Is It Really That Bad? Market Outlook For Remainder Of 2025

In their recent 2025 Q2 Quarterly Market Perceptions Study, Allianz Life reported that nearly half of all Americans (48%) are too nervous to invest right now. In addition, 63% of Americans believe that a major recession is right around the corner. And 72% worry that they might not be able to afford the lifestyle that they desire in retirement.  

In all fairness, the survey conducted by Allianz was conducted in May 2025. At that point in time, we were not too far removed from the market decline of early April. That decline, as Orion Investments Chief Investment Officer Tim Holland recently pointed out, represented the worst 2-day run in the history of the U.S. equity market with nearly $6 trillion in lost market cap.  

However, since the market lows in April, the U.S. equity markets have performed well. As of this writing, the three major U.S. indexes (S&P 500, Dow Jones and Nasdaq) have positive year to date returns of 7.15%, 4.59% and 8.17%. But as the chart below illustrates, it was not a smooth ride to this point. 

Most analysts are cautiously optimistic about market returns for the remainder of 2025. The LEI (Leading Economic Indicators) calls for lower GDP growth of about 1.4% and higher inflation of 3.1%, but continued strong employment numbers. Rob Haworth, Sr. Investment Strategy Director with U.S. Bank Asset Management Group, said “To this point, there aren’t signs that a recession is on the horizon, and it appears the economy is muddling through despite the uncertainty created by tariff policies.’ 

As we have noted in our past two market commentaries, the S&P 500 continues to trade at a historically high P/E (Price/Earnings) ratio of about 22x. However, for the time being, the financial strength of the technology stocks in the index and continued solid earnings appear to be enough to continue the lofty valuations. That said, we believe that future growth is likely to be slower than it has been. 

On the interest rate front, the near consensus is that the Federal Reserve Board will enact one or two rate cuts by year end. While this would result in lower fixed income yields, it would also ease the cost of capital for businesses.   

The U.S. and global economies do face headwinds and uncertainty. The looming U.S. debt ceiling, future impact of tariffs on trade, and conflicts in Ukraine and the Middle East all create challenges. So far, the strength of U.S. companies (as shown by robust earnings growth) and the resilience of the employment market and the U.S. consumer have been up to the task.  

Having an actionable financial plan, a diversified portfolio appropriate to your risk tolerance, and a long-term approach to investing are the best ways to manage risk in the markets. As Warren Buffett famously said: “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”  

If you have questions or concerns about your financial plan and would like to discuss them, please do not hesitate to contact us.