Q2 2025 MARKET COMMENTARY
The second quarter of 2025 wound up being an incredibly volatile period – especially for the month of April driven by “Liberation Day”, in which President Trump announced reciprocal tariffs on trading partners of the United States. A panic induced sell-off in global stock and bond markets motivated the President to then call for a 90-day delay in implementation until July 8th. Markets have since been able to recover and in some cases have now revisited previous all-time highs (To be discussed below). While we are still a long way off from resolution on the trade front, perhaps markets have become more comfortable with the uncertainty sewn by the US and its new policy agenda. In other news, the job market seems to be at a bit of a cross roads with data between private and public reports signaling very different environments. Perhaps this is an area to continue to monitor as job confidence, rising wages, etc. are a large contributing factor to consumer spending. Starting this quarter, we’ll also begin to include commentary on crypto markets as the Trump Whitehouse/agenda appears more open than previous regimes to the adoption and use of these tools/technologies.
Equity
We’ll lead off with Public Equities as it’s the most talked-about area of investing and relevant to just about every investor in our practice. For Q2, the S&P 500 had a challenging start to the quarter but rebounded fiercely in May and June posting a +5.72% YTD return through 6/27/25. The Nasdaq, with its tech champions, finished up as well +7.80% YTD through 6/27/25, and the Russell 2000 which represents US small caps remained negative -1.31% YTD through 6/27/25. [1]
Our philosophy around owning Public Equities has encompassed the following 1) Focus on owning the best companies – the strategy of indexing, where you effectively own all companies (Great, average & poor) has never made a lot of sense to us 2) Look to invest in businesses that exhibit pricing power due to limited competition 3) Look for businesses that are durable that can survive hard times – stock prices go up and down, but a durable business won’t go bankrupt and will increase in value over each economic cycle 4) Where we feel we have competency, own the individual companies, where we don’t utilize a passive basket like a sector ETF or active management through a mutual fund. Also, as part of our investment philosophy we prefer to invest new capital into areas that are unloved or what I refer to as “Orphaned” and wait for the market to rotate capital into that area. With experience has come the understanding that while the broad indexes represent returns for a broad basket of stocks, under the surface there can be a lot of turbulence sector to sector and stock to stock. We want to position our clients where we believe the puck will be going and try to arrive there before the herd shows up and bids prices much higher.
Q2 was an incredibly volatile quarter, but unlike pervious periods of volatility in that it was largely driven by one man – Donald Trump — and in a fashion where he could simply move markets with a Tweet or press conference. When markets are being whipped around by such a fickle personality, as investors, we don’t feel compelled to make large portfolio changes as one could easily find themselves jammed up by getting the timing wrong. Our opinion was to largely remain invested and make incremental changes as we felt they were warranted. Due to Compliance restrictions, we aren’t able to give our specific purchases and sales in the quarter, but we can provide color to assist with understanding our thinking. We trimmed positions in Gold Miners, Cell Towers, Tobacco, Utilities, Beer/Wine and Uranium. We also sold out of one and trimmed another of our commodity trading exchanges. Finally, we sold out of a Medical Device ETF to free up cash. Each of these cases was unique – a few of the sales were simply a result of price targets being attained, while others were motivated by a need to raise cash out of the portfolio to purchase what we considered a relatively better opportunity on a go-forward basis. On the buy side we added to Consumer Staple companies in Food and Household Cleaning Products, we added a new additional Gold Mining position to our existing 2 already in the portfolio, and we took an opportunity to buy back shares of a biotech position that we took profits in Q1. We were most excited about the opportunity to upsize our position in a credit bureau name widely known by consumers that was knocked down by comments from Bill Pulte, the new head of the FHFA. We had read research on the company during 2024, had purchased it for our model in February of 2025 and watched it rise quite nicely until this recent sell-off. As always, we checked our homework and decided that nothing had materially changed for the company and the sell-off induced by one of Trump’s appointees was a gift. So, we decided to buy in excess of 1 million dollars’ worth at prices that were even better than our original entry into the stock back in February.
Private Equity as usual, didn’t move a whole lot in the quarter. The IPO market might as well have been on holiday in the month of April as no one of note opted to go public in the teeth the volatility that month. However, we saw a bounce back in May and June with two tech offerings that have done very well since their market debuts. For now, we are content with our strategies focused on the Secondary Markets where investors are clamoring for liquidity and are often forced to sell their positions at discounts to the funds we own. If the IPO market can continue to pick up steam as we go through the year and start to attract listings from some of the most sought-after private companies waiting in the wings to go public, private equity returns may begin to take a nice jump up.
[1] Bespoke Report 6/27/25
Real Estate
Returns in Commercial Real Estate have been tough sledding since Q4 of 2022 – as interest rates have risen, so have Cap Rates, causing the value of buildings to fall. However, we are seeing green shoots that lead us to believe we’re seeing a bottoming process. We’ve seen an uptick in new investment coming into the area and for those brave enough we are even seeing Office Buildings being purchased. Perhaps more interesting have been the cracks that we are starting to see in the single family residential market. Due to the generationally low mortgage rates in the early 2020s, homeowners have largely chosen to stay in their existing homes, causing for sale inventory to be incredibly low over the last three years. Typically, when mortgage rates double as they have in recent years, we would see an adjustment lower in for sale prices, but that has not been the case due to steady buyer demand and incredibly low inventory for sale. This dynamic however may finally be changing, not so much because listings are suddenly flooding into the market, but rather, buyers have started sitting on their hands. One San Diego realtor recently commented that our local market in recent years has had about 3 months’ worth of inventory (Meaning it would take 3 months to clear all of the existing homes for sale from the market), currently we are looking at 7 months of inventory. For those sellers that aren’t particularly motivated, they’ll simply pull their listing off – but for those that need to sell, you’ll start to see price reductions… and perhaps negative comps, something we haven’t seen in quite a long time. Could this change in buyer behavior be a short-term blip due to market volatility? Perhaps, but we think it’ s combination of the level of unaffordability (Price of the home combined with cost to finance) as well as confidence around employment. Who wants to run out and make a new major purchase if they aren’t fully confident in the job that produces the income to service it?
