Trade, conflict, and the case for staying invested in 2025

Turbulence and opportunity: Market insights for the second half of 2025.

Turbulence and opportunity: Market insights for the second half of 2025.

In his 1949 classic The Intelligent Investor, Benjamin Graham came up with a clever way to explain the ups and downs of the market: Mr. Market—a moody business partner whose emotions swing between optimism and fear. Some days, he offers a fair, rational view of your investments. Other days, his anxiety or excitement gets the best of him.

Now that we’re halfway through 2025, with a world buffeted by tariff announcements and geopolitical crises, let’s pause to consider what Mr. Market has had to tell us about the meaning and impacts of these events so far. 

Do tariffs still matter?

Back in April, when we shared our Q1 recap, trade tensions had stirred up volatility in investor portfolios. Since then stocks around the world have staged a comeback, with large U.S. stocks climbing into positive return territory year-to-date, and their international peers maintaining strong relative performance. 

Mr. Market appears to believe that the economic impact of tariffs will be limited. There may be good reason for that, as the Trump administration has walked back its most extreme threats, and the U.S.-U.K. framework for negotiating trade— featuring a 10% baseline tariff and tariff-free quotas on certain goods in areas like autos, steel, and aluminum— is being viewed as a template for other major trade partners.  

That said, Mr. Market may be getting ahead of himself.  The full effects of tariffs on inflation are still unfolding. A rise in inflation could push policymakers to keep rates higher for longer, slowing economic growth and weighing on markets by raising borrowing costs. Still, a recession has yet to surface in the data, and risks remain well balanced for diversified investors.

What does Middle East tension mean for investors? 

Recent airstrikes involving Israel, the U.S., and Iran have drawn global attention; however, world markets remained relatively steady. Over the past month, the S&P 500 has edged toward all-time-highs, suggesting investors don’t expect further escalation. Market participants appear confident that the fighting will be somewhat contained, and news of a ceasefire has further eased fears about economic disruption.

Stock and bond markets have largely shrugged off the conflict, but oil prices are more reactive to instability in the Middle East. The region is home to many key exporters, as well as the Strait of Hormuz, a major global shipping route. Oil prices spiked in early June as Israel-Iran tensions intensified, but have since dropped sharply, reflecting both Iran’s limited ability to respond and the announcement of a ceasefire.

A look ahead...

The lesson Mr. Market keeps offering is that patient, broad-based investing beats reactive guesswork. Genuine hazards remain: Trade frictions could flare again, geopolitical surprises lurk, and any stumble in corporate earnings would challenge current market index levels. 

Yet with inflation decelerating and the Federal Reserve signaling it may trim rates before year-end, there’s a growing case for further upside in portfolios. Staying invested, diversified, and focused on long-term goals ensures Mr. Market’s mood swings are a source of opportunity, rather than regret, for disciplined investors. And our investing team is here to keep you up-to-date on macro-trends and market insights as they evolve.