Linc Wealth Solutions Update: Global Markets Power Through Persistent Volatility in Q2 2025

Global financial markets scaled a wall of worry in the second quarter of 2025— geopolitics took center stage from tariff turbulence, while equity markets rallied sharply from the post “Liberation Day” lows. Delays on implementing broad-based tariffs and progress with certain negotiations, including China, gave investors confidence to buy the early April equity dip and push the broad-market S&P 500 Index to an all-time high to close the quarter. Even the lack of progress with the Russia/Ukraine war and the escalation of the conflict between Israel and Iran, including the U.S. bombing of Iranian nuclear sites, were not enough to derail the risk rally. In contrast to equities, oil and volatility markets failed to hold gains from the price spike following news of the U.S. involvement given the subdued Iranian response, open shipping lanes in the Strait of Hormuz, and a clear desire from the Trump administration to limit further actions.

Geopolitical risk obviously remains elevated, with the latest focus on the Israel Iran war and America’s entry into the fray. Outside of the energy complex, there has been little reaction on the part of financial markets. The jump in crude oil prices seemed rather constrained and have fallen back to pre-war levels. Iran cannot afford to disrupt its neighbors’ exports without disrupting its own. In addition, China, one of Iran’s strategic partners, receives almost half of its imported oil from the Middle East; Iran cannot afford to lose any allies.

Regarding monetary policy, more interest-rate cuts are probably ahead, but the pace of easing in Canada and the eurozone should slow since policy rates are approaching the same level as the current inflation rate. The U.S. and the U.K., on the other hand, probably have more room to cut their respective policy rates, but we expect both central banks to be cautious in doing so. At a time when the outlook is so uncertain, all the major central banks are probably more data-dependent than ever. Among the potentially inflationary developments all central banks need to consider: the generally expansive fiscal policies pursued by their governments, the potential for retaliatory tariff hikes that increase prices on targeted goods, and the potential impact of the Israeli-Iranian war on energy prices (now less concerning).

There has been a good deal of volatility, particularly for equities, but a broad grouping of assets is in positive territory for the year to date. Remarkably, the market

(and investors!) managed to take all this uncertainty in stride. Global diversification in equity markets remains a strategic investment theme.

Contact Becky to review your financial portfolio.