Staying invested and diversified has proven beneficial so far this year, with the S&P 500 reaching new all-time highs in June, emphasizing the importance of a long-term strategic asset allocation and periodic portfolio reviews.
In Short
- Geopolitical tensions, particularly the Israel-Iran conflict, drove oil price volatility, but equity and bond markets remained resilient, with the S&P 500 reaching new all-time highs in June.
- Strong economic fundamentals and anticipated Federal Reserve rate cuts supported positive market sentiment; consumer and business confidence rebounded.
- Staying invested and diversified has proven beneficial, as attempts to time the market often results in underperformance over time. An emphasis on long-term strategic asset allocation, coupled with periodic portfolio reviews, is critical.
The Month in Markets
An eventful year continued into June as the Israel-Iran conflict moved to the forefront of global headlines. Tensions escalated rapidly throughout the month, with multiple strikes executed on both sides. The U.S. entered the conflict by targeting key Iranian nuclear facilities but ultimately brokered a ceasefire deal. The situation in the Middle East caused significant swings in the price of oil as the market attempted to price in the probability of supply disruptions amid ongoing tensions. The situation remains highly unpredictable going forward, and while there could be potential implications for energy prices, we believe these geopolitical risks are likely to represent only a short-term distraction for markets.
Equity and bond markets were generally unphased by the headlines. In fact, despite geopolitical concerns, continued tariff discussions and back- and-forth on the One Big Beautiful Bill Act (OBBBA), the S&P 500 closed at a fresh all-time high on June 27—its first new peak since February 19. The index was up 5.1% in June, 11.5% for the quarter, and 6.2% year-to-date. Perhaps more impressive was the index’s rally from its April 8 post-Liberation Day “bottom” through the end of June—up about 25%.
Meanwhile, we believe economic conditions still look solid in terms of growth, a stable consumer and labor force, and an overall trend of disinflation. While the Federal Reserve is still advancing with caution due to tariff-related inflation concerns, the central bank appears to be on track for two rate cuts in 2025. Fed Chair Jerome Powell recently reiterated that no meeting is off the table in terms of cuts, so there is still a possibility for a “live” meeting on July 30. The expectation for rate cuts this year is reflected in the movement in fixed income yields, with the 10-year U.S. Treasury yield dipping to around 4.2% at the end of June compared to roughly 4.5% at the beginning of the month, and down from 4.8% at the beginning of the year.
It Pays to Be Optimistic
Sentiment appears to be shifting, too. Concerns from earlier in the year surrounding tariff policy have quieted as markets appear to have digested a 10% baseline tariff and have been generally less reactive to trade discussion headlines. Various surveys, such as the Conference Board’s Consumer Confidence and NFIB Small Business Optimism, have rebounded from their lows. Supporting improved sentiment, S&P 500 earnings for 1Q 2025 were stronger than anticipated at over 13% blended growth, although Q2 is projected to be lower, with consensus sitting at about 5%. In addition, the recently enacted OBBBA is expected to prop up economic growth, with permanent tax cuts and acceleration of expensing for capital expenditures perceived as stimulative for the U.S. economy. Even the Magnificent 7 stocks have benefited from the changed mood, as the basket has rebounded 37% since the April 8 lows.
The post-“Liberation Day” rally is a reminder of the importance of setting long-term investment goals and staying invested. It’s been demonstrated in the past that attempting to time the market can harm portfolio returns, and that theory was once again proven this year. If an investor decided to pull out of the S&P 500 on April 8—the bottom of the index’s pullback and when tariff-related pessimism was at its peak—and missed the following trading day (a historic +9.5% in a single session), that same investor would be down 3% year-to-date as opposed to up over 6%.
Staying Invested Pays Off - S&P 500 YTD Returns: Fully Invested vs. Portfolio That Shifted 50% Equity Exposure to Cash
Source: Bloomberg as of June 30, 2025. The “50% to Cash at Bottom” portfolio assumes the investor sold 50% of their equity exposure and went to cash on April 8.
