At the start of each year, I look forward to the warmth of summer. Somehow, it always seems to arrive in a flash, and suddenly I find myself in the middle of the hot, humid, dog days of July. Time really flies.
Lately, I’ve been thinking a lot about time. In investing, time is essential. We rely on time to let investments grow and compound. And while we often say, “Don’t try to time the market,” lately it’s not uncommon to hear questions like, “Is this the right time to invest?” or “Is it different this time?”
I recently finished a book about the early days of the American Revolution, when messages between England and the colonies took months to arrive, often passing like ships in the night. Can you imagine? Today, thanks to technology, we communicate instantly—a striking reminder of how quickly time can reshape our world. Speaking of technology, someone recently reminded me that the iPhone was released just 18 years ago. It’s barely an adult—yet it’s hard to imagine a life and time without a smartphone. Time moves quickly—often without us noticing—and its impact can be profound.
For example, twenty-five years ago my younger daughter was just an infant. This year, she earned her master’s degree in mechanical engineering and data science. Back then, her older sister was just three, dancing with abandon and carefree joy at her aunt’s wedding. Next month, she’ll be the one walking down the aisle. A quarter of a century gone in the blink of an eye. And while all this has me wondering, “Where does the time go?” I couldn’t be more excited for what lies ahead.
That same sense of anticipation carries over into how I view the future with regard to investing. Many of us may be looking back over these past two quarters thinking, “Wow! We’ve been through a lot in such a short time.” Trade tensions, market volatility, global strife, rate worries—you name it. March and April brought sharp market whipsaws, followed by a historic rebound. We’ve packed plenty into just a few months. Many of us may also be looking forward and hoping summer will offer a much-needed break. As the song goes, “Summertime, and the livin’ is easy,” —right?
It’s hard to stay focused on the long term when daily headlines demand our attention. But one year will turn into five, and then ten —so, the time to invest is now. Every moment is unique, but we always come back to the basics: maintain perspective, think long term, diversify, and stay focused on your goals. Investing takes time—plain and simple.
Speaking of time, there’s much to cover, so let’s get to it. Along with a market summary and our take on recent moves, we’ll highlight a few key themes that could make headlines in the coming months—topics we believe are worth watching as the landscape evolves.
Summary
The resolution of the U.S. budget and tax plan provides fiscal clarity, giving companies, regulators, and investors a clear framework. Combined with recent market strength and potential productivity gains from AI, the economic outlook appears more stable than anticipated just a few months ago.
Investors faced serious and unpredictable geopolitical risks through the year. However, those issues had limited impact on financial markets. While not minimizing their severity or humanitarian toll, history shows overreacting can be counterproductive. Staying focused on long-term market trends remains essential.
Market Update
Markets swooned in March amid tariff uncertainty and recession fears but rebounded sharply from April 9 through June as worst-case scenarios on tariffs and geopolitical tensions ultimately failed to materialize.
The S&P 500 is up 6.2% year-to-date after being down nearly 19% in early April. Gains have come from more than just technology, with economically resilient sectors like industrials (+11.4%), communication services (+10.2%), and financials (+7.5%) leading the rebound. Over the past 12 months, top-performing sectors have been financials, utilities, communication services, and industrials. In contrast, the “Magnificent 7” have averaged just 2.4% year-to-date, with Meta, Microsoft, and Nvidia posting gains; Amazon remaining flat; and Tesla, Apple, and Google declining.
Driven by a weaker U.S. dollar, concerns over slowing U.S. growth, and improving conditions in Europe, international equities surged—developed markets (MSCI EAFE) rose 19.9% and emerging markets (MSCI EM) gained 15.6%. More on international investors later.
In fixed income, the Bloomberg U.S. Aggregate Bond Index is up 4.0% YTD, benefiting from strong yields and narrowing credit spreads. However, volatility persisted as the 10-year Treasury yield swung from 4.79% in January to 4.24% by June 30.
Economic Resilience
The resilience of the U.S. economy remains a bright spot. Although GDP declined by 0.2% in the first quarter, largely due to inventory stockpiling, consumer spending—which is the largest driver of growth—continued to increase, supporting overall economic stability.
