Q2 2025: PFM Quarterly Commentary
Every generation, rare individuals emerge imbued with profound wisdom that transcends their years and enriches the world. These modern-day sages possess an extraordinary gift for distilling the complexities of human experience into concise, timeless words that guide us through turbulent times. Of course, we are referencing legendary New York Yankees catcher, Yogi Berra, whose iconic quotes, whether deliberately discerning, delightfully absurd, or a curious blend of both, have endured for half a century. His insights alone possess the simple wisdom needed to navigate the remarkable market volatility during the second quarter of 2025.
One of Yogi’s gems was, “It’s like deja-vu, all over again.” Market volatility is an ever-looming feature of financial markets, where periods of heightened uncertainty represent the inherent cost of pursuing returns that exceed the risk-free rate. However, recent years have revealed an unusually high frequency of extreme volatility, with events once considered rare, occurring perhaps once per business cycle (every five to seven years), becoming disconcertingly more common. Notable examples include the sharp declines of Q4 2018, Q1 2020, and the first nine months of 2022, each witnessing the S&P 500 plummet by 20% or more. The first week of April 2025 has now joined this notorious roster, marked by an 11.2% drop in the S&P 500. This precipitous fall contributed to a staggering 21.6% decline from the intraday peak on February 19, 2025, plunging the market into bear territory in a mere 33 trading days. The initial catalyst for this downturn was mounting apprehension over looming tariffs, which escalated into a full-blown market rout triggered by the dramatic “Liberation Day” shock.
The recent market selloff presented challenges in identifying historical parallels across global markets. For the S&P 500, April 3rd and 4th, 2025, marked the most severe two-day decline since the COVID-19 crisis of 2020. Meanwhile, numerous Asian indices endured their steepest drops since the infamous “Black Monday” crash of 1987. Additionally, prominent stocks, once celebrated as cornerstones of the investment landscape, fell sharply from their recent all-time highs. Notably, Tesla plummeted by 56%, Nvidia by 44%, Apple by 35%, and Amazon by 34%, underscoring the intensity of the market’s retreat.[i]
Yogi unwittingly pegged the unpredictability of the markets when he sagely offered that, “It’s tough to make predictions, especially about the future.” By Monday, April 7th, 2025, investor sentiment reached rock bottom, with confidence completely eroded. Consensus economic forecasts painted a grim outlook, while financial media adopted a near-apocalyptic tone in their coverage. Renowned CNBC market commentator Jim Cramer warned viewers of an impending market collapse reminiscent of the 1987 crash.[ii] He was not alone in his concerns: major investment banks significantly lowered their S&P 500 price targets, sharply increased their recession probabilities for 2025, and revised their inflation forecasts upward, signaling widespread apprehension about the economic horizon. Investors everywhere were bracing for significantly more downside.
As despair permeated the financial landscape in early April 2025, the markets staged a breathtaking recovery, defying the prevailing gloom. The second quarter began with a tumultuous decline, yet it culminated in an extraordinary resurgence. On April 9, 2025, just two days after widespread pessimism had seized investors, the S&P 500 surged by 9.5%, securing its eleventh-largest single-day gain in a century. Simultaneously, the Nasdaq Composite delivered its second-largest one-day return in history, underscoring the market’s remarkable resilience.[iii]
From that pivotal moment, the markets embarked on a near-unrelenting ascent, reaching unprecedented heights by the quarter’s end. The S&P 500 closed Q2 with an impressive total return of 10.9%, while the Nasdaq soared to an 18% gain. From the intraday low on April 7, when many analysts publicly predicted significant further declines, the S&P 500 skyrocketed by 29.2%, and the Nasdaq climbed an astonishing 38.9%. In a mere 84 calendar days, these gains effectively mirrored the sharp declines that preceded April 7, highlighting the market’s extraordinary capacity for recovery.[iv]
“Make a game plan and stick to it. Unless it’s not working” was one way Yogi might have explained the management style of many professionals in the finance industry. How did a cadre of prominent, well-resourced pundits, analysts, and institutions so profoundly misjudge the market’s path at just the wrong time? Many maintained a bullish outlook through much of the market’s precipitous decline, only to pivot to dire predictions of collapse at or near the nadir. Yogi’s insight was correct, these financial professionals often adhere to a disciplined investment system until the moment it falters or fails to anticipate a sudden market upheaval. Yet, it is precisely in these moments of acute uncertainty that steadfast commitment to time-tested, historically grounded investment principles proves most critical.
