Insights

Q2 Market Review

July 29, 2025

Kaleb Fontenot, AAMS®

Associate Advisor at Rolling Hills Advisors

How did the Markets Perform Last Quarter?

S&P 500
10.5%

NASDAQ
16.8%

DOW 30
5.45%

All economic numbers and information discussed in this article are provided by our research partners Bespoke and YCharts.

“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” — Benjamin Graham

If the second quarter of 2025 proved anything, it was Graham’s wisdom in action. While media noise and policy surprises stirred investor anxiety, the market ultimately weighed earnings, economic resilience, and forward momentum—and found substance worth rallying around. Despite a chaotic start, the S&P 500 surged 10.5%, its best quarterly performance in over a year, reclaiming and surpassing Q1’s losses to notch new record highs by the end of June. This wasn’t merely a bounce—it was a full-throated vote of confidence in a cooling inflationary environment, stable labor markets, and the possibility that the Federal Reserve’s rate-hiking campaign had finally peaked.

April lead off the quarter with a jolt to markets as President Trump’s surprise announcement of widespread tariffs caused the VIX to spike dramatically, touching levels near 50—territory last seen during the Global Financial Crisis. However, the escalation was short-lived. As the quarter progressed, many of the tariffs were scaled back, volatility subsided, and equity markets regained their footing. Those who reacted to early volatility by abandoning equity markets missed the rebound; those who held steady were rewarded. This quarter clearly distinguished the short-term “voters” from the long-term “weighers.”

Fundamentals carried the quarter. Corporate earnings were a standout, with the S&P 500 posting 13% year-over-year growth—far surpassing forecasts. Management teams largely predicted confidence, citing continued investment in artificial intelligence as a durable secular theme. Economic data bolstered the story. The U.S. June PMI came in at 52.8, showing expansion, while inflation continued its descent—annualized Consumer Price Index settled at 2.4% in the U.S. and in Europe, dropped below the European Central Bank’s 2% target for the first time since the pandemic.

Sector performance showed striking divergence. Technology stocks led the way with a stunning 22.8% gain, fueled by revived enthusiasm for AI, cloud infrastructure, and semiconductors. Industrials and communication services each posted gains above 12%, benefiting from infrastructure tailwinds and digital media strength. Meanwhile, defensive sectors faltered. Real estate and consumer staples hovered around flat, while health care sank 7.2% due to weak pharmaceutical earnings and regulatory uncertainty. Energy was the worst-performing sector, dropping 8.5% as oil prices declined.

As the dust settles, the key narrative emerging from Q2 is a tale of substance over sentiment. Despite persistent policy risk, geopolitical uncertainty, and inflation that’s still above the Fed’s long-term goal, markets have rallied around what matters: earnings, innovation, and economic stability. Benjamin Graham’s quote wasn’t just a guiding principle this quarter—it was the roadmap. As short-term panic gave way to long-term perspective, it became clear: markets don’t reward the loudest signals; they reward the heaviest fundamentals. In Q2 2025, it paid to weigh—not vote.

Sources:

This commentary is provided for informational and educational purposes only. As such, the information contained herein is not intended and should not be construed as individualized advice or recommendation of any kind.

The opinions and forward-looking statements expressed herein are not guarantees of any future performance and actual results or developments may differ materially from those projected. The information provided herein is believed to be reliable, but we do not guarantee accuracy, timeliness, or completeness. It is provided “as is” without any express or implied warranties.

There is no assurance that any investment, plan, or strategy will be successful. Investing involves risk, including the possible loss of principal. Past performance does not guarantee future results, and nothing herein should be interpreted as an indication of future performance. Please consult your financial professional before making any investment or financial decisions.

Equity securities are subject to price fluctuation and investments made in small and mid-cap companies generally involve a higher degree of risk and volatility than investments in large-cap companies. International securities are generally subject to increased risks, including currency fluctuations and social, economic, and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.

The S&P 500 is a stock index considered to be representative of the U.S. stock market in general. The NASDAQ Composite Index is an unmanaged composite index of over 2,500 common equities listed on the NASDAQ stock exchange. The Dow Jones Industrial Average is a price-weighted index that tracks 30 large, publicly traded American companies. For specific details on the sector performance referenced herein please contact Rolling Hills Advisors All index returns exclude reinvested dividends and interest. Indices are unmanaged and cannot be invested into directly.

The VIX (Volatility Index) is a real-time market index published by the Chicago Board Options Exchange (CBOE) that measures the market’s expectations for volatility over the next 30days, often referred to as the “fear gauge” of the stock market. The CPI (Consumer Price Index) is a monthly report that measures the average change over time in the prices paid by urban consumers for a basket of goods and services, serving as a key indicator of inflation. The PMI (Purchasing Managers’ Index) is a monthly economic indicator based on surveys of private sector companies, reflecting the prevailing direction of economic trends in manufacturing and services, with a focus on new orders, output, employment, supplier delivery times, and inventories.

Investment Advisory Services are offered through Mariner Platform Solutions (MPS), an SEC Registered Investment Adviser. Rolling Hills Advisors and MPS are not affiliated entities. For additional information about MPS, including fees and services, please contact MPS or refer to Form ADV Part 2A, which is available on the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov). Registration of an investment adviser does not imply a certain level of skill or training.