Monthly investment portfolio brief
Staying goal-oriented and opportunistic in the second half
What you need to know
- Markets powered through noise and posted broad gains in June amid solid economic data, anchored inflation expectations and steady labor markets.
- Equities provided portfolios a greater boost than bonds, building on their remarkable rally from the year’s lows and, in some cases, hitting new all-time highs.
- Periodic volatility may occur as policy debates unfold, but a goal-oriented approach to investing can help you stay disciplined.
- Based on our updated global outlook, we now recommend overweighting U.S. stocks by underweighting U.S. high-yield bonds, international bonds and international large-cap stocks.
- We have also raised our recommendation for the consumer discretionary sector to overweight.
Portfolio tip
Setting appropriate performance expectations and goal-oriented portfolio allocations can help you stay disciplined during periodic market volatility.

This chart shows the performance of equity and fixed-income markets over the previous month and year.

This chart shows the performance of equity and fixed-income markets over the previous month and year.
Where have we been?
Markets demonstrated resiliency in June despite recent headwinds. Global trade tensions, shifting monetary policy expectations, U.S. budget and debt ceiling debates, and escalating geopolitical tensions have triggered market volatility this year, which became extreme at times. Look no further than April, when the S&P 500 index bottomed 19% lower than its February high.
Markets are watching some key July dates, such as the end of the 90-day pause for “reciprocal” tariffs, the potential for the U.S. to hit its debt limit, and another Federal Reserve meeting. But they’ve shown resiliency in June amid solid economic growth, anchored inflation expectations and steady labor markets, logging gains across the board and boosting well-diversified portfolios. Impressively, the S&P 500 index hit a new all-time high at month-end.
Equities provided portfolios a greater boost than bonds, building on their remarkable rally from the year’s lows. With markets comforted by economic data, the more economically sensitive asset classes performed best in June, with emerging-market debt and U.S. small-cap stocks leading the pack. Supported by gains across nearly all sectors, U.S. stocks generally outperformed international developed-market stocks. Growth and cyclical sectors, such as technology and energy, gained the most.
Despite U.S. stock asset classes returning roughly 4%–5% in June, they continue to be a significant underperformer for the year. U.S. large-cap stocks are about 6% higher year to date despite the volatility, but they trail the 20% returns posted by international developed-market equity following announcements of stimulative policies in Europe and U.S. dollar weakness.
Returns within bonds were more muted in June. Central banks largely remained in cutting cycles, though some have paused as they await additional certainty and interest rates have been relatively range-bound. Lower-quality bonds outperformed investment-grade bonds, as they have over the past year, benefiting from their higher yields and contained credit spreads.
What do we recommend going forward?
Set appropriate performance expectations and goal-oriented portfolio targets to help avoid market volatility’s distractions. Trade negotiations are likely to stretch over the course of months, and adjustments to fiscal and monetary policies will likely take shape in the second half of 2025. Geopolitical tensions may also flare from time to time. While we don’t believe the gains have been exhausted or are unjustified, it wouldn’t be surprising if the equity rally paused periodically amid the uncertainties.
While volatility is uncomfortable, it’s normal for an investor to encounter numerous pullbacks on the path toward long-term financial goals. For example, based on our analysis, the S&P 500 index has experienced a pullback of 5% or more three to four times a year on average since 1928.
To help navigate volatility, set well-diversified strategic asset allocation targets according to your risk and return objectives. We also suggest taking a global approach by incorporating all 11 of our recommended asset classes, which we list in the graphics below. As market pullbacks occur, you can use these targets to buy quality investments at lower prices within asset classes that may have become too underweight in your portfolio.
We recommend overweighting U.S. stocks by underweighting U.S. high-yield and international bonds. We still recommend an overweight to equity investments, favoring U.S. large- and mid-cap stocks. But we’ve shifted our underweight recommendation within fixed income to include U.S. high-yield bonds as well as international bonds.
While economic data may cool in the months ahead, we expect labor markets to hold steady, a potential rise in inflation to be short-lived, and economic growth to remain positive. Despite the potential for periodic volatility, we believe an improving policy backdrop — potential progress in trade negotiations, additional central bank rate cuts, deregulation and fiscal policy support — should benefit stocks more than bonds. We’d focus on higher-quality and more cyclical U.S. stocks, alongside mega-cap tech allocations, as market leadership broadens.
With credit spreads within emerging-market debt no longer as wide as they once were, when compared to those of U.S. high-yield bonds, we no longer recommend overweighting the asset class. However, we continue to recommend underweighting U.S. high-yield bonds to help offset the overweight to equity investments. This can help manage risk during periods of volatility.
Credit spreads within U.S. high-yield bonds are historically low, leaving them more susceptible to volatility amid heightened U.S. policy uncertainty. This could weigh on the asset class.
We continue to favor U.S. stocks over international stocks, but to a lesser degree. International equity regained momentum in the first half of 2025, propelled by increasingly stimulative fiscal and monetary policies, especially within Europe, and a falling U.S. dollar. Recent policy adjustments have made international equity more attractive in the near term, supporting our move to raise international small- and mid-cap stocks to a neutral recommendation. Their impact on longer-term growth potential, however, remains uncertain, especially given ongoing trade tensions.
We expect the U.S. economy to maintain its position of relative strength, benefiting domestic stocks despite their higher valuations and the potential for periodic volatility. We also expect a resilient economy, contained inflation and higher interest rates in the U.S. to support the value of the dollar in the near term, potentially weighing on international stock returns. Therefore, we still recommend shifting portfolios slightly away from international large-cap stocks and toward U.S. mid-cap stocks.
We’ve raised our recommendation for the consumer discretionary sector to overweight. Given our existing recommendation to overweight the financial services and health care sectors, we are now overweight across defensive, cyclical and growth sectors. This underscores our expectation for sector leadership to broaden.
We expect the consumer discretionary sector to benefit from a stabilizing tariff backdrop and improving tax regime, as well as exposure to growth and technology companies. We believe the financial services sector will be a key beneficiary of deregulation and tax reform, and it appears less exposed to trade uncertainties. The health care sector offers relatively attractive valuations and the potential for earnings growth to outpace the broader market.
We’re here for you
Periods of market volatility may occur as policy debates unfold, but a goal-oriented approach to investing can help you stay disciplined through the noise. Talk with your financial advisor about designing your strategic portfolio targets based on what you’re trying to achieve, so market volatility doesn’t become a distraction. From there, they can help you opportunistically position your portfolio for the back half of 2025.
If you don’t have a financial advisor, we invite you to meet with an Edward Jones financial advisor to help you design your portfolio to deliver performance aligned with what you’re trying to achieve, while staying opportunistic as we navigate the uncertainties ahead.
Strategic portfolio guidance
Defining your strategic investment allocations helps to keep your portfolio aligned with your risk and return objectives, and we recommend taking a diversified approach. Our long-term strategic asset allocation guidance represents our view of balanced diversification for the fixed-income and equity portions of a well-diversified portfolio, based on our outlook for the economy and markets over the next 30 years. The exact weightings (neutral weights) to each asset class will depend on the broad allocation to equity and fixed-income investments that most closely aligns with your comfort with risk and financial goals.
Diversification does not ensure a profit or protect against loss in a declining market.

