Mid Quarter Market Update August 2025
Good afternoon! With the “dog days of summer” upon us, and the year that is 2025 sprints into the second half, Ed and I thought it was a good time to reach out and share another update. Stating the obvious, what a difference a few months can make. 2025 began with plenty of uncertainty— a new administration taking office, renewed tariff talks, and equity markets under pressure. By mid-April, the S&P 500 had fallen nearly 20%, with other sectors hit even harder. Quite frankly, it was looking ugly. Then it wasn’t….. everything shifted in a meaningful way. From April 15th to today, the S&P 500 and other major indexes not only recovered their losses but surged to new all-time highs. The 10-year Treasury yield has pulled back to 4.3%, and it now appears the Federal Reserve is preparing for its first rate cut after nearly three years of tightening.
While opinions vary on where interest rates should be, the truth is simple: no one knows for certain where they will be. As Warren Buffett once said, “Tell me the direction of interest rates, and I’ll tell you where to put all of your money.” Interest rates are basically the “cost of money” which is massively important for businesses and consumers.
Looking back, the Fed’s actions tell a clear story. Under Jerome Powell, the central bank first responded to the pandemic with massive stimulus to keep the economy afloat, fueling a surge in nearly all asset classes. But as inflation spiked in 2021, the Fed pivoted aggressively, raising the Fed Funds Rate from 0% to 5% in just a couple of years—one of the sharpest tightening cycles in recent memory. It was the right monetary policy for the times we were in.
From late 2022 through today, equities have flourished, fixed income has lagged, and many investors have grown increasingly confident that markets will simply continue higher. Yet, conditions aren’t quite as rosy beneath the surface. Interest rates remain 4% higher than in early 2020, and the economic data shows it: employment has slowed, labor participation is falling, and housing activity has nearly stalled. Higher rates are having a meaningful impact, even if equity markets appear unfazed for now. And THAT would seem to be the problem. When the great unwashed masses have no fear, the seasoned pro is reticent.
Our Outlook
First, we are NOT predicting immediate (or even imminent) market declines. We’re not in the business of timing markets, but we remain mindful. When optimism becomes extreme—when “everyone” seems to have a hot stock pick (or crypto pick, or private equity pick)—it’s often a cue to step back and evaluate valuations with caution. When prudent investment strategies give way to the sublime, the ridiculous cannot be far behind. In past cycles we collectively were reminded that trees don’t grow to the sky. This time is no different. The reminder is to stick to your risk tolerance (don’t get more risky) and evaluate investments in the proper light of always understand the downside.
For now, we continue to maintain a neutral risk stance in portfolios. We remain slightly overweight in value stocks and intermediate-to-long-term municipal bonds. With markets pushing into record territory, we encourage you to stay disciplined, focus on your long-term plan, and prioritize a conservative approach to achieving your goals. Stick to the strategy that got you here and don’t get crazy with the latest thing.
As always, don’t hesitate to reach out to discuss this or any other thought you may have. We work for you and that’s a commitment we don’t take lightly.
Frank, Ed, & Tammy
Frank Vance
200 N Union St.
Kennett Square, PA 19348
cell 412-722-3795
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All indices are unmanaged, and investors cannot actually invest directly into an index. Unlike investments, indices do not incur management fees, charges, or expenses. Past performance does not guarantee future results. All references to markets, equities, stocks, crypto, bonds, interest rates, Muni’s, and treasury securities, are notional and for informational and explanation purposes only.
This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.