Even the most clairvoyant of investors would have had a difficult time calling this year’s market moves: The worst single day of stock performance, the market bottom and the best single day in the market all occurred within four consecutive trading days, further highlighting the volatility and difficulty that comes with timing the market. Investors should remember that unpredictability in the markets (especially for equities) is normal. In fact, volatility often comes in clusters, with a tendency for large price swings to be followed by more large swings, regardless of direction. A well-diversified portfolio should help weather these volatility storms, protecting on the downside while still participating in the upside. Additionally, periods of market turbulence highlight the importance of periodically revisiting long-term strategic asset allocations and risk tolerance, as these can shift over time as life situations change.
Market Timing Is Difficult - S&P 500 Daily Returns YTD 2025
Source: Bloomberg as of June 30, 2025.
Although there may be some concerns about reaching new all-time highs, history shows that new peaks have been a positive sign for markets: Going back to 1970, the S&P 500 Index finished higher in the 12 months following an all-time high 75% of the time, with an average gain of 8.8%.
In the wake of Independence Day celebrations and President Trump’s OBBBA passing into law, investors should take some time to pause and reflect on the year so far. Though eventful and not without turbulence, those who stayed the course have been rewarded. We still recommend adhering to long-term asset allocations and believe that diversification across asset class, sector, size and style, and utilizing active management where appropriate, may help mitigate downside risks during periods of volatility.
Portfolio Implications
Equities were significantly higher in June across all styles, sizes and regions. Domestic growth stocks and emerging markets equities were the leaders. We are broadly positive on global equities and developed non-U.S. equities due to continued monetary policy easing, pro-growth fiscal policies, and solid corporate earnings prospects in major economies. We maintain an overweight to small- and midcaps despite recent disappointing performance as we anticipate improved gains against a backdrop of lower policy rates, deregulation and pro-business elements from the U.S. tax and spending law. Otherwise, we maintain an “at-target” view across equities. Admittedly, short-term volatility related to the end of the 90-day tariff pause, coupled with historical volatility in August due to seasonality factors, may create some pressure. However, any larger pullbacks (10% or more) could be an appropriate trigger to add risk, especially for those holding excess cash. In this more challenging environment, we favor employing active management to select companies with high earnings visibility.
Fixed Income was also higher during the month, with longer-dated bonds up as yields fell. We are more constructive on investment-grade fixed income as yields are close to fair value, with shorter-dated bonds in particular presenting little downside risk, in our opinion. With the spread of bond yields over cash rates likely to widen further, we see opportunities to deploy cash tactically, adding and/or shortening duration based on the movement of rates. Expected cuts of U.S. policy rates by the Fed in the second half should help boost performance of U.S. fixed income, but the OBBBA has added a level of uncertainty to the mix, as investors may continue to demand higher term premiums to compensate for the risk of holding long-term government bonds at a time when large federal deficits are creating uncertainty about future economic stability. Multi-sector bond funds may be an appropriate vehicle to consider, given the levers a manager can opportunistically pull across sector, duration profile and region.
With a fading liquidity drought and an expected pickup in mergers and acquisitions and other deal activity due to a healthy macro backdrop, we believe significant opportunities still exist within Private Markets, as investors should expect new buyout activity and an unlocking of distributions. That said, liquidity and capital solutions providers will likely remain important to work through the substantial backlog of legacy investments. As a result, we continue to see compelling opportunities across secondaries, mid-life co-investments and capital solutions. We are cautious on core private real estate, but this is offset by what we see as abundant market-dislocation opportunities in the value-add and opportunistic sectors and, particularly, real estate secondaries. Neuberger Berman’s deep relationships and unique position within the private equity ecosystem have translated into record levels of deal flow across our platform.
