2025 Mid-Year Outlook: Volatility Comes and Goes, But Growth Stays

Markets have hit new highs.

This did not feel like the case during April when we saw the U.S. market plunge 20% from its high.

With Trump’s tariff policy in full swing, it looked as though 2025 could be a difficult year for investors. However, economic fundamentals remained strong, and the risk of a full-blown recession could be easily managed.

Interest rates were high, but these could have been lowered to stimulate market growth, and unemployment was very low, indicating that the U.S. economy was in good shape.

After much toing and froing, it became clear that there was a lot of posturing, and Trump was really trying to position himself to negotiate better deals rather than aiming to produce everything domestically.

As a result, markets rallied, and we saw a gain of nearly 10% in the U.S. market on 9 April.

This clearly illustrates our point about staying invested and avoiding knee-jerk reactions.

Had you missed that day and panic sold on 9 April, you would now have a -1.8% return from your U.S. exposure, compared to the +7.5% we are seeing today.

The US has experienced its third bear market in just five years – the first being sparked by the Covid pandemic of 2020 and the second by high inflation sparked largely by the Russia-Ukraine war in 2022.

This is a rapid pace by historical standards and, for investors heavily concentrated in the U.S., this volatility was both painful and disorienting.

Yet amid this turmoil, other regions showed strength. The Euro Stoxx 50 rose by nearly 12% year-to-date, and the FTSE 100 posted a modest but steady gain of around 1.3%.

This divergence is exactly why our portfolios maintain broad global exposure. It’s not about predicting which region will win next – it’s about making sure you’re never overly dependent on just one.

Historically, there have been entire decades, such as the early 2000s, where U.S. markets underperformed significantly. During those years, international stocks and commodities helped balance returns and preserve investor confidence.

We don’t build portfolios on assumptions about what might happen this quarter. We build them for durability through many cycles – bull and bear alike.

The U.S. continues to offer compelling opportunities long term – after all, the S&P 500 index is up around 97% since the beginning of 2020, despite the bear markets and upheaval.

But this year’s events have once again shown that diversification is the quiet hero of portfolio resilience.

As trade tensions rise, interest rates fluctuate, and political uncertainty casts a long shadow, different markets respond in different ways. That’s why we continue to rebalance, reassess and maintain exposure across multiple regions and asset classes.

Our Moderate and Adventurous funds, for example, have benefitted not just from European equity strength but also from strategic allocations to gold and short-dated bonds both of which have acted as valuable stabilisers during this turbulent stretch.

In a world that moves quickly and often irrationally, it’s easy to be swept up in short-term drama. But diversification remains your first and best line of defence.

It cushions the blow when a single market stumbles and positions you to benefit when other regions thrive.

At Hoxton Wealth, that’s the foundation of how we manage your investments: with clarity, care, and a steadfast eye on the long term.

Inflation – the biggest worry over the past two years – is finally calming down and returning to normal levels.

In the U.S., it’s cooled to 2.4%, close to the Fed’s 2% target. And in the UK, it has dropped to 2.3% – a dramatic fall from the eye-watering 10%+ levels of 2022.

This matters because lower inflation makes it more likely that interest rates will be cut – which supports stock and bond prices.

We’re no longer in “rate hike” mode – now it’s all about watching for cuts. The U.S. Federal Reserve is keeping rates steady for now but is eyeing cuts in 2025.

The European Central Bank already cut rates back in June, while the Bank of England held steady but could cut as soon as August.

Rate cuts make it cheaper to borrow, help businesses grow, and often lift market returns.

While stocks have been stealing the spotlight, bonds are quietly doing well too. Recent U.S. jobs data showed cooling momentum, boosting expectations for interest rate cuts. That sent bond yields lower and bond prices higher, making them more attractive for income.

If rates do fall, bond prices could rise further. Plus, bonds offer valuable protection in volatile markets.

For investors, it’s a reminder that if you’d written off bonds before, now might be a good time to take another look.

Trade tensions returned to the spotlight in Q2. A new U.S.–China deal kept tariffs at 55% on some Chinese goods but improved rare-earth exports and reduced some trade barriers.

Broader tariff freezes expire on 9 July, which could mean renewed tariffs unless more trade agreements are finalised.

The U.S. also imposed 50% tariffs on steel/aluminium (excluding the UK) and 25%+ tariffs on Chinese autos, appliances and electronics.

Tariffs affect costs for companies, especially in manufacturing and tech. But the recent deals also ease supply chain bottlenecks and strengthen trade visibility. Watch for short-term market reactions – especially around the 9 July deadline.

Bitcoin is hovering near its all-time high of $108,000, reinforcing its reputation as a “digital safe haven.” Meanwhile, stablecoins are gaining increasing prominence. These cryptocurrencies are pegged to stable assets, such as the US dollar, euro, or gold, to maintain a consistent value.

At the end of June, Reuters reported that Circle – one of the leading stablecoin firms – had applied to establish a national trust bank in the U.S., following an IPO that valued the company at nearly $18 billion.

The rise of stablecoins signal greater integration between traditional finance and digital assets, expanding tools and strategies for diversified portfolios.

Gold remains strong as investors look for safety.

Its price rose from $2,624 per ounce on 1 January to $3,326 on 3 July – a 27% increase in the first half of the year.

This is unsurprising, as when geopolitical tensions, wars, or financial crises occur, investors flock to gold as a store of value, driving up its price. It is perceived as a reliable asset when confidence in markets or currencies declines.

Oil prices spiked during recent Middle East tensions but have since stabilised.

Commodities, as well as alternatives like crypto, can add valuable diversification to a portfolio, especially during times of uncertainty.

However, they tend to be more volatile and unpredictable, so while they can help cushion market swings or seize specific opportunities, they shouldn’t form the core of your long-term investment strategy.

There has been a great deal of noise in markets over the past six months. But underneath it all, the message is clear: Inflation is easing, the global economy is healing, central banks are shifting from tightening to easing, and markets have already bounced back.

In this environment, investors tend to fall into three categories:

Type of Investor	What They Do
Bad Investors	Panic and sell during the dip
Good Investors	Stay invested and ride it out during times of volatility
Great Investors	See opportunity, and lean into the market when they see a good buying opportunity

Retail investors who “bought the dip” in U.S. stocks this year have achieved their highest profits since the early days of the Covid-19 crisis, according to data from VandaTrack.

The Nasdaq 100 index, which tracks large-cap U.S. technology stocks, has gained 7.8% so far this year. However, Bank of America analysis shows that an investor who only bought the index after it had fallen the previous trading day would have seen a cumulative return of 31% over the same period.

While no one can predict every headline, here’s what we’re watching:

• Rate cuts likely from the Federal Reserve and Bank of England
• Continued cooling of inflation
• Stronger performance in bonds and equities
• New opportunities in international markets as growth broadens
• Clarity on the tariffs

Markets don’t wait for certainty. They move ahead.

The biggest mistakes investors make is trying to time the market, selling during fear and missing the rebound.

The smartest move is to stay the course, stay diversified, and think long term.