Halfway There, Still Charging: The Mid-Year Market Punch-Up

Jun 30

Markets at the Half: Still Rallying, Still Rational?

The first half of 2025 ends with a bang: the S&P 500, Dow, and Nasdaq all closed at fresh all-time highs on June 30. This rally isn’t just momentum-driven — it’s being underwritten by a Goldilocks setup: slowing inflation, resilient consumer data, and rising expectations for rate cuts later this year.

Today’s University of Michigan consumer sentiment index printed at 60.7, beating expectations and signaling steady household confidence. Inflation continues to ease modestly, and while job growth has cooled, it hasn’t crashed. The Fed is treading carefully, but markets are now pricing in a possible rate cut in Q3 or Q4.

📈 Translation: We’re not in euphoric territory — this is calculated optimism based on soft-landing probability.

Quiet Rotation: Hedged Yield Moves In

While megacap tech continues to dominate headlines, a quieter — and arguably smarter — rotation is happening under the surface: investors are shifting toward hedged income strategies that can deliver yield without exposing them to full-blown equity risk. In a market setting fresh records yet facing soft economic undercurrents, these funds offer a "get paid to wait" profile. Leading the pack is the RH Hedged Multi‑Asset Income ETF (AMAX), but it’s not alone. ETFs like JEPI and JEPQ also blend covered call strategies with blue-chip exposure, offering lower volatility and reliable income streams. These funds are built for this very moment: a late-cycle expansion with uncertainty hiding just around the corner.

  
        Ticker
        Yield
        Strategy
        Expense Ratio
      
        AMAX
        ~7.0%
        Multi-asset income with embedded hedging
        0.84%
      
        JEPI
        ~8.6%
        Equity income with covered call overlay
        0.35%
      
        JEPQ
        ~10.5%
        Growth-oriented income using Nasdaq-100 exposure + call writing
        0.35%

July Watchlist: Catalysts Ahead

Even with the S&P 500 sitting at all-time highs, the second half of 2025 opens with a cautious tone. Several catalysts loom in July that could reshape expectations, test investor sentiment, or reset the Fed narrative.

Jobs Report – Thursday, July 3

Markets expect the U.S. to have added around 120,000 jobs in June — a moderate figure reflecting a softening but stable labor market.

A stronger-than-expected print (150k+) could reinforce the Fed’s higher-for-longer stance, delaying rate cuts.
A weaker-than-expected number (<100k) may stoke recession fears and drive capital toward defensives and bonds.

🧠 Key focus: Wage growth and labor force participation — not just the headline print.

U.S.–China Trade: A Truce, Not a Treaty

Yes, a framework deal was reached in late June — a welcome cooling of tensions between the world’s two largest economies. But it’s not a comprehensive resolution.

China resumed exports of rare earths and industrial magnets.
The U.S. relaxed certain tech export controls and visa restrictions.
However, major tariffs remain, and no enforcement mechanism was included.

Bottom line: This is a diplomatic timeout, not the end of trade risk. Fragile progress can easily reverse under political pressure.

Q2 Earnings: The Real Test Begins

With the S&P 500 hovering near record highs, all eyes are shifting to Q2 earnings season—a period that could fundamentally redefine market direction. Historically, July starts strong (+2.9% on average), but it’s the earnings narrative that often drives performance

Key Stats & Market Pulse

~60% of S&P 500 companies report in July, with Q2 earnings growth expected at 5.7% year-over-year.
According to FactSet, 110 companies issued Q2 EPS guidance, with 54% negative—slightly below their 5‑year average of 57%.
That leaves 46% issuing positive guidance, above long-term averages—signaling cautious optimism across sectors.

  
      Factor
      Why It Matters
    
      Mega-Cap vs. Broad Market
      Market direction hinges on how tech giants (Apple, Amazon, Microsoft) perform vs. smaller sectors.
    
      Guidance vs. Results
      Forward guidance will weigh more than EPS beats — cautious outlooks may spook markets even after solid results.
    
      Sector Rotation
      Weak reports may spark a shift into defensives; strong performance could extend growth leadership.

What This Means

Bull Case: If earnings meet or exceed expectations—especially from the Magnificent 7 and financials—the bull narrative strengthens, stoking further gains.
Risk Case: Guidance downgrades or revenue softness—particularly in cyclical sectors—could spark volatility and push investors toward higher-yield, lower-risk assets.

Your Mid-Year Financial Reset

It’s halftime — a perfect opportunity to reassess your portfolio.

  
      Action
      Why It Matters
    
      🔁 Rebalance
      Check if your allocations still align with your 2025 goals and risk tolerance.
    
      🛡️ Add Hedged Income
      Funds like AMAX offer yield and protection — great for navigating late-cycle shifts.
    
      💰 Stay Liquid
      Have cash ready to deploy if earnings disappoint and opportunities arise.
    
      📉 Monitor Fed Signals
      The tone of policy commentary may shift market direction faster than data alone.

Bottom Line

This isn’t a bubble — it’s a disciplined rally with narrow room for error. Inflation is retreating without stalling the economy, and the Fed is watching from the sidelines—for now. Corporate earnings are holding up, and markets are rewarding resilience more than hype.

But Act II could shift the tone quickly. With jobs data, fragile trade agreements, and Q2 earnings on deck, sentiment could turn on a dime. Investors don’t need to exit—but they do need to tighten risk, stay selective, and demand quality.

Ride the trend—but do it with a seatbelt, a parachute, and a plan that pays while you wait.

Andrew Hauenstein