The Consumer Price Index rose 2.4% year-over-year in May and the University of Michigan Consumer Sentiment Index increased to 60.7, its first gain in six months. Despite Q2 volatility, oil prices are down about 11% YTD. Trade policy is becoming clearer, but markets remain sensitive to upcoming trade developments. The focus is on containing inflation, stabilizing earnings growth, and enabling the Fed to begin lowering interest rates to support the economy.
This year’s volatility underscored two key lessons: the importance of diversification and staying invested. The benefits of diversification were on full display as developed market equities have outperformed U.S. large cap equities by over 13% YTD (as seen in the chart below). Fixed income provided solid returns and stability when risk assets declined, while cash, often overlooked, returned 2% YTD with a 4% annualized yield (as seen in the chart below).
Attempting to time the market proved far less effective than remaining invested. As shown in the accompanying J.P. Morgan chart, U.S. large caps were down as much as 18.9% and small caps 24.5%, while international equities and fixed income experienced smaller drawdowns. By June 30, all had rebounded. Investors who maintained diversified portfolios and stayed the course came through the turbulence in a stronger position.
Data from J.P. Morgan July 7, 2025 Weekly Market Recap. See website for full disclosures. Further data from: Source: Bloomberg, FactSet, MSCI, NAREIT, FTSE Russell, Standard & Poor’s, J.P. Morgan Asset Management. Returns shown are total return as of June 30, 2025 unless stated otherwise. *Maximum drawdown for equities calculated using price return and reflects largest peak to trough drawdown during the year.
Looking Ahead
Two key themes to watch are the Federal Reserve’s next move and the investment implications of the U.S. dollar.
The Fed
Many investors expected multiple rate cuts in the first half of the year, but those didn’t materialize due to ongoing uncertainty around tariffs, inflation, and employment. Fed Chair Jerome Powell has emphasized a “wait and see” approach, seeking more clarity on how these factors affect the broader economy. The Fed’s next meeting is in late July, and most Fed watchers expect no action then.
While consensus still points to a rate cut by year-end, the timing continues to shift. By the September meeting, the Fed will have several more months of data, including developments on tariffs and the new tax bill. According to many Fed watchers, a rate cut may be considered at that point, though any policy shift is expected to be gradual rather than aggressive.
The U.S. Dollar
While many headlines spotlight the impact of a weakening dollar—and no doubt, more headlines are on the way—it’s worth remembering that they rarely capture the full story.
In simple terms, a weakening dollar means its value is falling relative to other currencies. For example, if one USD used to buy one Euro but now only buys 0.90 Euro, the dollar has weakened. This shift reflects a range of interconnected factors—interest rates, inflation, trade dynamics, and both monetary and fiscal policy.
Lower U.S. interest rates may prompt investors to seek higher returns elsewhere, reducing demand for the dollar. Higher U.S. inflation erodes purchasing power. A growing national debt can hurt confidence, and expansionary monetary policy can also lead to a weaker dollar.
While a strong dollar benefits U.S. travelers by increasing their purchasing power abroad, it makes American exports more expensive for foreign buyers, potentially hurting U.S. businesses that rely on global sales. Understanding these trade-offs is key to evaluating the dollar’s impact on the economy and markets.
A lesser-known truth—rarely discussed in polite circles—is that many U.S. multinational companies quietly want a weaker dollar. Firms with large international operations see higher profits when foreign earnings are converted back into dollars. A weaker dollar also makes U.S. exports more competitive, as products become cheaper for international buyers, potentially boosting sales and market share.
That being said, one exception to these benefits is oil, which is priced globally in U.S. dollars. A weaker dollar means it takes more dollars to buy a barrel, which could increase demand from foreign buyers with stronger currencies and thus raise prices. However, factors like hedging, reserves, and global trade dynamics help moderate these effects.
Implications for Investors
For all of the aforementioned reasons, a weaker dollar may boost international equities held by U.S. investors. A weak dollar can boost foreign investments, as currency appreciation enhances returns when converted back to dollars. U.S.-based international mutual funds and ETFs often don’t hedge currency risk, as hedging can increase volatility. The chart below shows the inverse relationship between international equities and the U.S. dollar index from January 1, 2000, to June 30, 2025.
A weaker dollar may also benefit emerging markets by supporting capital expansion, increasing purchasing power, and increasing profit margins.
Net-net: Despite what the headlines may suggest, a weaker dollar isn’t always inherently negative. Like equity markets, currency movements are hard to time and shouldn’t drive short-term investment decisions.
