Good Vibrations
Brian Wilson and Mike Love (1966)

When Brian Wilson, the genius behind the music of the Beach Boys, passed away in June there were numerous retrospectives about his many talents, including his ability to create musical orchestrations that produced so many classic songs that endure today. Wilson’s gift was his ability to combine different instruments and sounds in ways that made the complexity of the arrangements come together with a sound that revolutionized music for many. He was also a talented lyricist who found ways to take small phrases and turn them into songs that captured a feeling of optimism and a positive outlook. One of those songs is “Good Vibrations” which he co-wrote with fellow Beach Boy Mike Love. The song tells a simple story of a boy becoming interested in a girl and the positive mood he is in when thinking about her. He imagines all the good things about her and what it would like to be with her. It is a song of optimism built on expectations that may or may not match her reality. Fortunately, there is no part two to find out if those expectations are met with joy or disappointment, so the optimism of the song endures.

I’m pickin’ up good vibrations
She’s giving me excitations
Gotta keep those lovin’ good vibrations a-happenin

There were many “good vibrations” for investors in June and the second half of Q2 2025. Stocks were up across all major US market segments, non-US stocks continued to deliver positive results, and bonds added value. The familiar refrain of big cap growth and technology stocks resonated with investors who showed renewed confidence in the US equity markets after a painful end to Q1 2025. The second quarter started poorly with markets reacting negatively to Liberation Day on April 2 only to reverse a week later when the first tariff “pause” was announced. Uncertainty persisted into June with muted reactions to news about tariff negotiations, political battles over Trump’s “big beautiful bill” and other administration initiatives, and an escalation of geopolitical events in multiple regions. So many of these issues and risks that historically would have caused more market volatility have been normalized in today’s market environment. Investors appear to be looking past these issues and focusing on forward-looking expectations of higher market returns. Staying positive even when markets are signaling negativity and being opportunistic during volatile periods has rewarded many investors in recent periods. Just like the simple, feel-good story of this month’s song hides the complexity of the underlying instrumentation and sound, so too do the current “good vibrations” of today’s markets mask many potential risks.

Looking ahead into the second half, investors who are trying to “keep those lovin’ good vibrations a-happenin” should be mindful that many risks still remain that could dampen the current optimism.

Here are observations on what occurred across the public markets during June and Q2:

Broad Market Performance¹

• US stocks rallied in June on optimism that tariff impacts would be less severe and the US economy would continue to grow. Q2 returns highlight a strong bounce back from Q1’s declines.
• Stocks were up across each category during June and the quarter, with large cap growth leading the way from the lows of Q1.

International and Global Equities³

• Non-US developed markets trailed US large caps in the month while maintaining a small outperformance for the quarter and a big lead YTD.
• Many Pacific Basin stock markets rallied on the tariff pauses and increased expectations of higher economic activity.

Fixed Income Markets⁴

• Treasury yields declined modestly during June, contributing to the positive returns across bond market segments. Credit sectors performed well, boosted by rising equity markets.

Specialty Markets⁵

• Commodity markets were up generally, with oil prices briefly spiking on geopolitical issues before falling back late in June. Gold prices have settled down after a big jump earlier in the year.

Sectors⁶

• Big cap growth stocks in the IT and Communication Services sectors drove the sectors to the highest returns in June and Q2. The Real Estate and Utilities sectors were the laggards for the month and the quarter.

If you have questions or want to discuss the current state of the investment markets and their impact on your plan or portfolio, please do not hesitate to reach out to your advisor—they are here to help. In the meantime, enjoy your summer.

1-6 All data supplied by Morningstar.

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