Bonds and Tariffs: Key Catalysts Shaping the Second Half of 2025

were among the hardest hit when tariff fears peaked in April, but now they're leading the charge, pushing the Nasdaq and S&P 500 to fresh record highs.

Growth stocks like Nvidia and Palantirer hitting new highs, but it's not just.

Value names like Dollar General and also Financials, including JPMorgan, have also been among Wall Street's hottest trades.

Yet the Dow Jones is still lagging, held back in part by Volatile trading and UnitedHealth, which has been a drag on the index.

Well, joining me this morning right.

After the US jobs report is Eric Bailey, wealth manager and executive managing director of the Bailey Group at Stewart Partners.

Good morning and thank you so much for joining me.

Thanks.

Nice to be here.

Well, here we are.

We are a few days into the second half of 2025, and the first half has been quite a stellar performance for the US market.

So first and foremost, what do you make of where we are right now and do you think the sector performance underlying the gains in the major averages will hold?

I do.

It's impressive.

After what you just described happened in April, this recovery in US equities, and it's broad-based.

Obviously growth has led the charge, but if you look at the indexes, value is actually still are performing, and that's to me very positive is that you're getting a wide range of of stocks doing quite well.

Sectors you're seeing more obviously technologies come up, but you're seeing industrials doing very well.

Consumer.

Uh communications consumer cyclicals doing well, so it's broad based.

Yeah, and it's so important to look under the hood to see where the gains are and also where the laggards are as well.

But when we take a step back and look at the global forces, the global markets, the other markets are doing well, and we have to keep in mind S&P 500, Nasdaq at record highs, but what's happening in the other developed markets?

You have very strong returns.

So if you break down Japan, Europe, you're seeing returns in certain European markets well north of 20%.

Sectors over there are doing extremely well.

Defense sector, you're seeing stocks that have doubled this year, and I think that's a trend that continues.

You've seen a kind of reallocation of global. global assets really moving out of the dollar assets out of dollar bonds, dollar equities going into European equities, European bonds, Asian equities.

I think that continues and certain sectors I do like over there like I mentioned defense as we just saw European countries are going to increase spending by 5%.

That's a huge sum of money.

It is spread out over several years and most of that I think will stay.

In the continent and so those sectors could perform well for years to come.

Yeah, and you just mentioned defense, and that was a sector that was in the spotlight given the geopolitical tensions, the out were happening, and we still continue to monitor what's happening regarding Iran as well as Israel.

But at the same time you mentioned bonds and where we are right now on the 10 year, it is lower than when we were at the end of 2024.

But where do we go from here when it comes to bonds?

Yeah, I think bonds is is the big issue right now because you have this dynamic of, as we just saw this morning with the job number, pretty strong economic numbers, and that's going to put the Fed in a challenging spot because there's a lot of pressure on the Fed by the administration to lower rates, but on the other hand they're seeing an economy that is strong, inflationary concerns.

And so to me that's the, you know, that's the key is if the rates can hold or go lower, that's very positive for I think assets in general, but that's something I'm watching closely.

Yeah, and we hear a lot of noise behind us because we're fast approaching the market open here at the New York Stock Exchange, and I think this is a good time to pause and talk about separating the noise from the signal because that is something that's very important.

But as you also mentioned, there's still tariff uncertainty as we head into this holiday weekend, and we don't know what the implications are and what the impact is going to be on the US economy.

So what are some of the key catalysts that you're watching as we head into the second half?

Yeah, I mean, the markets are very lofty right now.

Valuations are very high.

It seems investors have just really been comfortable now adding risk to their portfolios.

We've seen it all across the board and as you mentioned, there are these big issues out there that could really impact the global economy, could impact the financial markets, and so that's what I'm telling my clients is let's be a little cautious here as we head into the summer months.

And I know an area that you pay particular attention to is growth versus value, but when you take a step back and look at your to date gains for large cap, mega cap growth as well as value, we are seeing lofty levels here.

So what's going on underneath the hood?

Yeah, as I said earlier, you know, we've seen a broader base of returns this year, and I think that's very positive value which has lagged growth for numerous years, has outperformed now for close to 9 months, really going back to the last summer.

Um, corporate earnings continue to be strong, and you know this is a key month, right?

We're going to get the 2nd quarter results, and those are going to be very important.

We're going to see which companies, what sectors are still performing in this environment of of tariffs, of a consumer that's a little more cautious right now.

And so my advice is to always be diversified, you know, by you know strong companies, good balance sheets, and obviously that have proven track records.

Yeah, and earnings, that is something that we're counting down to not just for the big names, but also other names, especially given some of the outperformance we're seeing in small caps because while the Nasdaq and S&P 500 are seeing records, the Brussel 2000 has also been out.

Forming and given the fact that some names in specific sectors, they were not able to issue forecasts in the previous earnings season.

This is something that we're keeping our eyes on.

So where are you a bullish and where are you perished when it comes to some of the sectors for earnings?

Sectors for earnings, uh, well, like I said, I like industrials, you know, if you look at big themes out there, less regulation, uh, AI, so technology, industrials, I do see lower interest rates, so financials to me. could really benefit.

Obviously we're having strong financial markets that should be positive for a broad base of financial firms.

The Fed just lowered certain requirements of the big banks, and this week we saw the big banks tremendous freeze up their capital, and they use that for dividend increases, stock buybacks, and I think that's going to spread out throughout the financial sector.

So those are some of the areas I like.

And we have less than 60 seconds here, but before I let you go, based on what we're seeing across the major stock averages, are we going to see a healthy rotation or is this a time to be concerned?

I would not say concerned, I would say you need to be cautious right here.

It seems the market's investors have been lulled into this very, very, you know, positive environment.

It's really been incredible the last several weeks.

And so, um, if you, if your portfolio is overweight now, stocks, I would take some, you know, take a few profits, raise a little bit of cash because I think we will see some volatility.

You never know what's going to happen in the markets.

Um, and we're at these high levels, and the question is can we continue on this strong upward projectory or are we going to see a little bit of a pullback?

Well, if the first half was any indicator when it comes to volatility, then perhaps we will have to enter the second half with caution.

So thank you so much for joining me and have a wonderful holiday weekend.

You too.

Thank you very much.