Time, as we’ve seen throughout this commentary, moves quickly—whether in family milestones, technological shifts, or market cycles. But in both life and investing, it’s not about predicting every moment; it’s about being prepared for the long run. This year has reminded us how much can happen in just a few months—from sharp market swings and geopolitical headlines to evolving economic data and currency movements. Through it all, the fundamentals hold: stay diversified, think long term, and remain grounded in a strategy built for more than just the moment. As we look ahead, we’ll continue to monitor the Fed’s next steps, the direction of the U.S. dollar, and other factors that may reshape the financial landscape.
Thank you, as always, for reading. And thank you for your time and trust. We look forward to helping you navigate what is next. In the meantime, have a wonderful summer!
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Chart of the Week: Source: Bloomberg, FactSet, MSCI, NAREIT, FTSE Russell, Standard & Poor’s, J.P. Morgan Asset Management. Returns shown are total return as of June 30, 2025 unless stated otherwise. *Maximum drawdown for equities calculated using price return and reflects largest peak to trough drawdown during the year.
Thought of the week: Source: Bloomberg, FactSet, MSCI, NAREIT, FTSE Russell, Standard & Poor’s, J.P. Morgan Asset Management.
Abbreviations: Cons. Sent.: University of Michigan Consumer Sentiment Index; CPI: Consumer Price Index; EIA: Energy Information Agency; FHFA HPI: – Federal Housing Finance Authority House Price Index; FOMC: Federal Open Market Committee; GDP: gross domestic product; HPI: Home Price Index; HMI: Housing Market Index; ISM Mfg.Index: Institute for Supply Management Manufacturing Index; PCE: Personal consumption expenditures; Philly Fed Survey: Philadelphia Fed Business Outlook Survey; PMI: Purchasing Managers’ Manufacturing Index; PPI: Producer Price Index; SAAR: Seasonally Adjusted Annual Rate Equity Price Levels and Returns: All returns represent total return for stated period. Index: S&P 500; provided by: Standard & Poor’s. Index: Dow Jones Industrial 30 (The Dow Jones is a price-weighted index composing of 30 widely-traded blue chip stocks.); provided by: S&P Dow Jones Indices LLC. Index: Russell 2000; provided by: Russell Investments. Index: Russell 1000 Growth; provided by: Russell Investments. Index: Russell 1000 Value; provided by: Russell Investments. Index: MSCI – EAFE; provided by: MSCI – gross official pricing. Index: MSCI – EM; provided by: MSCI – gross official pricing. Index: Nasdaq Composite; provided by: NASDAQ OMX Group.
MSCI EAFE is a Morgan Stanley Capital International Index that is designed to measure the performance of the developed stock markets of Europe, Australasia, and the Far East.
Bond Returns: All returns represent total return. Index: Bloomberg US Aggregate; provided by: Bloomberg Capital. Index: Bloomberg Investment Grade Credit; provided by: Bloomberg Capital. Index: Bloomberg Municipal Bond 10 Yr; provided by: Blomberg Capital.
Index: Bloomberg Capital High Yield Index; provided by: Bloomberg Capital.
Key Interest Rates: 2 Year Treasury, FactSet; 10 Year Treasury, FactSet; 30 Year Treasury, FactSet; 10 Year German Bund, FactSet. 3 Month LIBOR, British Bankers’ Association; 3 Month EURIBOR, European Banking Federation; 6 Month CD, Federal Reserve; 30 Year Mortgage, Mortgage Bankers Association (MBA); Prime Rate: Federal Reserve.
Commodities: Gold, FactSet; Crude Oil (WTI), FactSet; Gasoline, FactSet; Natural Gas, FactSet; Silver, FactSet; Copper, FactSet; Corn, FactSet. Bloomberg Commodity Index (BBG Idx), Bloomberg Finance L.P.
Currency: Dollar per Pound, FactSet; Dollar per Euro, FactSet; Yen per Dollar, FactSet.
S&P Index Characteristics: Dividend yield provided by FactSet Pricing database. Fwd. P/E is a bottom-up weighted harmonic average using First Call Mean estimates for the “Next 12 Months” (NTM) period. Market cap is a bottom-up weighted average based on share information from Compustat and price information from FactSet’s Pricing database as provided by Standard & Poor’s.
