day” announcement, resulting in a sharp dip in equity prices. However, sentiment quickly recovered following news of a 90-day delay, leading to a rapid rebound. Focus then shifted to fiscal developments, notably the “One, Big, Beautiful Bill Act” (OBBBA). Strong corporate earnings and a robust labor market further buoyed stocks during this time.

U.S. equities saw a positive performance, with the S&P 500 Index climbing about 11% and the Nasdaq Composite Index surging by close to 18%. Large-cap stocks outperformed their small-cap counterparts, while growth stocks outpaced value stocks. International equities also fared well, benefiting from a weaker U.S. dollar. On the fixed income front, returns were more tempered, with the Bloomberg Aggregate Bond Index seeing only a modest increase of just over 1%. Treasury prices fluctuated, with longer-term Treasuries underperforming compared to short- and intermediate-term maturities. Concerns about fiscal deficits and higher Treasury issuance exerted pressure on the longer end of the curve. Credit markets, however, were supported by attractive overall yields.

The first half of 2025 highlighted the significance of remaining invested amid uncertainty and the advantages of diversification as leadership in the market shifted across different segments. Trade and tariff policies have been constantly evolving, leading to a volatile environment where investors react to headlines but quickly adapt as new information emerges. Despite this, investors seem to be largely ignoring the broader implications of tariffs at the moment. The lack of significant price increases can be attributed to businesses stockpiling imports earlier in the year to mitigate potential cost spikes.

Although prices have been relatively stable due to these measures, there are indications of increasing price pressures. With tariffs still in effect, it is likely that we will see more price impacts moving forward. The ongoing fluidity of trade policies contributes to the uncertainty in the market, with investors remaining vigilant and responsive to any new developments that may arise. Overall, maintaining a diversified investment strategy remains critical in navigating the current market landscape.