Forty "W"ritings

“There are decades when nothing happens, and there are days when decades happen.” That timeless adage feels especially apt in 2025. Since January, we’ve witnessed sweeping developments in tariffs, tax policy, immigration, and geopolitics - each significant on its own, but together, they’ve compressed the pace of change into mere days and weeks. For investors, it has been both exhilarating and exhausting. We’ll unpack the key themes shaping the current landscape, separate signal from noise, and discuss how to remain grounded when the world feels anything but.

US small cap stocks rode the wave of investor's desire to expand outside of the mega-cap tech stocks, the ability to continue the ride will depend on economic data that will come in the next two months. If the economy holds strong, then small caps may be able to continue their ride.

In July, US equity markets had a positive month overall, with large-cap stocks (S&P 500 - SPY) slightly outperforming small-caps (Russell 2000). On the international front developed markets (IEFA) were negative after a stellar first half of the year. Emerging markets (EEM) proved relatively resilient compared to Europe and Japan, even as global trade and growth concerns hung over markets. Core aggregate bonds (as shown by AGG) posted a modest loss of -0.17%, pressured by rising yields for most of the month before a late rally. High-yield bonds outperformed, benefiting from a supportive risk environment and less rate sensitivity.

The first half of 2025 delivered a tale of two quarters for US equity markets, characterized by significant volatility that ultimately resolved in modest positive returns across major equity indices. The bond market delivered solid, positive returns in the first half of 2025, with most high-quality fixed income sectors up by low- to mid-single digits. We believe investors should remain vigilant to both opportunities and risks while maintaining a focus on long-term fundamentals.

The excitement surrounding the AI ecosystem is immense, and it’s easy to get caught up in the hype. But it’s important to remember that we are still in the early stages, and we encourage investors to take a step back and consider the full picture. The investment opportunities related to AI span multiple sectors and extend beyond the public markets alone.

With the negative impact of rising interest rates hopefully out of the way bond yields are attractive. If interest rates were to fall returns would further benefit from price appreciation. In this article we breakdown the math of how bonds generate returns for investors.