MSCI Index Characteristics: Dividend yield provided by FactSet Pricing database. Fwd. P/E is a bottom-up weighted harmonic average for the “Next 12 Months” (NTM) period. Market cap is a bottom-up weighted average based on share information from MSCI and Price information from FactSet’s Pricing database as provided by MSCI.
Russell 1000 Value Index, Russell 1000 Growth Index, and Russell 2000 Index Characteristics: Trailing P/E is provided directly by Russell. Fwd. P/E is a bottom-up weighted harmonic average using First Call Mean estimates for the “Next 12 Months” (NTM) period.
Market cap is a bottom-up weighted average based on share information from Compustat and price information from FactSet’s Pricing database as provided by Russell.
Sector Returns: Sectors are based on the GICS methodology. Return data are calculated by FactSet using constituents and weights as provided by Standard & Poor’s. Returns are cumulative total return for stated period, including reinvestment of dividends.
Style Returns: Style box returns based on Russell Indexes with the exception of the Large-Cap Blend box, which reflects the S&P 500 Index. All values are cumulative total return for stated period including the reinvestment of dividends. The Index used from L to R, top to bottom are: Russell 1000 Value Index (Measures the performance of those Russell 1000 companies with lower price-to book ratios and lower forecasted growth values), S&P 500 Index (Index represents the 500 Large Cap portion of the stock market, and is comprised of 500 stocks as selected by the S&P Index Committee), Russell 1000 Growth Index (Measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values), Russell Mid Cap Value Index (Measures the performance of those Russell Mid Cap companies with lower price-to-book ratios and lower forecasted growth values), Russell Mid Cap Index (The Russell Midcap Index includes the smallest 800 securities in the Russell 1000), Russell Mid Cap Growth Index (Measures the performance of those Russell Mid Cap companies with higher price-to-book ratios and higher forecasted growth values), Russell 2000 Value Index (Measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values), Russell 2000 Index (The Russell 2000 includes the smallest 2000 securities in the Russell 3000), Russell 2000 Growth Index (Measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values).
Past performance does not guarantee future results. Diversification does not guarantee investment returns and does not eliminate the risk of loss.
Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be appropriate for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. The Market Insights program provides comprehensive data and commentary on global markets without reference to products. Designed as a tool to help clients understand the markets and support investment decision-making, the program explores the implications of current economic data and changing market conditions.
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Unless otherwise stated, all data is as of July 7, 2025 or as of most recently available.
Modera Wealth Management, LLC (Modera) is an SEC-registered investment adviser. SEC registration does not imply any level of skill or training. For information pertaining to our registration status, the fees we charge including how we are compensated and by whom, additional costs that may be incurred, our conflicts of interest, any disclosed disciplinary events of the Firm or its personnel, and the types of services we offer, please contact us directly or refer to the Investment Adviser Public Disclosure web site (www.adviserinfo.sec.gov) to obtain a copy of our disclosure statement, Form ADV Part 2A, and ADV Part 3/Form CRS. In addition, our Privacy Notice outlines how we handle your non-public personal information. Please read these documents carefully before you make a decision to hire Modera, invest or send money.
This material is limited to the dissemination of general information about Modera’s investment advisory and financial planning services that is not suitable for everyone. Nothing herein should be interpreted or construed as investment advice nor as legal, tax or accounting advice nor as personalized financial planning, tax planning or wealth management advice. For legal, tax and accounting-related matters, we recommend you seek the advice of a qualified attorney or accountant. This material is not a substitute for personalized investment or financial planning from Modera. There is no guarantee that the views and opinions expressed herein will come to pass, and the information herein should not be considered a solicitation to engage in a particular investment or financial planning strategy. The statements and opinions expressed in this material are relevant as of the date of publication and are subject to change without notice based on changes in the law and other conditions.
Investing in the markets involves gains and losses and may not be suitable for all investors. Information herein is subject to change without notice and should not be considered a solicitation to buy or sell any security or to engage in a particular investment or financial planning strategy. Individual client asset allocations and investment strategies differ based on varying degrees of diversification and other factors. Diversification does not guarantee a profit or guarantee against a loss.
