MARKET COMMENTARY
The second quarter of 2025 began with significant uncertainty as President Trump’s “Liberation Day” tariff announcement on
April 2 introduced a much broader and more aggressive set of tariffs than investors had anticipated. This triggered a sharp
selloff initially, however, after markets reacted negatively, the administration softened its stance, pausing reciprocal tariffs for
90 days and ultimately reached a preliminary trade agreement with China. This reversal restored investor confidence and fueled
a robust market rebound.
GDP in the prior quarter fell by 0.5% due to higher imports which likely occurred as a result of concerns around future tariffs.
The labor market remained relatively stable, with the unemployment rate holding at 4.2% in May. Headline CPI inflation rose
to 2.4% in Q2, with core CPI at 2.8%, both remaining above the Fed’s 2% target and consumer inflation expectations also
moved higher with the New York Fed’s survey showing a one-year-ahead median prediction of 3.2%. At its June meeting, the
Federal Reserve held rates steady, maintaining a cautious approach as the potential for tariff-driven inflation pressures
continued to be a focal point. Market expectations shifted toward a potential rate cut in September, reflecting the Fed’s
balancing act between managing inflation risks and slower growth. Looking forward, the Federal Reserve lowered their median
GDP projection for 2025, from 1.7% at their March meeting to 1.4% in June. Likewise, the Fed is projecting slightly higher
unemployment of 4.5% for 2025 and slightly elevated inflation from current levels.
Bond markets experienced heightened volatility as treasury yields spiked in April on fiscal and inflation fears but later stabilized
as trade tensions eased, with the 2-year and 10-year finishing the quarter 16 bps and 2 bps lower to 3.72% and 4.23%,
respectively. High yield bond spreads narrowed by 59 bps, and the Barclays Aggregate Bond Index finished the quarter up
+1.2%.
After a steep selloff in April, U.S. stocks staged a dramatic recovery with the S&P 500 ending the quarter up +10.9%, led by
growth stocks (Nasdaq), which returned 18.0% compared to +5.5% for value stocks (Dow). Non-U.S. equities, represented by
the MSCI EAFE Index and MSCI Emerging Market Index, finished the quarter +12.0% and +12.2%, respectively,
outperforming relative to US markets.
ALTERNATIVE INVESTMENT COMMENTARY*
Hedge funds concluded the first half of 2025 with positive results, as concerns about recession and inflation subsided. For the
quarter, the HFRI Fund-of-Funds index rose 4.1%. Trade tariff policy was positive for markets this quarter, as many countries
had their implemented tariffs suspended during ongoing trade negotiations. Global investors had a significantly greater appetite
for US shares, with many AI-related stocks experiencing a resurgence of interest. As a result, high beta strategies ‘Equity
hedged’ and ‘Event Driven’ were among the best-performing strategies for the quarter as the HFRI Equity Hedged index and
HFRI Event Driven index rose by 7.7% and 5.9%, respectively. The “all-weather” strategies continued another impressive
quarter as the HFRI Equity Market-Neutral and HFRI Multi-Strategy index rose 4.3% and 2.0%, respectively. Similar to the
various indices, many of the core managers across the Family Management platform performed well during the quarter.
*HFRI Performance taken as of July 10th, 2025.
This material contains the current opinions of Family Management Corporation and its affiliates (collectively, “FMC”), which may change without notice. This material is distributed for informational purposes only. It is not a recommendation or offer of any investment or strategy. Nothing herein shall be considered a solicitation to buy or sell, or an offer to buy or sell, to or from any persons in any jurisdiction where such solicitation, offer, purchase, or sale would be unlawful. Information contained herein has been obtained from sources believed to be reliable, but are not guaranteed. FMC provides no guarantees regarding the performance of any investment or strategy. Investing entails risks, including possible loss of principal. Past performance is no guarantee of future performance and individual client results will vary. No part of this material may be reproduced in any form, or referred to in any publication, without the express written permission of FMC.
