Q2 2025 Market Commentary

JULY 9, 2025

Annie Tran, CFA

Corporate VP/Senior Portfolio Manager

 

“The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.”

        – Alex de Tocqueville, "Democracy in America", 1835

 

The stock market celebrated the United States’ birthday with a new high, marking a significant comeback from an 18% decline in the volatile trading session last quarter. The market was laser focused on Uncle Sam’s trading and finance book; namely the US tariff policies and federal budget.

 

President Trump’s “reciprocal tariff” announcement on April 2nd, with duty rates ranging from 10% to 50%, sent shockwaves across the world’s markets. China, as the largest trading partner, initially faced a 34% tariff. While many nations chose to engage in negotiations, the escalating tit-for-tat between the US and China pushed the respective tariff rates to 125% (imposed by China) and 145% (by the US) before they finally came to the table. The last time trade was brought to such a virtual standstill was during the early stage of COVID-19 pandemic, but the last time we’ve seen this scale of trade protectionism in US history was almost a century ago*. This type of “black swan” event occurs so rarely, it caused market participants to scramble for direction. As the 90-day trade relief period nears its end, the limited number of announced deals underscores the protracted and intricate nature of these negotiations. Although the tariff impact on inflation figures has been modest, many factors can influence the final outcome. Nevertheless, consumers will eventually bear the brunt of higher prices, highlighting further headwinds for the Federal Reserve’s path to lower interest rates.

 

In May, Moody’s joined other major rating agencies in lowering the US credit rating from Aaa to Aa1, citing an increased debt ratio and budget deficit. It seems certain that the “One Big Beautiful Bill,” signed into law on July 4th, will significantly increase the federal deficit. Nevertheless, it has at least eliminated the immediate uncertainty surrounding the debt limit and tax rates. While many taxpayers stand to benefit from the extended tax cuts and some other provisions like the increased State and Local Tax (SALT) deduction limit to $40,000, the new Medicaid requirements are projected to affect millions of individuals’ health coverage as well as the healthcare providers and hospitals that serve them.

 

Conversely, the market appears to be largely shrugging off most of these concerns, showing robust confidence in US corporate earnings. Stocks are at record highs, and interest rates remain elevated. This suggests an extended window for investors to lock in decent yields before the Federal Reserve’s next rate cut. The municipal bond market, having been spared from the tax-exemption cut in the budget bill, has seen a sign of relief. New issue supply is up another 20% this year, following record issuance in 2024. Opportunities to secure dual tax-exempt yields of 4% and higher translate to an 8%-9% taxable equivalent for those in the top tax brackets. These long-term portfolio opportunities can be captured in a balanced portfolio with a strong liquidity component that can take advantage of market fluctuations. Since bonds are marked-to-market, we may not see an immediate effect on a portfolio, but the higher income will ultimately be reflected in the return over the long run. Despite these current headwinds, most muni credits remain on solid footing, and we anticipate the asset class to ride through these challenges and continue to perform its core functions of wealth preservation, liquidity, and income.

 

* The Fordney-McCumber Tariff Act of 1922 and the Smoot-Hawley Tariff Act of 1930 raised import duty fees to the range of 40-60%.

Dear Friends,

 

I am pleased to announce that Charles Fish Investments, Inc. (CFI) has just merged with Brentview Investment Management, LLC.  For over a year, CFI has been searching for a partner whose investment philosophy and dedication to their clients would be compatible with CFI’s. Importantly, we wanted a partner that could help our existing clients as well as promote CFI’s growth. Brentview recognizes the unique value we bring to our clients and will not change the manner in which CFI conducts its business. With offices in Chicago and Los Angeles, they make an ideal partner for us. They have received a five-star overall rating from Morning Star and were recently featured in US News and World Report. I’ll be sending you more information about them soon.

 

CFI will continue to manage client portfolios just as we have these many years and the people you have come to rely on will be the same.  I have personally committed to many more years of service. I can’t tell you how much I appreciate the loyalty you all have given CFI and I promise that you can continue to count on the same level of performance, service and integrity as in the past.

 

Please give us a call anytime if you have any questions or would like further information.

 

Be well,

Charles W. Fish

Chairman/CEO

 

Promontory Point, Utah, 1869

The contents herein are for informational purposes only, and under no circumstances are they to be construed as a recommendation of a solicitation. The information and opinions herein are subject to change without notice and CFI does not undertake to advise the reader of changes in opinion or information.