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, and CFP® (with plaque design) in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
Investment Commentary: Q2 2025
George Padula, CFA®, CFP®
Chief Investment Officer, Wealth Manager & Principal
Hello everyone, and welcome to the summer edition of the investment commentary.
At the start of each year, I look forward to the warmth of summer. Somehow, it always seems to arrive in a flash, and suddenly I find myself in the middle of the hot, humid, dog days of July. Time really flies.
Lately, I’ve been thinking a lot about time. In investing, time is essential. We rely on time to let investments grow and compound. And while we often say, “Don’t try to time the market,” lately it’s not uncommon to hear questions like, “Is this the right time to invest?” or “Is it different this time?”
I recently finished a book about the early days of the American Revolution, when messages between England and the colonies took months to arrive, often passing like ships in the night. Can you imagine? Today, thanks to technology, we communicate instantly—a striking reminder of how quickly time can reshape our world. Speaking of technology, someone recently reminded me that the iPhone was released just 18 years ago. It’s barely an adult—yet it’s hard to imagine a life and time without a smartphone. Time moves quickly—often without us noticing—and its impact can be profound.
For example, twenty-five years ago my younger daughter was just an infant. This year, she earned her master’s degree in mechanical engineering and data science. Back then, her older sister was just three, dancing with abandon and carefree joy at her aunt’s wedding. Next month, she’ll be the one walking down the aisle. A quarter of a century gone in the blink of an eye. And while all this has me wondering, “Where does the time go?” I couldn’t be more excited for what lies ahead.
That same sense of anticipation carries over into how I view the future with regard to investing. Many of us may be looking back over these past two quarters thinking, “Wow! We’ve been through a lot in such a short time.” Trade tensions, market volatility, global strife, rate worries—you name it. March and April brought sharp market whipsaws, followed by a historic rebound. We’ve packed plenty into just a few months. Many of us may also be looking forward and hoping summer will offer a much-needed break. As the song goes, “Summertime, and the livin’ is easy,” —right?
It’s hard to stay focused on the long term when daily headlines demand our attention. But one year will turn into five, and then ten —so, the time to invest is now. Every moment is unique, but we always come back to the basics: maintain perspective, think long term, diversify, and stay focused on your goals. Investing takes time—plain and simple.
Speaking of time, there’s much to cover, so let’s get to it. Along with a market summary and our take on recent moves, we’ll highlight a few key themes that could make headlines in the coming months—topics we believe are worth watching as the landscape evolves.
Summary
The resolution of the U.S. budget and tax plan provides fiscal clarity, giving companies, regulators, and investors a clear framework. Combined with recent market strength and potential productivity gains from AI, the economic outlook appears more stable than anticipated just a few months ago.
Investors faced serious and unpredictable geopolitical risks through the year. However, those issues had limited impact on financial markets. While not minimizing their severity or humanitarian toll, history shows overreacting can be counterproductive. Staying focused on long-term market trends remains essential.
Market Update
Markets swooned in March amid tariff uncertainty and recession fears but rebounded sharply from April 9 through June as worst-case scenarios on tariffs and geopolitical tensions ultimately failed to materialize.
The S&P 500 is up 6.2% year-to-date after being down nearly 19% in early April. Gains have come from more than just technology, with economically resilient sectors like industrials (+11.4%), communication services (+10.2%), and financials (+7.5%) leading the rebound. Over the past 12 months, top-performing sectors have been financials, utilities, communication services, and industrials. In contrast, the “Magnificent 7” have averaged just 2.4% year-to-date, with Meta, Microsoft, and Nvidia posting gains; Amazon remaining flat; and Tesla, Apple, and Google declining.
Driven by a weaker U.S. dollar, concerns over slowing U.S. growth, and improving conditions in Europe, international equities surged—developed markets (MSCI EAFE) rose 19.9% and emerging markets (MSCI EM) gained 15.6%. More on international investors later.
In fixed income, the Bloomberg U.S. Aggregate Bond Index is up 4.0% YTD, benefiting from strong yields and narrowing credit spreads. However, volatility persisted as the 10-year Treasury yield swung from 4.79% in January to 4.24% by June 30.
Economic Resilience
The resilience of the U.S. economy remains a bright spot. Although GDP declined by 0.2% in the first quarter, largely due to inventory stockpiling, consumer spending—which is the largest driver of growth—continued to increase, supporting overall economic stability.
