July 2025 Investylitics

Horizon Advisor Network Investment Committee July 7, 2025

The Horizon Advisor Network Investylitics Committee members met on the afternoon of Monday, July 7th, as markets were coming off a week of multiple new all-time highs. It is hard to fathom the range of emotions investors have experienced over the last four months. First, markets dropped 20% or more from their February all-time highs. This was precipitated by fears that an escalating trade war threatened to upend the global economy, causing growth to slow and inflation to rise. Asset prices dropped across the globe, as did small business, consumer, and investor sentiment. By early April, the prevailing consensus was that things would continue to deteriorate.

It appears that the markets forced the administration's hand, and a more moderate approach ultimately prevailed. The original Liberation Day tariff announcements were paused for 90 days. Eventually, progress was made on the trade front, which helped avoid the worst-case scenario that many had initially feared. At the same time, inflation readings suggested their prices were not accelerating as quickly as many had projected. This combination allowed investors to feel more confident and begin buying stocks again. This happened despite ongoing geopolitical events in Eastern Europe and the Middle East, including the United States bombing Iran's nuclear facilities, when they would not come to the negotiating table.

As shown in the chart above, the markets rebounded in under three months. It took only 89 days for the S&P 500 to reach new all-time highs, beating the previous record turnaround of 90 days in 1998. This speed surprised many, as the average recovery time from a 15% drop is typically closer to eight months, based on historical data dating back to 1954. Few economists, market strategists, or individual investors would have predicted such a strong rebound in early April, as the market was tumbling, and fear indicators were spiking. This once again demonstrates the difficulty of consistently timing the markets. 

Despite widespread fear that inflation and unemployment would spike due to the uncertainty, so far, both have surprised with better-than-expected readings. The labor market increased more than forecasted in June, with nonfarm payrolls rising by 147K (vs +110K expected). Job growth accelerated from a monthly pace of 111K in the first quarter to 150K in the second quarter, as shown in the chart below. Furthermore, the unemployment rate dipped from 4.2% to 4.1%, surprising many.

The May 2025 US Consumer Price Index (CPI) report showed a 2.4% year-over-year increase, with a 0.1% month-over-month rise from the previous month. Core CPI, which excludes food and energy, also rose 0.1% month-over-month and 2.8% year-over-year. These figures were slightly lower than economists' expectations. The softer-than-expected inflation readings suggest that the impact of recent tariffs hasn't significantly increased prices. Despite the better-than-expected news on both sides of its mandate, the Federal Reserve Bank decided to leave interest rates unchanged and wait for further data before making any further policy shifts.

With the passage of President Trump's One Big Beautiful Bill, the 2017 tax rates have been permanently extended. This reduces uncertainty, while the new law also provides several other pro-growth incentives for both individuals and small businesses. These include no tax on tips and overtime through 2028. It also provides seniors with a higher tax deduction to help offset taxes on income, including Social Security benefits. Businesses now have 100% bonus depreciation of domestic capital expenditures, including research and development. Some analysts estimate that this provision could reduce corporate tax rates from the current 21% to a range of 12-14%. This provides corporate America with significant encouragement to invest in new plants, equipment, and technology, which should contribute positively to GDP readings.

Multiple asset classes have outperformed U.S. stocks so far this year. Therefore, diversification has proven to be a valuable strategy. With markets at all-time highs, the committee believes it is a good idea to rebalance portfolios and to raise any cash you may need from your investments over the next 6 to 12 months. There has also been significant divergence within asset class performance. To illustrate, Large Cap Growth outpaced Large Cap Value by 14.1% in the second quarter, capping the widest Growth outperformance since the tech bubble peak in late 1999. However, in the first quarter, Value had its largest quarterly outperformance over Growth (+12.1%) in 24 years. The pendulum swings fast, and staying disciplined with your diversification and asset allocation strategy is critical.

According to some market strategists followed by our committee, it appears that markets have moved, navigating a period of extreme uncertainty, into a new phase. A key driver of the recent stock market performance is the reduction of uncertainty in the economic environment. They believe that the market has become better at navigating the volatility surrounding issues like trade talks and tariffs. While reduced uncertainty is a key factor, the strength of the US economy and strong corporate earnings are also cited as drivers of market performance. It is essential to note that, despite reduced uncertainty, the market remains sensitive to new information and unexpected events, which could lead to increased volatility in the future.

Finally, with markets near all-time highs, some investors are wondering whether now is a good time to allocate excess cash to the markets. Our final chart above shows that since 1950, investing when markets were at an all-time high actually produced slightly better results than investing on other days. Of course, past performance is not necessarily indicative of future results. However, we are looking at the last 75 years of investment history and performance. If you have questions about managing your portfolio or addressing your unique investment goals and objectives, please contact your advisor. We recognize that we are living in interesting and challenging times, and we are here for you.

The views stated in this piece are not necessarily the opinion of Cetera Advisors LLC and should not be construed directly or indirectly as an offer to buy or sell any securities. Due to volatility within the markets, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.

Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.

A diversified portfolio does not assure a profit or protect against loss in a declining market.

Re-balancing may be a taxable event. Before you take any specific action be sure to consult with your tax professional.

Sincerely,

Jesse W. Hurst, CFP®, AIF®
Senior Financial Planner and CEO

*Award Recipient Jesse Hurst 

Forbes: Best-in-State Wealth Advisors Award received by Jesse Hurst, Senior Wealth Advisor, (2018-2024). The Forbes ranking of Best-In-State Wealth Advisors, developed by SHOOK Research, is based on an algorithm of qualitative data, rating thousands of wealth advisors with a minimum of seven years’ experience and weighing factors like revenue trends, assets under management, compliance records, industry experience, and best practices learned through telephone and in-person interviews. Portfolio performance is not a criteria due to varying client objectives and lack of audited data. Neither Forbes nor SHOOK receive a fee in exchange for rankings. Research summary as of April 2024: - 44,990 nominations received, based on thresholds - 23,876 invited to complete online survey - 20,412 telephone interviews - 4,926 in-person interviews at Advisor's location - 1,507 virtual interviews. Listing in this publication and/or award is not a guarantee of future investment success. This recognition should not be construed as an endorsement of the advisor by any client. No compensation was provided directly or indirectly by the recipient for participation or in connection with obtaining or using the third-party rating or award.

¹ This recognition and the due–diligence process conducted are not indicative of the advisor's future performance. Your experience may vary. Winners are organized and ranked by state. Some states may have more advisors than others. You are encouraged to conduct your own research to determine if the advisor is right for you. 

² Portfolio performance is not a criterion due to varying client objectives and lack of audited data. SHOOK does not receive a fee in exchange for rankings.