Q2 Market Review 2025

What a volatile quarter!

Summary

• Q2 began with a sharp 15–21% drop in the S&P 500 and Nasdaq due to President Trump’s tariffs, then rallied back to new all-time highs when tariffs were paused for 90 days

• Early quarter sell‑off, then sharp rebound on earnings and tariff reprieve

• Roughly 78% of S&P 500 companies beat expectations, supporting the market rebound

• After a cautious start, global equities ended with strong gains for the month

• Worries related to geopolitical tensions in the Middle East (between Iran and Israel) receded quickly after a ceasefire was announced

• Top performers: Information technology, communication services and energy 

• Industrials and financials also delivered strong gains, benefiting from investor rotation into momentum stocks and cyclical sectors.

• It was announced July 7th that Trump signed an executive order delaying steep levies on dozens of countries that were set to take effect on July 9th to now take effect August 1st

• A highlight of Trump's Wednesday letters was a 50% tariff on goods from Brazil, citing its treatment of former President Jair Bolsonaro, now on trial in Brazil’s Supreme Court on charges that he plotted a coup in 2022.

• Earlier Wednesday, Trump set tariffs of 20% to 30% for leaders of the Philippines, Brunei, Moldova, Algeria, Iraq, Sri Lanka, and Libya, mostly matching April's "Liberation Day" rates

US

• President Donald Trump’s announcement of sweeping tariffs delivered a blow to US stocks in 2025 through April 15

• Consumer cyclical, technology, and energy sectors experienced double-digit declines in April

• A majority of US sectors were down YTD through to April 15th, with only 2 of 11 sectors in positive territory

• Strong corporate earnings and optimism about AI-led growth supported equity markets

• Consumer defensive and utilities were the only sectors posting positive returns as investors favoured more economically resilient businesses.

• Information tech stocks led the rally (especially those benefiting from AI advancements)

• We saw gains from this in S&P500 and NASDAQ in the remainder of Q2

• Growth stocks underperformed value stocks, while the “Magnificent Seven” stocks that buoyed markets in 2023-24 fell sharply in April

• Tesla is one of the larger contributors to this, being down approx. 22% YTD

Canada

• Real GDP growth showed early signs of weakness in April

• Canada saw its trade deficit reach record levels, exports fell ~11–16%, manufacturing and retail weakened, and unemployment rose to ~7%

• Despite headwinds, the S&P/TSX Composite remained strong—outpacing the S&P 500 with a ~9% YTD gain

• The Canadian dollar had a modest rally before recent pressure

• The Bank of Canada left rates at 2.75%, adopting a data-driven, cautious approach given trade uncertainty

Europe

• Non-US developed markets led the way in trailing 12 months ended April 15

• Equity markets have outperformed most major global markets this year, however ended June in red after trade tensions and geopolitical worries dampened sentiment ahead of the July 9 deadline for U.S. trade negotiations

• EM equities gained ground for the ytd but remain well behind US equities over the past year

• Turning to monetary policy, the European Central Bank delivered its eighth rate cut in twelve months, with the headline rate declining from 4% to 2% over the period

Global

• Regional tensions—especially Israel‑Iran hostilities—spurred spikes in oil and gold prices, though broader supply disruptions were avoided

• After volatility, bond yields stabilized globally, and fixed income markets posted steady gains

• Defensive areas like healthcare, utilities, and consumer staples saw greater interest, while growth tilted toward AI and tech sustainably

• Japanese equities gained during the month, despite geopolitical conflicts and global trade tensions

• Chinese equities delivered positive returns

If you have any questions please don't hesitate to reach out!

Sources: Fidelity Investments, YahooFinance, Morningstar, iA Clarington

The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This blog was prepared by Alison Cannell, for the benefit of Alison Cannell, Financial Advisor with Cannell Wealth Management Inc., a registered trade name with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this blog comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability.

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