56 Days to Rebound: What Q2 Taught Us About Staying the Course
Fifty-six trading days. That’s all it took for the U.S. stock market to go from an 18% decline back to near all-time highs. This remarkable turnaround in Q2 perfectly illustrates why we believe staying disciplined during market volatility is so crucial to long-term investment success. Following elevated levels of uncertainty, markets bottomed on April 7, with the S&P 500 declining 18% peak to trough. International stocks also briefly entered negative territory. In the 56 trading days that followed, stocks rallied 20% to end the quarter back in positive territory and back near previous highs.
During times like these, it’s tempting to think like Yogi Bear and believe you are “smarter than the average bear,” but Q2 served as another humble reminder that markets are difficult to predict. We believe that a patient, long-term approach is important when navigating uncertainty. As I write this letter, we’re in a very different market than just three months ago.
Let’s explore the current economic landscape and review the past quarter’s market performance.
Economy
The second quarter of 2025 showed mixed economic signals amid ongoing trade policy shifts. As expected, anticipation of new tariffs drove a surge in imports at the beginning of the year, resulting in Real GDP contracting 0.5% in Q1. Inflation moderated, with the Consumer Price Index (CPI) averaging 2.4% year-over-year, partly driven by falling energy prices. Labor markets remained stable, adding an average of 150,000 new jobs monthly, while unemployment held steady at 4.1%. The Federal Reserve kept the federal funds rate at a range of 4.25% to 4.5% in June, cautious of potential tariff-related inflation headwinds. Projections suggest there may be two rate cuts by year-end.
While we don’t position ourselves as currency traders, it’s worth noting the dollar’s 11% decline year-to-date. This drop reflects expectations of relatively higher domestic inflation, concerns about the growing U.S. deficit, policy uncertainty, and efforts by central banks to diversify their reserves. This shift in global currency dynamics has meaningful implications for U.S. investors.
Stocks
The stock market rallied in Q2. U.S. large-cap stocks rose 10.9%, while U.S. large-value stocks gained 3.8%. More economically sensitive U.S. small caps rose 8.5%. Global stocks (MSCI All Country World IMI Index) rose 11.8%, lifted by strong stock performance outside the country. International developed large-cap stocks were up 9.5%, and emerging markets stocks gained 12.0%. Year-to-date, global stocks—including U.S. and international—are up 11.6%.
The dollar’s 11% decline this year has significantly boosted international returns. When the dollar weakens, foreign stocks become more valuable in dollar terms, enhancing returns for U.S. investors. This dynamic has played out across your portfolios. The dollar has historically moved in cycles, and this recent decline represents a rebalancing that has rewarded internationally diversified investors.
Q2 stock returns reinforced how difficult it is to time the market and how important it is to maintain a long-term view. Markets are forward-looking, and low sentiment often precedes strong returns. How we respond to volatility is one of the few things we can control in investing. We designed our disciplined, evidence-based process to reduce emotional decisions and maintain consistent exposure to market opportunities, wherever they arise.
Bonds
Bonds continued to serve as a source of stability and income. U.S. bonds gained 1.2%, and international bonds rose 2.9%. Inflation-linked TIPS climbed 0.5% as real rates declined. One- to seven-year Treasury rates fell, with the two-year rate falling from 3.89% to 3.72%. Year to date, U.S. bonds have returned a healthy 4%.
Falling yields point to growing expectations of future rate cuts and underscore reinvestment risks for investors holding excess cash.
Alternatives
Alternative investments continued to add value in our portfolios by delivering positive, uncorrelated returns. Reinsurance gained 1.7%, while Private Debt returned 2.1%. Real Assets rose 2.8% as investors favored tangible assets with strong ties to economic growth. Multi-strategies added 2.0%. Trend Following fell -12.1%. Given that decline in trend-following strategies, I want to revisit why this allocation remains a meaningful part of your portfolio.
We think of each portfolio component as an ingredient in a recipe that we use to make the “wedding cake.” This analogy is most applicable to trend following. The manager’s objective is to have ZERO correlation with stocks and bonds, with a positive long-term return. During challenging periods—most recently in 2022 when stocks and bonds both posted negative returns—trend-following strategies delivered positive double-digit gains, helping to protect portfolios when it mattered most. During periods like Q2, when global market movements lack clear trends, these strategies may underperform. Think of it like home insurance: you don’t expect a payout every year, but you’re glad it’s there when you need it. While the fund may not have the highest expected return, its unique zero-correlation profile brings meaningful diversification to the portfolio. Over time, this helps to enhance our risk-adjusted returns over time, making it a valuable ingredient in the recipe.
The Long View
As the other famous Yogi Berra once said, “It ain’t over till it’s over.” Markets have consistently risen over long time horizons, even when logic seems to defy them. But when it is over, you’ll want diversification beyond just U.S. stocks. Despite tariff and geopolitical concerns, international stocks have outpaced U.S. stocks by 13.2% year to date. These returns may surprise some U.S. investors, but we know international stock returns respond to different drivers. That’s why they’re a vital part of any well-constructed portfolio.
At Savant, we adhere to an evidence-based investing approach—building portfolios with discipline, diversification, and sound analysis. The future will always carry uncertainty, which is why we diversify across asset classes, sectors, and geographies. No one knows where the next wave of returns will come from.
We’ll continue to guide you with wisdom, temperance, and humility.
Thank you for your continued trust and partnership as we pursue your financial goals together.
(Source: Morningstar Direct. Data as of 6/30/2025. For index information, visit www.savantwealth.com/index_disclosures.)
Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only. Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments and/or investment strategies recommended and/or undertaken by Savant, or any non-investment-related services, will be profitable, equal any historical performance levels, be suitable for your portfolio or individual situation, or prove successful.
C. Zach Ivey
Chief Investment Officer
CFA®, CFP®, MBA