The second quarter of the year ended with U.S. equities at or near record highs, defying turbulence and several macroeconomic uncertainties that sprung up throughout the quarter. Despite concerns around Federal Reserve policy, ongoing fiscal debates, and geopolitical tensions, equity markets have shown impressive resilience as underlying economic strength remains the anchor investors have focused on. Continued strong household spending, low unemployment, and strong corporate balance sheets have provided a durable foundation for risk assets. A temporary reprieve from the tariff negotiations and a ceasefire between Israel and Iran helped ease fears of global economic disruption.
The Federal Reserve continued their “wait and see approach” regarding the rate-cut cycle amid conflicting signals—slower growth, weakening consumer sentiment, and rising concerns around trade and fiscal policy. While the market currently expects rate cuts later in the year, upcoming data on employment and inflation will be critical in shaping the Fed’s next move. Meanwhile, uncertainty over the July 9th tariff deadline, the potential economic impact of new levies on pharmaceuticals and semiconductors, and high-stakes budget negotiations in Congress all present catalysts for renewed volatility. Although the “One Big Beautiful Bill” could remove near-term debt ceiling concerns, questions about long-term fiscal stability and inflationary pressures still linger, as reflected in the yield curve’s recent steepening and persistent foreign hesitancy toward long-dated Treasurys.
While we expect market leadership to remain concentrated, especially in firms with strong balance sheets and durable earnings, we continue to favor large-cap equities over their smaller counterparts, given their greater ability to navigate policy and macroeconomic shifts. On the fixed income side, we prefer taking credit risk over duration risk, as higher long-term yields may persist in the absence of a clear Fed easing path. Staying diversified, with an emphasis on flexibility and quality, remains essential as markets continue to digest both political developments and evolving economic data.
Information in this commentary is gleaned from third-party sources, and while believed to be reliable, is not independently verified. This content is not intended to be tax, legal, investment, or fiduciary advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this material may not be suitable for all investors. Bernardo Wealth Planning recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial advisor. Past performance does not guarantee future results.