Debt
Debt markets continue to be – boring. We saw some spread widening in credit markets in early April that coincided with the sell-off in the stock market, but with Trump putting the 90 day pause on tariffs, spreads tightened right back up. The yield curve as it pertains to the US Treasury market has been a little all over the board, rising with tariffs in early April only to head lower in June as the market was trying to suggest a possible Fed Rate Cut in July (Something we don’t agree with). For now, we have not seen a breach of the 3.6% to 5% range on the US 10 yr. treasury – if at some point we do, we believe it will not be a positive development. Either Inflation has become a problem, or we are in a recession – neither would be good for our client portfolios. We recently brought a new lending idea to clients in the month of June. We believe it’s an interesting time to consider lending to certain non-cyclical areas of the Commercial Real Estate Market. Values are down, meaning the equity compression has already happened, lessening the risk of further drawdowns. Second, interest rates are still attractive – the Fed may begin cutting rates again at some point, but we don’t see much downside unless the economy really goes into a tailspin… and if it does our guess is debt will outperform equity anyways. With capital appreciation being touch and go of late, perhaps investors should consider building more yield into their return profile.
Digital Assets
As promised earlier, we wanted to provide some commentary on the crypto market moving forward and for this Q2 write up, we were fortunate to have a new Act from Congress to talk about. On June 13th, the US Senate passed the GENIUS Act (Guiding and Empowering the Nation for Innovation with the US Stablecoins) marking a pivotal moment for digital assets. Like most of our readers, I had heard the term “Stablecoin” but had no knowledge as to what they were or why we needed them – but if Congress felt they were important enough to govern and regulate them, we might as well take a look! Much of what will be penned below comes from our Fintech/Payments expert – Warren Fisher of Manole Capital Management:
“The GENIUS Act will serve as a foundation for the legitimization and supervision of stablecoins. By identifying who can issue stablecoins, the required reserves backing them and creating the framework for their supervision, this formalizes stablecoins as a newly regulated category of digital payment instruments.”
To provide a little bit more context: a stablecoin is a type of cryptocurrency designed to maintain a stable value by pegging it to another safe asset like cash or short-term Treasuries. This mechanism helps to reduce the volatility commonly associated with cryptocurrencies, making stablecoins more suitable for transactions and as a store of value. With The GENIUS Act, not only does it introduce a clear framework for stablecoin issuance, 1:1 backing with safe assets, it also mandates transparency, consumer protection, and anti-money laundering compliance. These measures could boost investor confidence and encourage institutional participation. While more details are expected around consumer protections, operational guardrails, and yield structures, the key takeaway is this: stablecoins are now officially recognized and regulated.
Fisher goes on to write:
“Stablecoin adoption will likely take years to play out. We believe that consumers will need to be incentivized to transact, versus rewards-based credit cards. In our opinion, the best, near-term use case for stablecoins involves large-ticket cross-border payments, and traditional money transfers and remittances (i.e., Western Union, Moneygram, and Euronet). These areas seem to be the most at risk for stablecoin disruption. Stablecoins can remove friction, lower costs and potentially help lessen volatile currency fluctuations, but it will not solve all problems with the movement of money. In addition to money remittances, we see sizeable opportunities for stablecoins to assist businesses streamline their cross-border payments.”[1]
Even if stablecoins don’t yet play a role in our personal finances, this could become a powerful tool for multinational corporations and financial institutions to utilize. For investors, this is a moment to watch closely. Regulatory clarity often precedes innovation, and in crypto, that can mean opportunity.
Could the first 6 months be a microcosm for the next 3 ½ years of Trumps’ term as President? Only time will tell. Thus far the Presidency feels more like a drama-filled reality TV show than what we’re used to as investors. Markets generally operate best under certainty and although markets have rebounded handily from the heart attack in April, do any of us feel more certain that we are on the right path? I came into the year largely neutral as politicians say a lot on the campaign trail but often don’t follow through once in office. From the handling of Trade Policy to the lack of spending control exhibited in the “Big Beautiful Bill”, my concern is we are being led down a path by a President who frankly does not understand economics and could potentially be the exact wrong leader for the country at a critical time. If we see our capital markets and companies succeed over the coming years, it may not be because of but more likely in spite of our government.
[1] Manole Capital Q2 Investor Letter
[1] Bespoke Investments Year End Report
PO BOX 231030, Encinitas, CA 92023 | 760-602-6920 | info@koawealth.com
This material should not be considered a recommendation to buy or sell securities or a guarantee of future results. Koa Wealth Management, LLC is a registered investment adviser. Registration does not imply a certain level of skill or training. More information about Koa Wealth Management, LLC can be found in our Form ADV Part 2, which is available upon request or by visiting our website at www.koawealth.com/disclosure. Past performance is not a guarantee of future results. All investment strategies have the potential for profit or loss; changes in investment strategies, contributions, or withdrawals may materially alter the performance and results of a portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be suitable or profitable for a client’s investment portfolio.
