There is nothing quite like a dazzling show of fireworks on the Fourth of July. Sparkling bright colors that light up the sky followed by loud pops a fraction of a second later. The uncertainty of what’s coming next — chrysanthemum, shooting star, rings, willow, smiley faces (my fave) — and the surprise when it appears in the sky. And, of course, the grand finale featuring non-stop brilliance and brightness along with thunderous bang after bang after bang. 

What a wild fireworks show it’s been so far this year for the markets. Unpredictability, non-stop headlines popping here, there and everywhere with plenty of oohs and aahs expressed in amazement, wonder, and bewilderment. 

The grand finale? US stocks finished at all time highs.

The first half of 2025 was chock full of surprises, volatility, and uncertainty — everything that markets love to hate. Liberation Day tariff announcements, trade wars, Moody’s downgrade of the United States’ AAA credit rating, concerns over the increasing national debt, the One Big Beautiful Bill Act (OBBBA), escalating Middle East conflict, and just last week, the US bombing of Iranian nuclear sites. 

The year began with a lot of optimism driven by the prospect of interest rate cuts and deregulation under the Trump administration and what that could mean for the markets. That sentiment quickly turned sour with investors losing confidence with the threat of steep tariffs and trade wars, global unrest, the growing federal deficit that would follow extended tax cuts, and the prospect of higher interest rates for longer. US stocks responded by declining nearly 20% from February to April when Liberation Day tariffs were announced. When some tariffs were paused and walked back, stocks rebounded and have since oscillated its way back up from its April lows to new highs.

The S&P 500 and NASDAQ both notched gains of 5.7% year to date, while the DJIA gained 4%. Given all of the momentous events so far, it feels a bit improbable how markets can be up and reaching new heights. 

The reason? Resilience. 

The economy has remained remarkably resilient through a constant stream of negative headlines, from shifting interest rate expectations to geopolitical tensions to policy changes under a new presidential administration. While those headlines have often pointed to increasing risk — higher inflation, worries about the strength of the labor market, potential policy whiplash — the economy has somehow found ways to adapt and adjust. The doomsday, recession-esque scenarios investors had predicted earlier in the year have not materialized (yet) while inflation and unemployment data remain relatively stable, giving investors reasons to be optimistic. 

As the chart below highlights, markets performed significantly better in the second quarter than in the first as investors’ earlier fears around tariffs and inflation began to abate.

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Will the economy’s resilience continue?  

Heading into the second half of 2025, there are still plenty of unknowns, uncertainties, and risks: 

• The 90-day pause on tariffs for most countries is set to end in July, leaving a lot of uncertainty about where tariffs will end up. President Trump has been using this period to negotiate and it’s unclear whether the new deadline will be extended or shortened. 
• The recent trade agreement with China related to Chinese magnets and rare earth minerals is a promising start but many issues still remain unresolved. 
• Geopolitical flashpoints could disrupt commodity markets and drive higher inflation.
• President Trump’s OBBBA, which passed the Senate this week, could add more than $3 trillion to the federal deficit over the next 10 years.
• The Fed may keep interest rates higher for longer if wage growth reaccelerates.
• Unrest in the Middle East could still disrupt oil supply and drive up global oil prices.

Any of these could challenge the market’s resilience and force a correction and recalibration. 

Diversification is key to investor resilience.

Long-term investing shouldn’t feel like an exciting display of fireworks. Successful investing takes time, patience, and the fortitude to keep diversified regardless of what’s in the headlines. 

You can’t rely on just one path, one sector, one country, or one political outcome. As we’ve said again and again, a well-diversified portfolio can help weather uncertainty, providing the resilience you need when markets (and headlines) inevitably surprise you.

That means making sure you have exposure to a mix of asset classes with different risk and return drivers — public and private investments, large and small companies, international and domestic. Case in point: international stocks are up on average 15% year to date, three times that of US stocks, with some countries up more than 30% so far. In years like this one, where uncertainty is heightened and policy impacts unclear, diversification is the single best way to keep your portfolio resilient.

As we mark another July 4th, there is good reason to celebrate the resilience of the US economy and the adaptability of its capital markets. Our advice? Stay invested. Diversify thoughtfully. And remember that the real power of resilience — for an economy or for an investor — comes from being able to adapt and thrive through change, rather than react or retreat in fear.

Wishing everyone a safe and happy Independence Day.

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