Christy D. Stoner, AIF®, President and CEO of Uwharrie Investment Advisors offers her quarterly perspective on current economic and market events. We are dedicated to your success and look forward to working alongside you to see your goals achieved. Learn more about our advisors.

Summer (2025, Q2)

As we move into the third quarter of 2025, we find ourselves in the midst of a complex and often conflicting economic environment. The past several months have brought both recovery and hesitation—markets have shown moments of strength, but also signs of deeper concern. While headlines continue to shift quickly, our focus remains on helping you make sense of the bigger picture and what it may mean for your long-term financial goals.

The equity markets regained some ground during the second quarter, climbing back from the declines we saw earlier in the year. Much of this rebound was driven by renewed investor optimism and brief momentum following the U.S. presidential election. However, the broader outlook has since cooled. Current forecasts suggest that the United States economy may grow at a slower pace than originally expected – closer to 1.5 percent for the full year. This moderation reflects persistent inflation, global trade disruptions, and softening business confidence. ¹

The Federal Reserve has chosen to hold interest rates steady for now, maintaining a cautious, data-dependent approach. While many had anticipated a pivot to rate cuts by midyear, stronger-than-expected inflation data and a still-resilient labor market have extended the pause. The Fed has made it clear that it will continue to prioritize long-term price stability over short-term market expectations. For now, monetary policy remains firmly on hold as policymakers wait to see whether inflation can sustainably return to target levels without triggering a deeper economic slowdown. ^{2, 3}

The bond market has reflected this uncertainty. Although inflation has created some headwinds, fixed-income investments have generally delivered more stable performance this year. In fact, many bond strategies have outpaced equities in 2025, particularly as the post-election rally in stocks faded and trade tensions reemerged. Some of the large technology names that had driven much of the earlier market gains also saw a meaningful pullback. At the same time, the usual inverse relationship between stocks and bonds has not always held. Both asset classes have at times moved in the same direction, especially in response to inflation surprises or shifting expectations about Federal Reserve policy. This breakdown in traditional correlation patterns serves as a reminder of the importance of broad, well-considered diversification. ⁴

Global economic conditions also remain mixed. While some parts of Europe have seen modest growth, central banks remain cautious, and concerns over declining exports tied to U.S. tariff policy persist. In China, recent data points to a manufacturing slowdown, with weaker global demand and internal consumption weighing on the country’s outlook. Most central banks across developed markets are taking a similar approach to the Federal Reserve – holding rates steady while watching inflation carefully. These global crosscurrents are adding to market uncertainty and may contribute to further volatility in the months ahead. ⁵

Investor confidence was further tested this summer by events beyond the economy. In July, the director of the U.S. Bureau of Labor Statistics was abruptly dismissed following the release of disappointing jobs data. The timing and nature of the move led to concern among economists, policymakers, and investors that political interference could undermine the credibility of government-reported statistics. Markets depend not only on data, but also on trust in the institutions that report it. If that trust begins to erode, it becomes more difficult to interpret economic trends and build forward-looking strategies. ⁶

Despite these challenges, there are still reasons to remain grounded. Market volatility is uncomfortable, but it is not unusual. Conditions change, and markets adjust. The most important factor in long-term investment success is not reacting to headlines, but staying aligned with one’s overall plan. A steady, disciplined approach—built on clear goals and appropriate risk management – can help weather periods like this with clarity and purpose.

Even in uncertain times, history shows that disciplined investors can uncover opportunity by remaining patient and intentional. Our team is here to help you navigate these conditions with care and perspective. Whether you are revisiting your financial plan, assessing your portfolio strategy, or simply seeking clarity during a time of change, we welcome the opportunity to connect. Thank you for your continued trust and partnership. It remains our privilege to support you through every stage of your financial journey.

Citations

1. Reuters, “Markets rethink Fed rate path as growth forecasts revised,” July 31, 2025.
2. Kiplinger, “July Fed Meeting Commentary: Inflation Still a Concern,” July 2025.
3. U.S. Bureau of Economic Analysis, PCE Index, June 2025.
4. Fidelity Viewpoints, “Quarterly Market Update: Bonds Steady as Stocks Struggle,” July 2025.
5. Financial Times, “Global growth faces headwinds as inflation persists,” July 25, 2025.
6. Financial Times, “Trump’s firing of U.S. labor statistics director raises alarm,” August 1, 2025.

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