Navigating the Fastest Recovery in Market History - Q2 2025 Investment Update (July)
After the stock market declined in March and April, we experienced a rapid recovery, followed by a march to new all-time highs through June. In fact, it was the fastest recovery of all time1. While we fully expected a recovery, the speed took many by surprise. However, we were very quick and nimble while the market was down in April and made some very timely rebalancing (selling “higher” holdings to fund the purchase of “lower” holdings) and tax related moves where relevant.
Stock market volatility and declines can test an investor’s mettle and ability to stay invested. But investors who stay the course have been rewarded.
Your returns can suffer if you are out of stocks during the best days in the market. Those best days often occur during volatile times (for example after stocks dropped following the tariff announcement on April 2nd, a week later on April 9th the S&P 500 stock index rose 9.5% in one day3).
So kudos and thank you for hanging in there with us.
We invest with the foresight of knowing there will be risks and times of corrections and bear markets. April will not be the last. For long term results we believe the best defense is to stay diversified and manage the decline prudently by staying informed, rebalancing, and managing for taxes or other strategies all while waiting for the recovery.
Quarterly Changes
After a busy, and volatile, start to the year, the recovery in stocks was a welcome development.
With volatility waning, we went “risk on” with respect to high yield bonds seeking the higher yields compared to treasury bonds.
Our international stock exposure continues to be a bright spot, outperforming domestic stock markets. This is against a backdrop of what is said to be the worst start to a year for the dollar (albeit a decline from lofty levels therefore we keep it in perspective and take that with a grain of salt). Declines in the dollar can be a tailwind for international stocks. We are holding our overweight international exposure and adding to emerging markets.
For all the ink spilled and fretting by the financial news, interest rates have largely been level in a range since 2022. The jury is still out on whether the next big move will be up or down. Shorter-term bond holdings have helped offset both stock and bond market volatility (yes long term bonds have actually hurt portfolios in recent years). With the interest rate outlook still murky we continue to stay positioned in the lower risk end of short to intermediate term bonds (with a tilt towards intermediate).
This year we had favored a growth trade, then turned to less volatile stocks (known as value stocks) but are now taking a neutral “equal weight” position.
Let us know if anything has changed with your situation and if you want to review your investments to see if we need to make any changes.
What’s next?
The recently passed tax legislation now in signed into law (One Big Beautiful Bill) affected many areas of our financial lives – charitable contributions, SALT deductions, bonuses for ages 65+, social security and much more. We are currently researching, learning, and attending many educational events with the best and brightest thought leaders. We will be reviewing these changes with you soon to evaluate if we need to make any changes to strategies we have in place.
We continue to monitor Tariff policy, interest rates, and geo-political happenings.
The views and opinions expressed herein are those of the author(s) noted and may or may not represent the views of Lincoln Investment. The material presented is provided for informational purposes only. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Nothing contained herein should be construed as a recommendation to buy or sell any securities. As with all investments, past performance is no guarantee of future results. No person or system can predict the market. All investments are subject to risk, including the risk of principal loss. Diversification does not guarantee a profit or protect against a loss. None of the information in this document should be considered as tax advice. You should consult your tax professional for information concerning your individual situation.
1https://www.marketwatch.com/livecoverage/stock-market-today-s-p-500-set-for-record-high-as-dow-nasdaq-called-higher-with-pce-data-on-tap/card/s-p-500-headed-for-fastest-ever-recovery-to-record-highs-dow-jones-data-show-QP4UbpRKPMvbqVZwPsyb
3https://www.nasdaq.com/market-activity/index/spx/historical