Key Takeaways
Markets rebounded as U.S. stocks hit new highs.
International markets aided by weaker dollar outperformed again.
Growth and AI stocks led, but value may be positioned well for a comeback.
Crypto surged, with Bitcoin topping $110,000.
The U.S. economy returned to growth, supported by resilient labor market.
One Big Beautiful Bill Act, a major new tax and spending bill, reshapes the fiscal landscape.
Market review
After a volatile start to April including some of the largest daily moves in recent market history (+9.52% on April 9 and -5.97% on April 3 [1]) markets stabilized and gained momentum through the rest of the quarter. By end of June, major indices broke above their February highs, buoyed by several key developments like the announcement of some new trade agreements, delays in some tariffs, easing geopolitical tensions with Iran, and the progress on the “One Big, Beautiful Bill Act” (OBBBA).
Developed international stocks again outperformed U.S. markets, returning 12.05% vs. 10.99% for domestic stocks [2]. The outperformance was aided by continued weakness in the U.S. dollar, as it lost 7% in second quarter [3]. Emerging markets also posted strong gains, up 11.99%, although in local currency terms, U.S. market performed better [4]. Among countries globally, South Korea delivered best return with over 30%, while Saudi Arabia declined by 5%.
Market Performance [Source: Quarterly Market Review – Second Quarter 2025 by Dimensional Fund Advisors] [5]
In the U.S., large growth stocks led the way, driven by a strong rebound in the Technology sector, which returned 23.7% for the quarter [6]. The AI narrative remained dominant, propelling companies like NVIDIA (NVDA) to new all-time highs. In early July, NVDA became the first company to reach a $4 trillion market valuation, underscoring the strength of market leaders. Large-cap value stocks trailed this quarter, giving back some of the relative strength they demonstrated earlier in the year, in part due to weakness in the sectors like Energy, which declined 8.6% [7].
Looking ahead, there are encouraging signs for value strategies. Recent research from Research Affiliates [8] points to historically low relative valuations for value and other smart beta factors, setting the stage for potential outperformance. If market concentration begins to ease or valuations mean-revert, value-oriented approaches could be well-positioned to benefit over the coming cycle.
Commodity markets, particularly oil, were heavily influenced by geopolitical tensions during the quarter. Oil prices declined in early April due to concerns over global growth and the impact of tariffs but surged in June as conflict escalated between Iran and Israel. Following a ceasefire, prices moderated and returned to mid-March levels. Despite some recovery in oil, the broad commodity index fell 3% in Q2 [9], pressured by declines in natural gas, coffee, and oil itself. Gold continued its positive momentum, gaining 4% for the quarter [10]. However, research from Dimensional Fund Advisors (DFA) notes that gold has posted positive returns in only 60% of calendar years since 1970, compared to 80% for the S&P 500 Index, a reminder to view gold’s recent performance within a longer-term context.
The standout asset class this quarter was cryptocurrency with 31.5% return [11]. Bitcoin hit a new all-time high above $110,000 in May, while Ethereum recovered a big part of earlier-year losses. Regulatory momentum continued, with the SEC issuing new guidance [12] on exchange-traded crypto products in July—widely viewed as a step toward broader approval of crypto investment vehicles.
Finally, the U.S. bond market returned to stability during the quarter after couple days with big swings. The moves were driven mainly by policy changes from government, as The Federal Reserve held interest rates steady, awaiting more clarity on inflation and labor conditions. The yield curve steepened modestly, with short-term yields declining and longer-term yields edging higher. U.S. bonds returned 1.21% for the quarter, while foreign bonds outperformed with a return of 1.93% [13] as several foreign central banks lowered their interest rates.
As part of our ongoing review of the funds in our portfolios, recently we replaced BNDX, a foreign bonds fund that hedges its exposure to the U.S. dollar with BWX and IBND, funds which hold foreign bonds without currency hedging. This shift allows us to better diversify portfolio against adverse currency moves in USD and capture the benefit of foreign currency appreciation, a move that has already added value to our portfolios over the past months.
Economy
After a 0.5% GDP [14] contraction in first quarter, the U.S. economy is estimated to have rebounded with 2.6% growth in second quarter, according to the latest GDPNow [15] forecast. The first quarter’s downturn was driven mainly by a rise in imports and a decline in government spending. Despite this, some states like Michigan bucked the trend, which grew by 0.2% [16] during the first quarter.
While the national GDP declined in first quarter, personal income kept growing grew by 6.7%, with Michigan again outperforming at 7.4%. However, by May, this growth had reversed: personal income fell 0.4%, consumer spending dipped 0.1%, and the personal saving rate held at 4.5%, indicating growing household caution.
Interest rates remained unchanged in second quarter, as the Federal Reserve kept a cautious stance amid ongoing inflation and labor market uncertainties, even despite public pressure from President Trump to cut rates. Inflation stayed low and edged up only slightly, with May CPI at 2.4% over the last 12 months[17], compared to 2.3% in April, though still above the Fed's 2% target. The labor market stayed strong, with an unemployment rate of 4.1% [18] and nonfarm payrolls increasing by 147,000 [19] in June, marking an improvement over Q1 trends (average of 111 000 in Q1 vs 149,667 in Q2).
