The year 2025 has been, to say the least, “interesting” for the markets. The Opes Wealth Management team, Erin Whalen, Louis Odette, and Mark Duvall, unpack the complexities, from surprising market performance to the lingering impact of tariffs and strategic portfolio adjustments.
2025 Market Performance
Contrary to initial fears, following the Liberation Day selloff in April, the overall market picture for 2025 has been remarkably positive. The large U.S. stock market is up almost 10% year-to-date, driven primarily by large tech companies. Mid-cap stocks have seen a respectable 7.5% gain, while small caps, though lagging, are still up around 3%.
International Markets Outperform
One of the biggest stories of the year is the performance of international markets. Emerging markets have surged by approximately 20%, double the U.S. return, and developed international markets have done even better, rising by 23.5%. These are fantastic returns anytime, and especially within the first eight months of the year.
Bond Market Recovery
After an initial struggle due to rising interest rates, the bond market has also seen a turnaround. As rates leveled off and slightly decreased, U.S. bonds are up 4.5%. In a significant reversal from previous years, international bonds have seen an impressive 8.5% year-to-date gain. This broad-based positive performance across asset classes is good news for portfolios.
The Emerging Impact of Tariffs
Tariffs continue to be a significant question mark, with the situation remaining fluid. While it’s safe to assume that tariff levels will be higher than in recent decades, we are not yet experiencing the concerns initially raised when they were first announced. The primary question is how their impact will manifest in the real economy.
Initially, there were concerns about an increase in inflation and a significant slowdown in growth. However, this hasn’t fully materialized. Consumer prices remain in the high 2% to low 3% range, above the Fed’s target but much closer than in the post-pandemic era. The more subtle impact is being seen in producer prices, indicating that businesses have largely been absorbing the tariff costs to date. This is partly due to healthy business margins and consumer fatigue regarding pandemic-related inflation. However, it’s anticipated some of that pricing will eventually be passed through to either suppliers or consumers.
The Dollar’s Decline and Global Fiscal Stimulus: Driving Non-U.S. Performance
The strong performance of non-U.S. stocks and bonds can be attributed to two main factors. First, the U.S. dollar has fallen almost 10% this year, making international investments more attractive. Second, a shift in fiscal policy, particularly in Europe, is playing a crucial role. While the U.S. has been increasing deficit spending, Europe, and particularly Germany, has been more conservative. However, Germany has now implemented large fiscal stimulus packages, which have contributed to helping European-based businesses grow and creating new opportunities.
Portfolio Adjustments: Rebalancing for Optimal Returns
Opes Wealth Management typically rebalances client portfolios annually in the first quarter, with incremental adjustments as market conditions dictate. August 2025 was one such time. Given the 20%-plus returns in international stocks, international developed markets positions were trimmed to bring exposures closer to target allocations.
We took similar profits from gold, which has also had a strong run, to reduce its overweight position. The proceeds from these adjustments were then redeployed into international bonds, an area where Opes had been underweight for a long time due to negative interest rates in many parts of the world. With the absence of negative rates and the rise of positive company dynamics in regions like Japan and Europe, international bonds are now considered much more investable. The currency exposure is also being hedged, reflecting the decline of the dollar and strong returns in local currencies in many international markets.
These strategic adjustments reflect a proactive approach to managing client portfolios, leveraging market shifts to optimize returns and maintain a balanced investment strategy.
The markets have delivered both opportunities and challenges this year, ranging from strong international performance to the emerging impacts of tariffs. We continue to closely monitor these dynamics to help ensure we can capture opportunities and mitigate risk, employing a thoughtful and disciplined approach to investment management. If you have market or investment questions or need guidance for navigating the current landscape, contact us — our team is here to help. You can also complete a Personal Financial Evaluation, which helps us understand your situation better and explore how we can best support you.
