By: Matt Garrott
The S&P 500 jumped almost 11% this quarter while US bonds gained roughly 1%. Diversification returned with gusto as developed international stocks were up almost 20%, emerging markets stocks popped 15.5%, and international bonds saw a 7% return. The US Dollar has declined 11% year-to-date, bolstering already strong international returns. The big winners this quarter are the cherry-pickers as this quarter has a data set and time horizon to fit any story you want to tell. The S&P 500 was 19% off its all-time highs at one point in April, delighting the bears. It ended the quarter back at all-time highs, relieving the bulls. The whipsaw headlines were dramatic, but our view is that investors should measure their success in decades, not quarters.
A story that doomscrolling investors won’t find in their social feed is the flat returns for municipal bonds this year. The bottom line is that municipal bonds have been facing a heavy technical headwind, even moreso for individual bond buyers. Supply and demand dynamics are a major driver of municipal bond prices. Record supply came online in 2024. Through the first six months of 2025, supply is about 15% higher than that. Municipal bond managers we’ve been talking to expect at least some of this supply is pull-forward issuance from select sectors worried about their tax-exempt status (so they issue now in case they are cut off later), higher project costs due to inflation, and strong state and local balance sheets allowing for more borrowing. Fundamentals are strong, but demand isn’t keeping up with increased supply.
We don’t usually comment on the Federal Reserve, but JPMorgan had some good insight that should resonate with long-term investors. The Federal Reserve is holding rates steady for now as speculation swirls regarding how US policy will impact employment and inflation. They are in a “wait and see” phase rather than risking an overreaction one way or the other. JPMorgan’s Gabriela Santos points out that investors who want to cash out and “wait and see” would do well to note that cash has been one of the worst performing asset classes this year. Investors who hold large amounts of cash but are afraid of putting it to work at all-time highs should beware of “wait and see” as well. For this crowd, she notes that 7% of all market days are at all-time highs and in hindsight, 29% of those all-time highs turn out to be market floors, levels the market never falls below again. Timing the market to avoid pain or maximize potential gain more often leads to anxiety and wasted effort.
Fairway has been busy outside of the investment markets. We brought on two interns for the summer, Ben Perelka and Ethan Waye. Bess Brown earned the Financial Paraplanner Qualified ProfessionalSM designation. Fairway advisors have been quoted in the press this quarter including Cleveland Jewish News, Kiplinger, and MarketWatch. Mark Weiskind was featured on AdvisorHub’s List of Advisors to Watch for the third consecutive year, ranking #24 out of 250. If you haven’t already, consider following Fairway on LinkedIn and Facebook, where we regularly post updates about activities and accolades happening within the firm.
Market Commentary Disclosures
Fairway Wealth Management LLC (“Fairway”) is an SEC Registered Investment Adviser. Registration does not imply an endorsement of the firm by securities regulators nor does it indicate that the adviser has attained a particular level of skill or ability.
This post represents the opinions of Fairway as of the date indicated and may contain forward-looking statements, predictions and forecasts. Forward-looking statements necessarily involve risks and uncertainties, and undue reliance should not be placed on them. There can be no assurance that forward-looking statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. Past performance is no guarantee of future results. Market conditions can vary widely over time and can result in a loss of portfolio value.
This post is prepared using third-party sources. Fairway considers these sources to be reliable; however, it cannot guarantee the accuracy or completeness of the information received. This information is educational and general in nature and is not intended to be, nor should it be construed as specific investment, tax, or legal advice. Charts are provided for the illustrative purpose of general market commentary. No client or prospective client should assume the above information serves as the receipt of, or substitute for, personalized individual advice.
