The participation picture for the market looked bleak at the start of the April, and while most indicators rebounded throughout the quarter, things got significantly worse before they improved. The ten week for the S&P 500 (^TWSPX) gauges near-term participation, and the indicator sat at 39% entering Q2, but market selloff after “Liberation Day” saw TWSPX fall as low as 5%. However, the market’s rally following the initial selloff saw a rapid rise in participation, getting as high as 78% earlier this week. Wednesday’s action saw the indicator fall five percentage points, leaving it in position to potentially reverse right below 80% for the the third time in the last several weeks. 

Movement within TWSPX is often confirmed by the more intermediate-term bullish percent for SPX (^BPSPX), which started off at 40% entering Q2. Things bottomed out around 14% to begin the quarter, following the movement of the broader market and mirroring the decline of TWSPX. With equities quickly rebounding, we saw a massive upswing for BPSPX as high as 74% before reversing lower to its current position just below 70%. While both the ten week and bullish percent may have trouble moving higher from our current levels, that isn’t necessarily a bad thing, as the indicators could fall without a decline in the market given some consolidation. The S&P 500 has an overbought/oversold reading north of 80%, placing us in relatively overextended territory, meaning it could be healthy for the market to see some slowdown or consolidation in the near-term.

The positive trend percentage for the S&P 500 (^PTSPX) gauges long-term participation and is often used to confirm movement within the bullish percent. While PTSPX didn’t move as low as shorter-term indicators, it still saw a decline and subsequent rally above its initial 51% entering Q2. The metric hit a low of 32% during the peak of investor’s tariff fears before lifting off to its current levels around 70%. The majority of the market’s gains come when the PTSPX is above 50%, and readings north of 60% are even more positive, placing us in strong territory.

Given that all three major indicators for SPX paint a generally positive picture for participation, large caps are set up well for the second half of the year. That said, the market’s ability to maintain current participation levels will be a crucial factor in whether we see a strong close to 2025, making our Technical Indicator Report a crucial page to watch in the coming months. 

Quarter endings and beginnings are typically a good time to provide a touch point with your clients and prospects, so in recognition of the change of calendar, we wanted to give you a sample newsletter to aid you with this communication. You want to let your clients know that you are holding the reins of their portfolios and that you are holding on tight. This letter has not been FINRA approved; however, you are welcome to use the text as you like. Feel free to "slice and dice" the text to best incorporate it within your business.

Sample Client Newsletter: Q2 2025

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The S&P 500 finished the second quarter up more than 10.5%, its best quarter since Q4 2024, bringing its first half gain to 5.5%. Looking only at the headline figure, you might conclude that it had been a fairly uneventful quarter. However, stocks dropped precipitously in early April after the Trump administration announced reciprocal tariffs that were far larger than anticipated. At its lowest point during the quarter, the S&P was down more than 20% from the high it reached in February. The market rebounded dramatically after a 90-day pause on the tariffs was announced, recording its largest single-day gain since 2020 and reached a new all-time high in the final days of the quarter.

International equities also had a strong quarter, as the MSCI Emerging Markets Index and the MSCI EAFE Index, which is made up of developed international markets, each gained more than 10%. International equities are now well ahead of the domestic counterparts through the first half of the year. The US Dollar Index has experienced a historic decline this year, falling than 12% from its January high, which has helped boost non-US stocks.

The US Aggregate Bond Index gained a little over 1% for the quarter as long-term US Treasury yields declined slightly. Despite inflation falling below 3%, the Fed has been hesitant to lower interest rates, due in part to uncertainty about the effects of tariffs. The market is expecting the Fed to lower cut rates by at least ½ percent by the end of the year, but thus far this has not resulted in a material decline in long-term rates.

Gold continued to climb in the second quarter, rising by more than 5% and setting a series of new record highs. Crude oil, which has been beleaguered by excess supply, rallied more than 25% in mid-June due to the Israel-Iran conflict. But as tensions de-escalated oil prices retreated as quickly as they had risen.

After falling as low as third in Q2, domestic equities have regained the top spot in the asset class rankings in our Dynamic Asset Level Investing (DALI) tool as we enter the third quarter. DALI provides us with a heat map of where relative strength (and weakness) resides across and within class classes. The renewed leadership by domestic equities suggests that while uncertainty remains, long-term relative strength once again lies in US stocks. Meanwhile, from a sector perspective, we see leadership from communication services and financials.  

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