A major fiscal development was the signing of the One Big Beautiful Bill Act (OBBBA) into law on July 4, a sweeping 800-page legislative package that enacts several significant economic policies [20]:
Making 2017 tax cuts permanent, including lower income tax brackets and a standard deduction of $15,750 (single) and $31,500 (joint) in 2025. The 21% corporate tax rate also becomes permanent.
The estate tax exemption was made permanent and increased to $15 million per individual starting in 2026, with expanded valuation rules for family-owned businesses and farms. While the permanence of this legislation provides added certainty and time, individuals with estates near or above this threshold ($30 million for married couples) should still review their estate plans to ensure alignment with the new rules.
Green energy tax credits sunset, with no new federal tax credits for solar, wind, or EVs issued after December 31, 2027. Phaseouts begin in 2026.
Child tax credit from TCJA made permanent and increased to $2,200 per child beginning in 2026.
Debt ceiling raised by $5 trillion, extending federal borrowing authority through FY 2027, ensuring continuity in government funding. While the exact effect on the future deficit is not known, the current estimates by the Congressional Budget Office are around $3.4 trillion [21] over the next 10 years.
Focus on what you can control
With markets at all-time highs, Q2 earnings season beginning, and key tariff deadlines ahead, it’s easy to feel uncertain about what lies ahead. While we can’t control markets, legislation, or global events, we can control how we plan. The recent passage of OBBBA makes this a timely moment to revisit your financial strategy—especially around taxes, savings, and long-term goals.
If you’re curious about how these changes may affect you personally, feel free to reach out. We’re here to help you think through the next steps and stay aligned with your long-term financial plan.
Authors: Mark VanderPol, CFA, CFP; Richard Toth, CFA, CAIA; Noah Hoekstra
References
[1] S&P 500 Index
[2] Source: Quarterly Market Review – Second Quarter 2025 by Dimensional Fund Advisors
[3] WSJ Dollar Index
[4] Source: Quarterly Market Review – Second Quarter 2025 by Dimensional Fund Advisors
[5] US Stock Market (Russell 3000 Index), International Developed Stocks (MSCI World ex USA Index [net dividends]), Emerging Markets (MSCI Emerging Markets Index [net dividends]),Global Real Estate (S&P Global REIT Index [net dividends]), Commodities (The Bloomberg Commodity Total Return Index), US Bond Market (Bloomberg US Aggregate Bond Index), Global Bond Market ex US (Bloomberg Global Aggregate ex-USD Bond Index [hedged to USD]), Crypto (S&P Cryptocurrency MegaCap Index)
[6 - 7] Sectors listed are S&P 500 sector indexes according to Global Industry Classification Standard (GICS®) classification [Source: Quarterly Chartbook Q3 2025 by Charles Schwab]
[8] Source: https://www.researchaffiliates.com/publications/articles/1076-how-can-smart-beta-go-horribly-right
[9 - 10] Source: Quarterly Market Review – Second Quarter 2025 by Dimensional Fund Advisors
[11] S&P Cryptocurrency MegaCap Index (holdings are Bitcoin + Ether)
[12] Source: https://www.reuters.com/legal/government/us-secs-guidance-is-first-step-toward-rules-governing-crypto-etfs-2025-07-07/
[13] Source: Quarterly Market Review – Second Quarter 2025 by Dimensional Fund Advisors
[14] Source: U.S. Bureau of Economic Analysis
[15] Federal Reserve Bank of Atlanta’s GDPNow as of July 09, 2025
[16] Source: U.S. Bureau of Economic Analysis
[17 - 19] Source: U.S. Bureau of Labor Statistics
[20] Source: https://www.congress.gov/bill/119th-congress/house-bill/1/text
[21] Sources: https://www.cbo.gov/publication/61537
Disclosures
VanderPol Investments, LLC (“VPI”) is a registered investment adviser located in Michigan. VPI may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements.
This presentation is limited to the dissemination of general information regarding VPI’s investment advisory services. Accordingly, the information in this presentation should not be construed, in any manner whatsoever, as a substitute for personalized individual advice from VPI. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Any client examples were hypothetical and used to demonstrate a concept.
Past performance is not indicative of future performance. Therefore, no current or prospective client should assume that future performance of any specific investment, investment strategy (including the investments and/or investment strategies recommended by VPI), or product referenced directly or indirectly in this presentation, will be profitable. Different types of investments involve varying degrees of risk, & there can be no assurance that any specific investment or investment strategy will suitable for a client’s or prospective client’s investment portfolio.
Various indexes were chosen that are generally recognized as indicators or representation of the stock market in general. Indices are typically not available for direct investment, are unmanaged and do not include fees or expenses. Some indices may also not reflect reinvestment of dividends.
VPI may discuss and display, charts, graphs, formulas which are not intended to be used by themselves to determine which securities to buy or sell, or when to buy or sell them. Such charts and graphs offer limited information and should not be used on their own to make investment decisions.