Index Returns as of June 2025
June-25 | 3M | YTD | |
---|---|---|---|
Equities | |||
Major U.S. Indices | |||
S&P 500 Index | 5.1% | 10.9% | 6.2% |
Nasdaq Composite | 6.6% | 18.0% | 5.9% |
Dow Jones | 4.5% | 5.5% | 4.5% |
U.S. Size Indices | |||
Large Cap | 5.1% | 11.1% | 6.1% |
Mid Cap | 3.7% | 8.5% | 4.8% |
Small Cap | 5.4% | 8.5% | -1.8% |
All Cap | 5.1% | 11.0% | 5.8% |
U.S. Style Indices | |||
All Cap Growth | 5.1% | 11.0% | 5.8% |
All Cap Value | 3.5% | 3.8% | 5.5% |
Global Equity Indices | |||
ACWI | 4.5% | 11.5% | 10.0% |
ACWI ex US | 3.4% | 12.0% | 17.9% |
DM Non-U.S. Equities | 2.2% | 12.1% | 19.9% |
EM Equities | 6.1% | 12.2% | 15.6% |
Portfolios | |||
50/50 Portfolio | 2.9% | 5.4% | 2.9% |
June-25 | 3M | YTD | |
---|---|---|---|
Fixed Income Currencies & Commodities | |||
Major U.S. Indices | |||
Cash | 0.3% | 1.0% | 2.1% |
U.S. Aggregate | 1.5% | 1.2% | 4.0% |
Munis | 0.6% | -0.1% | -0.3% |
U.S. Corporates | |||
Investment Grade | 1.9% | 1.8% | 4.2% |
High Yield | 1.8% | 3.5% | 4.7% |
Short Duration (1.9 Yrs) | 0.6% | 1.3% | 2.9% |
Long Duration (12.8 Yrs) | 2.6% | -0.1% | 3.3% |
Global Fixed Income Indices | |||
Global Aggregate | 1.9% | 4.5% | 7.3% |
EMD Corporates | 1.4% | 1.8% | 4.2% |
Commodities | |||
Commodities | 2.4% | -3.1% | 5.5% |
U.S. Treasury Yields | |||
U.S. 10-Year Yield | -0.2% | 0.0% | -0.3% |
U.S. 2-Year Yield | -0.2% | -0.2% | -0.5% |
FX | |||
U.S. Dollar | -2.5% | -7.0% | -10.7% |
Source: Bloomberg, Total returns as of June 30, 2025. S&P 500 Index is represented by S&P 500 Total Return Index. Nasdaq Composite NASDAQ-Composite Total Return Index. Dow Jones is represented by Dow Jones Industrial Average TR. Large Cap is represented by Russell 1000 Total Return Index. Mid Cap is represented by Russell Midcap Index Total Return. Small Cap is represented by Russell 2000 Total Return Index. All Cap is represented by Russell 3000 Total Return Index. Large Cap Growth is represented by Russell 1000 Growth Total Return. Large Cap Value is represented by Russell 1000 Value Index Total Return. Small Cap Growth is represented by Russell 2000 Growth Total Return. Small Cap Value is represented by Russell 2000 Value Total Return. ACWI is represented by MSCI ACWI Net Total Return USD Index. ACWI ex US is represented by MSCI ACWI ex USA Net Total Return USD Index. DM Non-U.S. Equities is represented by MSCI Daily TR Gross EAFE USD. EM Equities is represented by MSCI Daily TR Gross EM USD. Cash is represented by ICE BofA US 3-Month Treasury Bill Index. U.S. Aggregate is represented by Bloomberg US Agg Total Return Value Unhedged USD. Munis is represented by Bloomberg Municipal Bond Index Total Return Index Value Unhedged USD. Munis Short Duration is represented by Bloomberg Municipal Bond: Muni Short (1-5) Total Return Unhedged USD. Munis Intermediate Duration is represented by Bloomberg Municipal Bond: Muni Intermediate (5-10) TR Unhedged USD. Investment Grade is represented by Bloomberg US Corporate Total Return Value Unhedged USD. High Yield is represented by Bloomberg US High Yield BB/B 2% Issuer Cap Total Return Index Value Unhedged USD. Short Duration is represented by Bloomberg US Agg 1-3 Year Total Return Value Unhedged USD. Long Duration is represented by Bloomberg US Agg 10+ Year Total Return Value Unhedged USD. Global Aggregate is represented by Bloomberg Global-Aggregate Total Return Index Value Unhedged USD. EMD Corporates is represented by J.P. Morgan Corporate EMBI Diversified Composite Index Level. EMD Sovereigns – USD is represented by J.P. Morgan EMBI Global Diversified Composite. Commodities is represented by Bloomberg Commodity Index Total Return. Commodities ex Energy is represented by Bloomberg Ex-Energy Subindex Total Return. U.S. 10-Year Yield is represented by US Generic Govt 10 Yr.