Yogi once opined, “You can observe a lot just by watching.” In early April 2025, we issued a special market volatility letter to our clients, underscoring a fundamental truth etched into over 150 years of financial history: every period of market turbulence has proven temporary. In that letter, we encouraged clients to, “Hang in there” by evoking the imagery of those iconic motivational posters often featuring a wide-eyed kitten clinging to a slender branch with the inspiring slogan urging resolve and perspective. Rather than amplifying the heightened fears of the moment, we encouraged our clients to remain steadfast, confident that this bout of volatility, like all others before it, would eventually subside.
The letter drew upon a series of analogous episodes from the past two decades, many now faded into obscurity, each marked by similar waves of apprehension. Yet, without exception, these periods of turbulence resolved favorably, with markets not only recovering but often ascending to new heights. These historical precedents reaffirm the enduring resilience of the financial markets, offering a compelling reminder to stay the course amid uncertainty.
Like a philosopher on a mountaintop, Yogi once uttered, “The future ain’t what it used to be.” As episodes of extreme market volatility grow more frequent, our critique of so-called “experts” who exploit their platforms to fuel investor fear, rather than foster confidence, intensifies. Regrettably, there is some number of investors who heeded such alarmist counsel, selling stocks near the market’s trough, locking in losses, and missing the subsequent meteoric rise to new highs. These investors suffered irreparable financial setbacks, while the pundits who fueled the panic swiftly pivoted to proclaiming bullish sentiments to their audiences, conveniently glossing over their earlier alarmism as if they had always championed the markets’ inevitable recovery.
The truth is stark: predicting the future is an impossible endeavor. No one can foresee tomorrow’s events, let alone months or years ahead. The financial system’s complexity further renders the notion of consistently forecasting its trajectory utterly implausible. Instead, we should anchor ourselves in enduring truths that the investment markets stand as one of humanity’s most formidable engines of wealth creation that have consistently triumphed over periods of turmoil. After more than a century of proving itself, we’d say the likelihood of the market’s resilience persisting into the future is substantial.
Had more financial “experts” embraced this long-term, common sense viewpoint and reassured investors of the inevitable return to stability and growth, rather than amplifying short-term panic, they would have done far less damage to their audiences. Such historical perspective could have steadied nerves and reinforced confidence in the markets’ capacity to recover, yet fearmongering often proves more compelling for media audiences than the calm assurance that, in time, all will be well.
We remain skeptical whether financial media “experts” will ever prioritize investors’ interests over their own, so instead, we turn our attention to a robust quarter for most asset classes. As noted above, despite a sharp decline in early April, major indices delivered impressive gains, with the S&P 500 achieving a 10.9% quarterly return and the Nasdaq soaring to 18% for the period. These gains were primarily driven by the technology and communication services sectors, which surged 23.7% and 18.5%, respectively, fueled by strong recoveries in mega-cap technology stocks such as Nvidia, Microsoft, Tesla, and Broadcom.[v]
However, the rally extended beyond technology. The industrials, consumer discretionary, financials, and utilities sectors posted solid total returns of 12.9%, 11.5%, 5.5%, and 4.3%, respectively.[vi] While these figures may appear less striking than those of technology-driven sectors, these areas demonstrated greater resilience during the April selloff and continue to boast stronger year-to-date performance.