The Consumer Price Index rose 2.4% year-over-year in May and the University of Michigan Consumer Sentiment Index increased to 60.7, its first gain in six months. Despite Q2 volatility, oil prices are down about 11% YTD. Trade policy is becoming clearer, but markets remain sensitive to upcoming trade developments. The focus is on containing inflation, stabilizing earnings growth, and enabling the Fed to begin lowering interest rates to support the economy.
This year’s volatility underscored two key lessons: the importance of diversification and staying invested. The benefits of diversification were on full display as developed market equities have outperformed U.S. large cap equities by over 13% YTD (as seen in the chart below). Fixed income provided solid returns and stability when risk assets declined, while cash, often overlooked, returned 2% YTD with a 4% annualized yield (as seen in the chart below).
Attempting to time the market proved far less effective than remaining invested. As shown in the accompanying J.P. Morgan chart, U.S. large caps were down as much as 18.9% and small caps 24.5%, while international equities and fixed income experienced smaller drawdowns. By June 30, all had rebounded. Investors who maintained diversified portfolios and stayed the course came through the turbulence in a stronger position.
Data from J.P. Morgan July 7, 2025 Weekly Market Recap. See website for full disclosures. Further data from: Source: Bloomberg, FactSet, MSCI, NAREIT, FTSE Russell, Standard & Poor’s, J.P. Morgan Asset Management. Returns shown are total return as of June 30, 2025 unless stated otherwise. *Maximum drawdown for equities calculated using price return and reflects largest peak to trough drawdown during the year.
Looking Ahead
Two key themes to watch are the Federal Reserve’s next move and the investment implications of the U.S. dollar.
The Fed
Many investors expected multiple rate cuts in the first half of the year, but those didn’t materialize due to ongoing uncertainty around tariffs, inflation, and employment. Fed Chair Jerome Powell has emphasized a “wait and see” approach, seeking more clarity on how these factors affect the broader economy. The Fed’s next meeting is in late July, and most Fed watchers expect no action then.
While consensus still points to a rate cut by year-end, the timing continues to shift. By the September meeting, the Fed will have several more months of data, including developments on tariffs and the new tax bill. According to many Fed watchers, a rate cut may be considered at that point, though any policy shift is expected to be gradual rather than aggressive.
The U.S. Dollar
While many headlines spotlight the impact of a weakening dollar—and no doubt, more headlines are on the way—it’s worth remembering that they rarely capture the full story.
In simple terms, a weakening dollar means its value is falling relative to other currencies. For example, if one USD used to buy one Euro but now only buys 0.90 Euro, the dollar has weakened. This shift reflects a range of interconnected factors—interest rates, inflation, trade dynamics, and both monetary and fiscal policy.
Lower U.S. interest rates may prompt investors to seek higher returns elsewhere, reducing demand for the dollar. Higher U.S. inflation erodes purchasing power. A growing national debt can hurt confidence, and expansionary monetary policy can also lead to a weaker dollar.
While a strong dollar benefits U.S. travelers by increasing their purchasing power abroad, it makes American exports more expensive for foreign buyers, potentially hurting U.S. businesses that rely on global sales. Understanding these trade-offs is key to evaluating the dollar’s impact on the economy and markets.
A lesser-known truth—rarely discussed in polite circles—is that many U.S. multinational companies quietly want a weaker dollar. Firms with large international operations see higher profits when foreign earnings are converted back into dollars. A weaker dollar also makes U.S. exports more competitive, as products become cheaper for international buyers, potentially boosting sales and market share.
That being said, one exception to these benefits is oil, which is priced globally in U.S. dollars. A weaker dollar means it takes more dollars to buy a barrel, which could increase demand from foreign buyers with stronger currencies and thus raise prices. However, factors like hedging, reserves, and global trade dynamics help moderate these effects.
Implications for Investors
For all of the aforementioned reasons, a weaker dollar may boost international equities held by U.S. investors. A weak dollar can boost foreign investments, as currency appreciation enhances returns when converted back to dollars. U.S.-based international mutual funds and ETFs often don’t hedge currency risk, as hedging can increase volatility. The chart below shows the inverse relationship between international equities and the U.S. dollar index from January 1, 2000, to June 30, 2025.
A weaker dollar may also benefit emerging markets by supporting capital expansion, increasing purchasing power, and increasing profit margins.
