Quarterly Newsletter - Q3 2025

Market Performance

U.S. Stocks: Impact of Tariff Policy

The second quarter got off to a rocky start when President Trump implemented a sweeping new tariff regime on April 2nd. The policy included a baseline of 10% on all imports with additional country-specific levies. The market response was swift with the Russell 3000 touching an intraday low on April 7th more than 21% below its 2025 high¹. The volatility continued when the majority of these tariffs were paused on April 9th. Stock indexes saw rebounds ranging from 7.9% on the Dow Jones Industrial Average  to more than 12% for the NASDAQ 100³.

International Markets: Showing Resiliency

Even with the tariff pause, the geopolitical uncertainty created by the US back-and-forth helped the outperformance of international stocks continue in the second quarter. International indexes were not spared the Liberation Day volatility, but the subsequent rebound put the MSCI All Countries ex-US Index up 18.32% for the year⁴ compared to 5.05% for the Russell 3000⁵ through the end of Q2. With the US suddenly an unreliable partner internationally, investors bet that increased domestic investment by European countries would reinvigorate stagnating economies.

Geopolitical Risks

Just as markets seemed to be adjusting to the new tariff regime, the quarter ended with military escalation in the Middle East. The conflict between Israel and Iran drew in the US as well and the flight to safety trade was on as oil prices spiked and the GLD ETF touched its 2025 highs again. Just as soon as it started, a cease-fire seemingly forced by the US led to a relief rally that allowed US stocks to hit new all-time highs again to end the quarter.

Our Thoughts on the Markets

"Dumb Money” Wising Up?

In the lexicon of Wall Street, retail investors have often been referred to as “dumb money” as compared to the “smart money” of larger institutional investors. Non-professionals were often considered prone to making emotional decisions to buy or sell, timing the market, or concentrating large positions in single stocks. However, recent trends seen in the post-pandemic retail trading boom seem to indicate that this cohort of investors has gotten increasingly resilient to market turmoil.

When the Liberation Day tariff announcement caused markets to free-fall, retail investors not only avoided panic selling, but actually added a net $4.7 billion dollars amid the uncertainty. This stands in contrast to institutional money managers who reported being their most bearish since 1997 in a survey done by Barron’s. Even more retail dip buying followed in the wake of the US credit rating downgrade by Moody’s. Beyond the short-term market moves, the Wall Street Journal also reported that the average contribution rate in 401k plans had climbed to a record of 14.3%.

Are investors becoming more financially literate or have markets just not tested their resolve as much in recent years? There is an impulse is to compare the selloffs during the pandemic, the 2022 rate hike cycle by the Fed, or the recent tariff announcements to the 2008 financial crisis and conclude that the more recent events have not seen losses as large or as lengthy as 2008 and 2009. However, the uncertainty of March 2020 was at least comparable to the fall of 2008, especially given the physical health component. During 2022, some of retail’s favorite names saw staggering losses including Meta (-73.7%)⁶, Tesla (-72.7%)⁷, and NVIDIA (-62.7%)⁸. Currently, traditional safe haven assets like US Treasuries are quietly under pressure with the price of the TLT ETF still down 41% from its all-time high in 2020⁹. These have hardly been investment environments for the faint of heart.
 

US Supremacy Tarnished?

The combination of rising geopolitical risks, uncertainty around US trade policy, and fiscal instability have led to a broader flight from US assets during 2025. The GLD ETF is up 25.9% through the first half of the year¹⁰, the dollar has been trending down throughout the second quarter¹¹, and international equities have finally shown some life with the MSCI ACWI ex-US outperforming the S&P 500 by 12.82% year-to-date¹².

While it is easy to point the finger at the recent tariff announcements, the simultaneous spike in interest rates, the drop in domestic equities, and the decline in the dollar point to the events in April being the tipping point for a longer-term trend that had possibly reached an inflection point. The fact that budget deficits have remained elevated during a robust economic environment has led to increased supply of US debt as foreign demand has been muted, especially on longer-term bonds. 

Meanwhile, the Federal Reserve has held interest rates steady. Economic data has been resilient even if slight cracks had begun to show earlier this year. The uncertainty of what will happen with tariffs and if that will lead to a renewed round of inflation later this year has been pointed to as justification for the lack of rate cuts. The Fed held rates steady in June, but Fed Governors Waller and Bowman have both recently called for rate cuts to resume as soon as July if conditions remain stable. This could provide some relief on the interest rate front, but other issues with the US fiscal situation persist.
 

Schechter in the News

Arax Advisory Partners Acquires $4 Billion as of 5/31/25 RIA Schechter Investment Advisors - Arax Investment Partners, a wealth management platform supported by RedBird Capital Partners, has acquired Schechter Investment Advisors.  Read more

Forbes | Best-In-State Wealth Advisors 2025 - We are proud to share that Bernie Kent, JD, CPA, PFS and Aaron Hodari, CFP®, CIMA® have been recognized on the Forbes 2025 Best-In-State Wealth Advisors list—an honor that highlights the meaningful and impactful work they do every day on behalf of our clients. Read more  

How to Pay Less in Taxes (For UHNW) - In a recent episode of How I Invest, Aaron Hodari, Managing Director at Schechter, shared his expertise on alternative investments, wealth management strategies, and the importance of financial stewardship for high-net-worth families. Schechter has built a reputation for its innovative approach to portfolio construction and tax optimization, helping clients protect and grow their wealth across generations. Watch the video  

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1.  Russell 3000 - 3,511.90 intraday high on 2/19/25 and 2,745.36 intraday low on 4/7/25  
2. Dow Jones Industrial Average - 37,645.59 on 4/8/25 close to 40,608.45 on 4/9/25 close
3. NASDAQ 100 - 17,090.40 on 4/8/25 close to 19,145.06 on 4/9/25 close
4. MSCI - 991.87 closing value on 6/30/25 and 838.32 closing value on 12/31/24
5. Russell 3000 - 3,526.40 closing value on 6/30/25 and 3,356.82 closing value on 12/31/24
6. ME  TA - $338.54 on 1/3/22 and $88.91 on 11/3/22
7. TSLA - $399.93 on 1/3/22 and $109.10 on 12/27/22
8. NVDA - $30.12 on 1/3/22 and $11.23 on 10/14/22
9. TLT – closing price of $88.25 on 6/30/25 and adjusted closing price of $149.76 on 8/4/20
10. GLD - $304.83 closing price on 6/30/25 and $242.13 closing price on 12/31/24
11. US Dollar Index - 96.88 closing value on 6/30/25 and 108.49 closing value on 12/31/24
12. MSCI - Up 18.32% - 991.87 value on 6/30/25 and 838.32 closing value on 12/31/24; S&P 500 - Up 5.50% - 6,204.95 closing value on 6/30/25 and 5,881.63 closing value on 12/31/24
     

Disclosure
Schechter Investment Advisor is a dba of Arax Advisory Partners, an SEC registered investment adviser whose principal office is located in Denver, Colorado. Opinions expressed are those of Arax Advisory Partners and are subject to change, not guaranteed, and should not be considered recommendations to buy or sell any security. Past performance is no guarantee of future returns, and investing involves multiple risks, including, but not limited to, the risk of permanent losses. Please be advised it remains the responsibility of our clients to inform Arax Advisory Partners of any changes in their investment objectives and/or financial situation. This commentary is limited to the dissemination of general information pertaining to Arax Advisory Partners’ investment advisory/management services.

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