Stock and Bond Markets – 2nd Half!
With the 1st half of 2025 officially in the rear view, what can we expect for the stock and bond markets for the remainder of 2025?
Let us take a quick look at where we stand. After last week’s slightly down week for most stock market indices, the Dow is up 4.27% for the year, the S&P 500 6.53, Nasdaq 6.64%, and the Russell 2000 .53%.
Foreign stocks led the way, moving higher 17.6% and emerging markets 15.47%.
The 10-year US Treasury ended last Friday with a yield of 4.417%. The Bloomberg US Aggregate Bond index is now up 3.60% for 2025.
Looking back, pretty good, when factoring all the issues.
Where do we go from here?
Stocks and bonds have priced in a lot of goodness. To move much higher from here, we will need to start seeing that old adage, “Show Me the Money”, meaning corporate profit forecasts, and then results will need to rise as the markets is already at a high priced multiple. But not so quick!
Tariff issues need to come to fruition in a “reasonable” manner and how will tariffs ultimately influence the pricing of goods AND services. According to Barron’s, this week’s CPI report may show the first real impact of higher prices. Higher prices have the potential to slow consumer spending, which can lead to increasing unemployment. The market appears to be discounting any negative impact, so far. The retails sales report on Thursday may also shed light on consumers’ spending attitudes.
The bond market has been tame as it battles the possibilities; higher inflation from tariffs, higher potential economic growth, and deficits as Trump’s Tax bill has economic stimulus, versus, the concern all of this “stuff” will slow down our economy, pushing interest rates lower, elevating bond prices.
At least, not in my career have we faced such a significant change in global trade. The consequences, whether favorable or not, will soon be visible in the front view window.
Corporate Profit Reports and the Fed
This week we will start to hear the beginnings of 2nd Quarter profit reports. Everyone is waiting to hear how corporate leaders are planning to deal with tariffs. Still challenging as the rules have not been finalized. The longer without resolution, the more challenging the environment may become.
The Fed continues to be in a hold pattern. Minutes from the last meeting were released, suggesting some members were in favor of an upcoming rate cut and some are concerned about that awful word, stagflation. It is always important to keep our thumbs on what Fed and company are saying: however, keep in mind the track record!
Social Security and Taxes
Social Security is not tax-free. If your Provisional Income is above a low threshold, a portion up to 85% may be taxable on your federal return. That does NOT change.
If your “adjusted gross income” is under $75k as a single filer, you will receive an additional $6,000 standard deduction. You will be phased out once your adjusted gross income hits $150k.
If you file jointly, each spouse receives an additional $6,000 deduction for a total of $12,000, if the adjusted gross income is under $150k. You will be phased out once your adjusted gross income hits $250k.
Last week, we had the opportunity to run projections for 2 clients to see the impact of the increased standard deduction for those 65 plus.
One couple had an AGI of <$150K. They received the full $12k deduction, saving them approximately $3,000 in Federal taxes. The other couple had an AGI of approximately $217k, and received a reduced additional standard deduction of $3,848, saving $1,176 in Federal Taxes.
How will this impact your situation? For clients, we will be running projections during your review meetings. It will be interesting for those on the cusp of being phased out how a Qualified Charitable Deduction may assist both increasing your additional Standard Deduction and reducing your Federal Taxes.
The bad news: Social Security is still taxable. The good news: for a few years, if your income qualifies, you will receive an additional standard deduction, reducing Federal taxes.
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Thank you for reading.
All data sourced from Wall Street Journal, July 11th, 2025.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested directly.
