2025 Q2 Market Review – The Price of Panic

By Schultz Collins Investment Counsel on July 28, 2025

The past quarter was an eventful one. From the announcement of the Liberation Day tariffs, to the potential rise of inflation and the national debt, to AI displacing human workers, there was a steady stream of news to create heightened volatility in the capital markets.

The Chicago Board Options Exchange (CBOE) Volatility Index, known colloquially as the VIX Index, is often referred to a “fear gauge.” A higher VIX indicates a greater degree of investor fear. During the second quarter, the VIX reached its highest level since the beginning of the COVID Pandemic in 2020.

The unrelenting flow of financial news headlines could cause any investor to feel overwhelmed and invoke profound emotional reactions. Those who resisted the urge to sell in the falling market witnessed the S&P 500 close out the quarter at an all-time high. This rebound illustrates that financial markets often reward long-term investors willing and able to endure short-term market risks.

U.S. large cap equities, as measured by the S&P 500 Index, rose 10.94% for the quarter, and 15.16% for the trailing twelve-month period. Small companies in the United States, as measured by the Russell 2000 Index, also showed resilience: returning 8.5% during the second quarter and 7.68% during the last four. However, the Dow Jones U.S. Select Real Estate Investment Trust Index, a benchmark for U.S. real estate performance, ended the quarter down 1.71%. Real estate is up 8.09% over the last twelve months though.

Globally, stocks were also able to weather the quarter’s volatility and ended in positive territory. The MSCI All Country World Index increased 11.69% in the quarter and 16.69% in the trailing twelve-month period. International large company stocks in developed countries, as proxied by the MSCI Europe, Australasia and Far East Index, returned 12.07% in the last three months and 18.33% in the last twelve. Emerging markets stocks, as measured by the MSCI Emerging Markets Stock Index, gained 12.20% in the last quarter and 15.97% in the last twelve months.

The quarter was also volatile for U.S. bond markets as investors struggled to understand the future policy of the Federal Reserve, the potential for rising inflation, and the future of the U.S. government’s debt. By the end of the quarter, bond markets settled and provided investors with positive returns. The Bloomberg U.S. Aggregate Bond Index, a proxy for the whole U.S. bond market, rose 1.21% during the quarter and 6.08% in the trailing one-year period. The Intercontinental Exchange Bank of America (ICE B. of A.) U.S. Corporate 5-10 Year Bond Index, a measure for the intermediate-term corporate bond markets, rose 2.53% in the last three months and is up 8.59% in the last twelve months. Global bond markets, as proxied by the Financial Times Stock Exchange World Government Bond Index, increased 4.58% in the second quarter and rose 8.49% in the trailing twelve-month period.

Investor concerns at the beginning of the quarter resulted in a demand for higher yields on the 10-year Treasury note. Some of those fears abated towards the end of the quarter, resulting in the 10-year yield falling from its intra-quarter peak of 4.58%. The yield on the 10-year Treasury note ended the quarter at 4.24%, relatively unchanged from its yield at the end of the first quarter.

The Price of Panic

Given the recent quarter’s relatively high level of volatility, I’d like to talk about how a hasty emotional decision caused by panic can be a costly one.
On April 8^th, the S&P 500 index closed at its lowest level this year, falling 18.9% in 48 days from its prior peak on February 19^th. In the midst of such volatility, some investors will believe that the decline in stock prices is only a brief adjustment in stock prices, while others will believe it’s the start of a long-term bear market. Those fearing the worst will start running for the proverbial door, perhaps causing other investors to panic. Quite understandably, the fears and concerns about whether the dwindling value of their portfolios can support their goals and objectives may cause some investors to sell all their stocks, and instead keep their money in a safe asset, like cash. Investing in cash or equivalents may help worried investors sleep better at night, but that security may also come at a high price that is detrimental to their long-term interests.

So, what was the price an investor paid if they sold completely out of the S&P 500 on April 8^th? It’s the returns forfeited by holding cash instead of being invested. As of June 30^th, the S&P 500 rebounded to an all-time high: gaining 24.9% since April 8^th.

The recent rebound in stocks is just one example of the price investors may have paid for panicking. History provides a number of market downturns and upturns to evaluate. The table presents some major market declines, along with the 3-year cumulative returns of the S&P 500 after the market troughed. 3-year cumulative returns on treasuries are also presented as an alternative to holding cash.

The table shows that sometimes markets can move swiftly or slowly. Not every market correction, defined as a 10% drop from the recent peak, leads to a bear market, defined as a 20% drop from peak. The three-year period following a trough does not always result in positive returns, as in the case of the Dot-com Bubble Burst following roughly three years after the Y2K Crisis. But in almost all of these cases, holding onto stocks produced more positive outcomes for investors with intermediate-term or long-term planning horizons. The average opportunity cost of missing out on the nine 3-year periods after the market troughs shown in the table is 60.9%.

Recent months have been an effective reminder of the financial market’s ability to rise from a fall. It’s unsettling to experience abrupt declines in financial markets, but history shows that returns after such declines have been positive, on average. For investors that did not participate in these market rebounds, the cost was likely substantial. While past performance never predicts future outcomes, the information in the table highlights a crucial investment principle: a mistake trying to time the market can be pricy.

It’s natural to feel apprehension when markets are volatile, resulting in feeling a need to act now! But rather than trying to predict what direction a falling market may turn, the act of creating and adhering to a prudent investment policy often proves more beneficial for long-term investors. If you have questions about your investment policy, then please don’t hesitate to reach out to us with questions. We are here to help you face the uncertainties that will inevitably show up on the road to your goals.

Download a copy of the article here.

Disclaimer: Schultz Collins is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC.

This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is neither indicative nor a guarantee of future results. The investment opportunities referenced herein may not be suitable for all investors.

All data or other information referenced herein is from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other data or information contained in this presentation is provided as general market commentary and does not constitute investment advice. Schultz Collins and Hightower Advisors, LLC or any of its affiliates make no representations or warranties express or implied as to the accuracy or completeness of the information, or for statements or errors or omissions, or results obtained from the use of this information. Schultz Collins and Hightower Advisors, LLC assume no liability for any action made or taken in reliance on or relating in any way to this information. The information is provided as of the date referenced in the document. Such data and other information are subject to change without notice. This document was created for informational purposes only; the opinions expressed herein are solely those of the author(s) and do not represent those of Hightower Advisors, LLC, or any of its affiliates.