Within our strategic guidance, we recommend these asset classes:
Equity diversification: U.S. large-cap stocks, international large-cap stocks, U.S. mid-cap stocks, U.S. small-cap stocks, international small- and mid-cap stocks, emerging-market equity.
Fixed-income diversification: U.S. investment-grade bonds, U.S. high-yield bonds, international bonds, emerging-market debt, cash.

Within our strategic guidance, we recommend these asset classes:
Equity diversification: U.S. large-cap stocks, international large-cap stocks, U.S. mid-cap stocks, U.S. small-cap stocks, international small- and mid-cap stocks, emerging-market equity.
Fixed-income diversification: U.S. investment-grade bonds, U.S. high-yield bonds, international bonds, emerging-market debt, cash.
Opportunistic portfolio guidance
Our opportunistic portfolio guidance represents our timely investment advice based on current market conditions and a shorter-term outlook. We believe incorporating this guidance into a well-diversified portfolio may enhance your potential for greater returns without taking on unintentional risks, helping keep your portfolio aligned with your risk and return objectives. We recommend first considering our opportunistic asset allocation guidance to capture opportunities across asset classes. We then recommend considering opportunistic equity style, U.S. equity sector and U.S. investment-grade bond guidance for more supplemental portfolio positioning, if appropriate.

Our opportunistic asset allocation guidance follows:
Equity — overweight overall; overweight for U.S. large-cap stocks and U.S. mid-cap stocks; neutral for U.S. small-cap stocks, international small- and mid-cap stocks and emerging-market equity; underweight for international large-cap stocks.
Fixed income — underweight overall; neutral for U.S. investment-grade bonds, emerging-market debt and cash; underweight for U.S. high-yield bonds and international bonds.

Our opportunistic asset allocation guidance follows:
Equity — overweight overall; overweight for U.S. large-cap stocks and U.S. mid-cap stocks; neutral for U.S. small-cap stocks, international small- and mid-cap stocks and emerging-market equity; underweight for international large-cap stocks.
Fixed income — underweight overall; neutral for U.S. investment-grade bonds, emerging-market debt and cash; underweight for U.S. high-yield bonds and international bonds.

Our opportunistic equity style guidance is neutral for value-style equity and growth-style equity.

Our opportunistic equity style guidance is neutral for value-style equity and growth-style equity.

Our opportunistic equity sector guidance follows:
• Overweight for consumer discretionary, financial services and health care
• Neutral for communications services, energy, industrials, real estate, technology and utilities
• Underweight for consumer staples and materials

Our opportunistic equity sector guidance follows:
• Overweight for consumer discretionary, financial services and health care
• Neutral for communications services, energy, industrials, real estate, technology and utilities
• Underweight for consumer staples and materials

Our opportunistic U.S. investment-grade bond guidance is overweight in interest rate risk (duration) and neutral in credit risk.

Our opportunistic U.S. investment-grade bond guidance is overweight in interest rate risk (duration) and neutral in credit risk.
Tom Larm, CFA®, CFP®
Tom Larm is a Portfolio Strategist on the Investment Strategy team. He is responsible for developing advice and guidance related to portfolio construction, asset allocation and investment performance to help clients achieve their long-term financial goals.
Tom graduated magna cum laude from Missouri State University with a bachelor’s degree in finance. He earned his MBA from St. Louis University, is a CFA charterholder and holds the CFP professional designation. He is a member of the CFA Society of St. Louis.
Important information
Past performance of the markets is not a guarantee of future results.
Diversification does not ensure a profit or protect against loss in a declining market.
Investing in equities involves risk. The value of your shares will fluctuate, and you may lose principal. Mid- and small-cap stocks tend to be more volatile than large-company stocks. Special risks are involved in international and emerging-market investing, including those related to currency fluctuations and foreign political and economic events.
Rebalancing does not guarantee a profit or protect against loss and may result in a taxable event.
Before investing in bonds, you should understand the risks involved, including credit risk and market risk. Bond investments are also subject to interest rate risk such that when interest rates rise, the prices of bonds can decrease, and the investor can lose principal value if the investment is sold prior to maturity.
The opinions stated are for general information purposes only and should not be interpreted as specific investment advice. Investors should make investment decisions based on their unique investment objectives and financial situation.