While domestic equities often dominate headlines, the defining narrative of 2025 has been the remarkable surge in non-dollar-denominated assets, including international developed stocks, emerging market equities, and precious metals. Less widely recognized is the sharp decline of the US Dollar, which fell 7.2% in the second quarter according to the Dollar Index, resulting in a year-to-date loss of 10.8%.[vii] This significant depreciation has created a powerful tailwind for assets with a negative correlation to the dollar.
Many other investment areas have capitalized on this trend, with international developed stocks (represented by the MSCI EAFE Index) rising 12.2%, emerging market equities (represented by the MSCI Emerging Markets Index) gaining 12.0%, and precious metals (represented by the Aberdeen Standard Physical Precious Metals Index) advancing 6.8% in the quarter. These gains have propelled their year-to-date total returns to a notable 19.9%, 15.5%, and 26.1%, respectively, underscoring the strength and resilience of these asset classes in a weakening dollar environment.[viii]
Not all asset classes thrived during the quarter, as interest rate sensitive securities faced headwinds. Real estate (represented by the Dow Jones U.S. Real Estate Capped Index), broad commodities (represented by the Bloomberg Commodity Index), and longer-dated bonds (represented by the Bloomberg. U.S. Universal 10+ Year Index) posted lackluster total returns of -0.4%, -3.0%, and 0.1%, respectively.[ix] This underperformance stems from a confluence of uncertainties unsettling investors. Ambiguity surrounding the Federal Reserve’s future interest rate policies, heightened geopolitical tensions in oil-producing regions, and widespread confusion over potential tariff-driven inflationary pressures have triggered significant price volatility in these sectors. Looking ahead, we anticipate the eventual resolution of these uncertainties as they impact these particular asset classes through clearer Federal Reserve guidance, stabilized geopolitical conditions, and clarity on trade policies.
From a high-level, long-term perspective, the stock market’s price chart appears deceptively smooth, tracing a steady ascent from the lower left to the upper right. This thirty-thousand-foot view obscures the complexities that make investing so challenging. Zooming in reveals a landscape marked by turbulent, white-knuckle episodes that test even the most resolute investors, eroding confidence and fostering doubt about future recovery. In these moments of volatility, investors often abandon reason, overcomplicating their strategies or succumbing to panic-driven decisions, often entering or exiting the market without a clear plan for when calmer times return. Instead, adopting a simplified approach, much like the straightforward wisdom of Yogi Berra, can provide clarity and stability. By distilling investing to its core principles, we maintain a steady hand through turbulent periods, anchored by the timeless truth: markets, over time, tend to recover and thrive.
Thank you for your continued trust in us. We are honored to serve you and strive to earn your confidence every day. Should you have any questions or wish to receive these updates through our secure client portal, please don’t hesitate to reach out.
Regards,
Peak Financial Management
Disclosures:
The views expressed represent the opinions of Peak Financial Management as of the date noted and are subject to change. These views are not intended as a forecast, a guarantee of future results, investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial or legal advice or service to any person. The information contained has been compiled from sources deemed reliable, yet accuracy is not guaranteed.
Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website at www.adviserinfo.sec.gov. Past performance is not a guarantee of future results.
[i] Bloomberg L.P. 2025
[ii] Qureshi, M. (2025, April 5). “Jim Cramer offers blunt warning on Trump tariffs: ‘1987 Black Monday’”. Yahoo Finance. https://finance.yahoo.com/news/jim-cramer-offers-blunt-warning-202922176.html
[iii] “Stock Market Outlook for April 10, 2025.” Equity Clock, 9 Apr. 2025, equityclock.com/2025/04/09/stock-market-outlook-for-april-10-2025/.
[iv] Bloomberg L.P. 2025
[v] Bloomberg L.P. 2025
[vi] Bloomberg L.P. 2025
[vii] Bloomberg L.P. 2025
[viii] Bloomberg L.P. 2025
[ix] Bloomberg L.P. 2025