13 charts on Q2’s major US market rebound
Stocks soared back to life after April’s tariff selloff, while bonds remained in the green despite renewed volatility.
Key takeaways
- Stocks climbed more than 11% in the second quarter after April’s tariff-induced selloff, while bonds notched a modest gain of 1%.
- Technology stocks roared back to life, leading the rally, while some international markets continued to outperform the US.
- Volatility ticked up in the bond market, thanks to deficit concerns.
- The Fed held interest rates steady as economic data remained solid. Traders now anticipate a rate cut in September.
What a turnaround. After a dizzying drop in the first week of April following the Trump administration’s announcement of new tariffs, stocks snapped back from bear market territory almost immediately once those tariffs were paused or reduced.
Stocks ended the second quarter with a gain of more than 11%, with the technology sector—the first quarter’s biggest laggard—leading the market higher once again. The Morningstar US Market Index surpassed its February high in the final days of June, even as the threat of significantly higher tariffs on US trading partners remained.
It was the stock market’s best quarter since 2023, when it returned 12% between October and December. Despite those gains, international stocks continued their first-quarter trend of outperforming the US market.
Analysts say investors appear to have priced out the worst-case scenario for tariffs and are looking ahead with more optimism. With a July 9 deadline for trade deals approaching next week, that optimism could be tested.
Under the hood, growth stocks soared while value stocks fell behind, reversing the first quarter’s trend. Non-US markets continued to outperform, though Chinese stocks fell behind.
Bond markets whipsawed as well, with yields spiking thanks to renewed concerns about stubborn inflation and an unsustainable fiscal picture in the United States. Even so, the Morningstar US Core Bond Index ended the quarter with a return of 1.17%.
Key stats: Q2 2025 stock and bond market performance
- Stocks ended the quarter up 11.14% after falling more than 19.00% from their February high in April.
- Growth stocks took the lead over value, with the Morningstar US Growth Index returning 19.43%, compared with 1.33% for the Morningstar US Value Index.
- The US Core Bond Index gained 1.17%, even as investor worries over the fiscal deficit sent yields soaring in May.
- Dividend stocks lagged the broader market, with the Morningstar Dividend Composite Index up 3.70% for the quarter.
- The Federal Reserve held rates steady as tariffs threatened to put upward pressure on inflation. Bond market traders now expect the first rate cut of its next easing cycle to come in September.
- Gold prices rose 5.0%, slower than the first quarter’s record highs and outsized gains of 17.5%.
- Bitcoin prices rebounded along with other riskier investments, such as tech stocks.
Q2 stock market performance
The second quarter began with global investors blindsided by US President Donald Trump’s announcement of harsher-than-expected tariffs on April 2. That sent stocks tumbling into bear market territory in a few days. Then, after Trump reversed course just a week after the announcement, stocks staged a remarkable rally, making up all those losses and then some. The market has climbed more than 25% since bottoming out on April 8, meeting the technical threshold for a new bull market of 20%.
The mega-cap tech stocks that make up the “Magnificent Seven” have fueled that recovery. The Morningstar Wide Moat Composite Index, which includes the stocks that Morningstar analysts believe have the largest and most durable competitive advantages, gained 13.89% between March and June after falling 6.58% in the first quarter.
The outsized gains came despite lingering concerns over slowing economic growth, potentially sticky inflation and rising valuations. Strategists say the outlook for the market is mixed, with bullish signals like robust earnings and a healthy economy helping to offset those risks.

Value vs. growth performance
As the technology sector soared, growth stocks regained the lead over value stocks in the second quarter after lagging during the first three months of the year. The US Growth Index returned 19.43% in the second quarter, while the US Value Index returned 1.33%. Large-cap value stocks performed worst among the nine categories of US stocks with a 0.89% return, while large-cap growth stocks fared best with a return of 23.05%.