Net-net: Despite what the headlines may suggest, a weaker dollar isn’t always inherently negative. Like equity markets, currency movements are hard to time and shouldn’t drive short-term investment decisions.
Time, as we’ve seen throughout this commentary, moves quickly—whether in family milestones, technological shifts, or market cycles. But in both life and investing, it’s not about predicting every moment; it’s about being prepared for the long run. This year has reminded us how much can happen in just a few months—from sharp market swings and geopolitical headlines to evolving economic data and currency movements. Through it all, the fundamentals hold: stay diversified, think long term, and remain grounded in a strategy built for more than just the moment. As we look ahead, we’ll continue to monitor the Fed’s next steps, the direction of the U.S. dollar, and other factors that may reshape the financial landscape.
Thank you, as always, for reading. And thank you for your time and trust. We look forward to helping you navigate what is next. In the meantime, have a wonderful summer!
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Chart of the Week: Source: Bloomberg, FactSet, MSCI, NAREIT, FTSE Russell, Standard & Poor’s, J.P. Morgan Asset Management. Returns shown are total return as of June 30, 2025 unless stated otherwise. *Maximum drawdown for equities calculated using price return and reflects largest peak to trough drawdown during the year.
Thought of the week: Source: Bloomberg, FactSet, MSCI, NAREIT, FTSE Russell, Standard & Poor’s, J.P. Morgan Asset Management.
Abbreviations: Cons. Sent.: University of Michigan Consumer Sentiment Index; CPI: Consumer Price Index; EIA: Energy Information Agency; FHFA HPI: – Federal Housing Finance Authority House Price Index; FOMC: Federal Open Market Committee; GDP: gross domestic product; HPI: Home Price Index; HMI: Housing Market Index; ISM Mfg.Index: Institute for Supply Management Manufacturing Index; PCE: Personal consumption expenditures; Philly Fed Survey: Philadelphia Fed Business Outlook Survey; PMI: Purchasing Managers’ Manufacturing Index; PPI: Producer Price Index; SAAR: Seasonally Adjusted Annual Rate Equity Price Levels and Returns: All returns represent total return for stated period. Index: S&P 500; provided by: Standard & Poor’s. Index: Dow Jones Industrial 30 (The Dow Jones is a price-weighted index composing of 30 widely-traded blue chip stocks.); provided by: S&P Dow Jones Indices LLC. Index: Russell 2000; provided by: Russell Investments. Index: Russell 1000 Growth; provided by: Russell Investments. Index: Russell 1000 Value; provided by: Russell Investments. Index: MSCI – EAFE; provided by: MSCI – gross official pricing. Index: MSCI – EM; provided by: MSCI – gross official pricing. Index: Nasdaq Composite; provided by: NASDAQ OMX Group.
MSCI EAFE is a Morgan Stanley Capital International Index that is designed to measure the performance of the developed stock markets of Europe, Australasia, and the Far East.
Bond Returns: All returns represent total return. Index: Bloomberg US Aggregate; provided by: Bloomberg Capital. Index: Bloomberg Investment Grade Credit; provided by: Bloomberg Capital. Index: Bloomberg Municipal Bond 10 Yr; provided by: Blomberg Capital.
Index: Bloomberg Capital High Yield Index; provided by: Bloomberg Capital.
Key Interest Rates: 2 Year Treasury, FactSet; 10 Year Treasury, FactSet; 30 Year Treasury, FactSet; 10 Year German Bund, FactSet. 3 Month LIBOR, British Bankers’ Association; 3 Month EURIBOR, European Banking Federation; 6 Month CD, Federal Reserve; 30 Year Mortgage, Mortgage Bankers Association (MBA); Prime Rate: Federal Reserve.
Commodities: Gold, FactSet; Crude Oil (WTI), FactSet; Gasoline, FactSet; Natural Gas, FactSet; Silver, FactSet; Copper, FactSet; Corn, FactSet. Bloomberg Commodity Index (BBG Idx), Bloomberg Finance L.P.
Currency: Dollar per Pound, FactSet; Dollar per Euro, FactSet; Yen per Dollar, FactSet.
