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

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.