Stock sector performance
The biggest story in the stock market in the second quarter was the rally in the tech sector, which returned 21.95% after falling more than 12% in the first quarter. But tech wasn’t the only sector that saw a turnaround. Communication services stocks gained 18.79% after falling 6.19% in the first quarter, while consumer cyclicals rose 10.91% after losing 12.83% in the first quarter as tariff fears faded. Industrials rallied 13.08% after a 3.21% loss in the first quarter.
On the other side of the spectrum were healthcare and energy stocks, which declined after posting solid gains in the first quarter.
Q2 dividend stock performance
Dividend stocks also staged a comeback, though they didn’t outpace the US market. The Dividend Composite Index rose 3.7% for the quarter compared with the broader market’s 11.1% gain.
The Morningstar US Dividend Growth Index rose 4.1%, while the Morningstar Dividend Leaders Index, which includes the 100 stocks from the Composite Index with the highest yields, fell 2.3%.
Global market performance
International markets continued to rally, with European, Canadian and Japanese stocks all outperforming the US market. Chinese markets faltered, with the Morningstar US China Index returning 3.05% compared with a 14.00% gain in the first quarter.
Federal Reserve still on hold
The target range for the federal-funds rate is 4.25%-4.50%, down from a peak of 5.50% a year ago. The Federal Reserve has kept interest rates in that range since December 2024, reiterating that it is not in a hurry to ease policy while the labor market remains healthy and inflationary pressures persist (and could potentially worsen once tariffs are implemented).
Analysts say the full impact of Trump’s new tariffs has yet to be felt in the economy, and with fiscal and trade policy still fluid, they expect the Fed to remain in wait-and-see mode. Bond futures traders currently see roughly 77% odds that the first rate cut comes in September.
Q2 bond market performance
Most of the bond market remained in the green in the second quarter, despite elevated volatility that send longer-term yields soaring as investors digested fresh concerns about the federal deficit and a declining global appetite for US dollar-denominated debt.
Yields on the 10-year Treasury note ended the quarter at 4.23% after climbing as high as 4.58% in May. Yields on the 30-year Treasury note soared above 5.00% in May before falling back to 4.79%.
Overall, gains were more muted across the bond market compared to the first quarter as yields climbed higher. Yields move in the opposite direction of prices. The US Core Bond Index returned 1.17%, while US Treasuries returned 0.84%. Investors in high-yield bonds saw the largest returns of3.57%. Municipal bonds, long-term core bonds, and long-term Treasury bonds saw negative returns.
Yield curve steepens further
The Treasury yield curve steepened in the second quarter, continuing a trend from the first. The curve is a graphical representation of government bond yields across different maturities. It measures how much compensation bond investors expect for the extra risk of having money locked up with the federal government for longer periods. A steeper curve means investors are demanding higher yields for longer-dated bonds.
At the end of the second quarter, the spread between the 10-year and two-year Treasury yields was 0.56 percentage points, compared with 0.34 percentage points at the end of the first quarter.
Stock and bond volatility
Stock market volatility rose across the US, developed, and emerging markets in the quarter, as evolving US trade policy and geopolitical tensions muddied the outlook. Meanwhile, bond market volatility ticked up as concerns about the sustainability of the US fiscal picture sent yields higher.
Cryptocurrency performance
After falling sharply alongside tech stocks in the first quarter, cryptocurrency prices rebounded between March and June. Optimism surrounding crypto-friendly policies from the Trump administration helped fuel some of that gain. Bitcoin prices rose30.9%, while ether prices rose 38.1%.
Commodity market performance
Gold prices continued to climb in the second quarter, though the 5.0% gains were more muted compared with a 17.45% gain in the first. Investors flocked to gold at the start of the year when the outlook was most uncertain, and that momentum slowed in the second quarter as the worst-case scenario for tariffs appeared to fade. The price of copper, a key material in industrial production, rebounded once tariffs were paused.
Meanwhile, oil prices fell 8.9% over the quarter, despite geopolitical tensions ramping up in the Middle East in June.