As we approach the halfway point of 2025, global markets have shown resilience amid persistent economic uncertainty. While the first quarter was characterized by muted or even negative equity returns in many segments, the second quarter—so far—has delivered a sharp rebound, particularly in technology and international equities. The chart below shows performance for Exchange Traded Funds for different asset classes to assess returns from March 31, 2025 to May 31, 2025 and year to date through May 31, 2025.
U.S. Equities: Tech Surge Leads the Way
Large-cap technology stocks have been the standout performers this quarter. The Nasdaq-100 ETF (QQQ) has surged 10.7% QTD, helping it move into positive territory for the year at +1.7% YTD, despite earlier weakness. Broader large-cap indices like the S&P 500 (VOO) and total market index (IWV) have also posted solid quarterly gains of 5.4%, though their YTD returns remain modest at +0.9% and +0.4%, respectively.
Value-oriented stocks, represented by VTV, remain flat to slightly down for the quarter (-0.8% QTD) but are still up 1.8% YTD. Small-cap stocks (IWM), while gaining 2.8% QTD, are still underwater with a -7.0% YTD return, reflecting ongoing challenges in that segment.
International Equities: The Bright Spot of 2025
International markets have been the clear leaders so far this year. Developed market stocks (SPDW) are up 9.3% QTD and an impressive 16.6% YTD, while fundamental-weighted international stocks (FNDF) have gained 8.0% QTD and 17.5% YTD. Emerging markets (EEM) have also contributed positively, up 4.2% QTD and 8.8% YTD.
Bonds: Modest Gains with a Mixed Outlook
Bond markets have seen modest and stable gains. Intermediate-term (VGIT) and inflation-protected bonds (VTIP) are each up 0.4%–0.5% QTD, with 3.5% YTD returns. The broader bond market (BND) is slightly down for the quarter (-0.3% QTD) but still up 2.5% YTD. Short-term bonds (SCHO) are up 0.6% QTD, maintaining a 2.5% YTD gain.
Alternatives: Mixed Results
Real estate (VNQ) has slipped -1.3% QTD but remains slightly positive for the year (+1.3% YTD). Commodities (DBC), which had a strong run in 2024, are down sharply this quarter (-7.2% QTD) and remain negative YTD (-2.3%).
Balanced Portfolios: A Reversal in Momentum
Diversified asset allocation funds have posted strong quarterly returns, with the 80/20 stock-bond mix (AOA) gaining 5.1% QTD and 4.9% YTD. Even more conservative mixes like AOK (40/60) have gained 2.0% QTD, bringing YTD returns to 3.3%, highlighting how a well-diversified portfolio has benefited from this quarter’s broad-based equity rally.
Takeaway
The strong QTD equity performance has helped many portfolios recover from a sluggish first quarter. The rally has been driven by a rebound in technology and continued strength in international equities, while bonds have offered modest, steady support. As always, we emphasize the importance of diversification and discipline—especially when market leadership rotates and uncertainty persists.