As we reach the midpoint of 2025, global markets continue to reflect a dynamic interplay between economic resilience and persistent headwinds. Inflation appears largely contained, but monetary policy remains a key variable. The Federal Reserve has maintained a cautious tone, signaling that any potential rate cuts later this year will be data-dependent, particularly as trade policy and geopolitical developments introduce new layers of uncertainty.
Equity markets have advanced meaningfully, with the S&P 500 reaching all-time highs in the second quarter and international equities continuing to deliver strong, double-digit gains. That said, sector dispersion remains elevated. Technology rebounded sharply following a volatile first quarter, while other sectors such as consumer staples experienced a much more stable first and second quarter, highlighting the value in exposure to different markets.
Fixed income markets, meanwhile, offer some of the most compelling yields in over a decade. Bonds have reasserted their role as a meaningful contributor to total return, enabling investors to trim equity risk and reallocate toward high-quality, income-generating assets without sacrificing overall portfolio efficiency. For the first time in years, cash equivalents such as money market funds and short-duration Treasuries offer both liquidity and attractive returns.
Investor sentiment is being shaped by several macro themes: stable (though moderating) corporate earnings, sustained consumer strength, rising labor and borrowing costs, and a growing focus on global trade and geopolitical alignment. Ongoing trade negotiation milestones in the weeks ahead may introduce episodic volatility (although further extensions could occur) underscoring the importance of discipline and flexibility. Most recently, the mega-bill out of the White House was passed, extending tax cuts made in 2017. While the tax regime may support growth, annual budget deficits remain a forward-looking concern.
At Gryphon, we remain focused on managing risk while seeking opportunity. Our philosophy is grounded in strategic asset allocation, complemented by thoughtful, opportunistic adjustments as conditions evolve. For clients with ongoing cash needs, the recent rally presents a favorable window to build or replenish reserves using money markets or high-quality municipal and Treasury bonds. For clients with excess liquidity, we are deploying capital systematically, with an emphasis on aligning exposure to long-term objectives and risk tolerance. Should volatility increase, we view it as a potential entry point to add equity exposure at more attractive valuations.
Diversification remains central to our approach, not just as a tool for managing downside risk, but as a means of positioning for long-term growth across changing environments. While headlines may continue to shift, our investment process is grounded, forward-looking, and client-centered. As always, we welcome the opportunity to discuss how these evolving market dynamics may influence your financial strategy in the months ahead.
Disclosure
This material is provided by Gryphon Financial Partners, LLC (“Gryphon”) for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product. Facts presented have been obtained from sources believed to be reliable. Gryphon, however, cannot guarantee the accuracy or completeness of such information. Gryphon does not provide tax, accounting or legal advice, and nothing contained in these materials should be taken as tax, accounting or legal advice. Individuals should seek such advice based on their own particular circumstances from a qualified tax, accounting or legal advisor.