S&P Index Characteristics: Dividend yield provided by FactSet Pricing database. Fwd. P/E is a bottom-up weighted harmonic average using First Call Mean estimates for the “Next 12 Months” (NTM) period. Market cap is a bottom-up weighted average based on share information from Compustat and price information from FactSet’s Pricing database as provided by Standard & Poor’s.
MSCI Index Characteristics: Dividend yield provided by FactSet Pricing database. Fwd. P/E is a bottom-up weighted harmonic average for the “Next 12 Months” (NTM) period. Market cap is a bottom-up weighted average based on share information from MSCI and Price information from FactSet’s Pricing database as provided by MSCI.
Russell 1000 Value Index, Russell 1000 Growth Index, and Russell 2000 Index Characteristics: Trailing P/E is provided directly by Russell. Fwd. P/E is a bottom-up weighted harmonic average using First Call Mean estimates for the “Next 12 Months” (NTM) period.
Market cap is a bottom-up weighted average based on share information from Compustat and price information from FactSet’s Pricing database as provided by Russell.
Sector Returns: Sectors are based on the GICS methodology. Return data are calculated by FactSet using constituents and weights as provided by Standard & Poor’s. Returns are cumulative total return for stated period, including reinvestment of dividends.
Style Returns: Style box returns based on Russell Indexes with the exception of the Large-Cap Blend box, which reflects the S&P 500 Index. All values are cumulative total return for stated period including the reinvestment of dividends. The Index used from L to R, top to bottom are: Russell 1000 Value Index (Measures the performance of those Russell 1000 companies with lower price-to book ratios and lower forecasted growth values), S&P 500 Index (Index represents the 500 Large Cap portion of the stock market, and is comprised of 500 stocks as selected by the S&P Index Committee), Russell 1000 Growth Index (Measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values), Russell Mid Cap Value Index (Measures the performance of those Russell Mid Cap companies with lower price-to-book ratios and lower forecasted growth values), Russell Mid Cap Index (The Russell Midcap Index includes the smallest 800 securities in the Russell 1000), Russell Mid Cap Growth Index (Measures the performance of those Russell Mid Cap companies with higher price-to-book ratios and higher forecasted growth values), Russell 2000 Value Index (Measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values), Russell 2000 Index (The Russell 2000 includes the smallest 2000 securities in the Russell 3000), Russell 2000 Growth Index (Measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values).
Past performance does not guarantee future results. Diversification does not guarantee investment returns and does not eliminate the risk of loss.
Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be appropriate for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. The Market Insights program provides comprehensive data and commentary on global markets without reference to products. Designed as a tool to help clients understand the markets and support investment decision-making, the program explores the implications of current economic data and changing market conditions.
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Modera Wealth Management, LLC (Modera) is an SEC-registered investment adviser. SEC registration does not imply any level of skill or training. For information pertaining to our registration status, the fees we charge including how we are compensated and by whom, additional costs that may be incurred, our conflicts of interest, any disclosed disciplinary events of the Firm or its personnel, and the types of services we offer, please contact us directly or refer to the Investment Adviser Public Disclosure web site (www.adviserinfo.sec.gov) to obtain a copy of our disclosure statement, Form ADV Part 2A, and ADV Part 3/Form CRS. In addition, our Privacy Notice outlines how we handle your non-public personal information. Please read these documents carefully before you make a decision to hire Modera, invest or send money.
This material is limited to the dissemination of general information about Modera’s investment advisory and financial planning services that is not suitable for everyone. Nothing herein should be interpreted or construed as investment advice nor as legal, tax or accounting advice nor as personalized financial planning, tax planning or wealth management advice. For legal, tax and accounting-related matters, we recommend you seek the advice of a qualified attorney or accountant. This material is not a substitute for personalized investment or financial planning from Modera. There is no guarantee that the views and opinions expressed herein will come to pass, and the information herein should not be considered a solicitation to engage in a particular investment or financial planning strategy. The statements and opinions expressed in this material are relevant as of the date of publication and are subject to change without notice based on changes in the law and other conditions.
Investing in the markets involves gains and losses and may not be suitable for all investors. Information herein is subject to change without notice and should not be considered a solicitation to buy or sell any security or to engage in a particular investment or financial planning strategy. Individual client asset allocations and investment strategies differ based on varying degrees of diversification and other factors. Diversification does not guarantee a profit or guarantee against a loss.
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, and CFP® (with plaque design) in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
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