IMPORTANT INFORMATION:
This material is provided for informational and educational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. This material is general in nature and is not directed to any category of investors and should not be regarded as individualized, a recommendation, investment advice or a suggestion to engage in or refrain from any investment-related course of action. Neither Neuberger Berman nor its employees provide tax or legal advice. All information is current as of the date of this material and is subject to change without notice. The firm, its employees and advisory accounts may hold positions of any companies discussed. Any views or opinions expressed may not reflect those of the firm as a whole. Neuberger Berman products and services may not be available in all jurisdictions or to all client types. Diversification does not guarantee profit or protect against loss in declining markets. Investments in private equity are speculative and involve a higher degree of risk than more traditional investments. Investments in private equity are intended for sophisticated investors only. Unless otherwise indicated, returns shown reflect reinvestment of dividends and distributions. Indexes are unmanaged and are not available for direct investment. Investing entails risks, including possible loss of principal. Past performance is no guarantee of future results.
Portfolio positioning views expressed herein are those of Neuberger Berman’s Private Wealth Investment Group which may include those of the Neuberger Berman’s Asset Allocation Committee. Asset allocation and positioning views are based on a hypothetical reference portfolio. The Private Wealth Investment Group analyzes market and economic indicators to develop asset allocation strategies. The Private Wealth Investment Group works in partnership with the Office of the CIO. The Private Wealth Investment Group also consults regularly with portfolio managers and investment officers across the firm. The Asset Allocation Committee is comprised of professionals across multiple disciplines, including equity and fixed income strategists and portfolio managers. The Asset Allocation Committee reviews and sets long-term asset allocation models, establishes preferred near-term tactical asset class allocations and, upon request, reviews asset allocations for large, diversified mandates. Asset Allocation Committee members are polled on asset classes and the positional views are representative of an Asset Allocation Committee consensus. The views of the Asset Allocation Committee and the Private Wealth Investment Group may not reflect the views of the firm as a whole and Neuberger Berman advisers and portfolio managers may take contrary positions to the views of the Asset Allocation Committee or the Private Wealth Investment Group. The Asset Allocation Committee and the Private Wealth Investment Group views do not constitute a prediction or projection of future events or future market behavior. Defensive positioning generally means an underweight bias on allocations to risk assets such as equities and alternatives. Positioning views may change over time without notice and actual client positioning may vary significantly. Discussion of yield characteristics or total returns of different asset classes are for illustrative purposes only. Such asset classes, such as equities and fixed income, may have significantly different overall risk-return characteristics which should be consider before investing.
The information in this material may contain projections, market outlooks or other forward-looking statements regarding future events, including economic, asset class and market outlooks or expectations, and is only current as of the date indicated. There is no assurance that such events, outlook and expectations will be achieved, and actual results may be significantly different than that shown here. The duration and characteristics of past market/economic cycles and market behavior, including any bull/bear markets, is no indication of the duration and characteristics of any current or future be market/economic cycles or behavior. Information on historical observations about asset or sub-asset classes is not intended to represent or predict future events. Historical trends do not imply, forecast or guarantee future results. Information is based on current views and market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons.
Discussions of any specific sectors and companies are for informational purposes only. This material is not intended as a formal research report and should not be relied upon as a basis for making an investment decision. The firm, its employees and advisory accounts may hold positions of any companies discussed. Nothing herein constitutes a recommendation to buy, sell or hold a security. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. Investment decisions and the appropriateness of this content should be made based on an investor's individual objectives and circumstances and in consultation with his or her advisors.
Neuberger Berman Investment Advisers LLC is a registered investment adviser.
The “Neuberger Berman” name and logo are registered service marks of Neuberger Berman Group LLC.