Q2 2025 in Review and Q3 2025 Market Outlook

Investors head into the second half of 2025 after some significant whiplash in the stock market and unusual swings in the bond market. The primary culprit: President Donald Trump’s tariff announcements and US fiscal policy.

As the third quarter of 2025 gets underway, what’s the outlook for the stock and bond markets? What stock sectors are most attractive? What should investors do from here? We’ve gathered insights and perspectives from analysts and specialists about market performance, individual stocks, sectors, and mutual funds.

Q2 2025 Market Performance and the Economy

The second quarter started with a bang, courtesy of Trump’s tariffs announcement, which sent the stock market into a spiral that approached bear-market territory. But when Trump retreated with a 90-day pause, the market was back off to the races and on its way to record highs. While US stocks managed to post solid gains, the real story may have been gains in European stock markets.

But for bonds, it was a much more dour outlook. Due to concerns about the inflationary aspects of tariffs, the exploding budget deficit, and global investors voicing greater worries about US government bonds’ role as a safe haven, yields moved higher.

Here is our look at the big market and economic trends from the second quarter of 2025 and Morningstar’s market outlook for the third quarter and beyond:

Q2 2025 Stock Performance and Q3 Sector Outlooks

Although it didn’t start out that way, the second quarter’s stock market winners were once against technology names, which leaped ahead after a first quarter pause.

Here, we take a deeper dive into second quarter stock market performance among sectors and individual stocks. We’ve also got third quarter 2025 outlooks with top stock picks from Morningstar’s stock analysts:

Q2 2025 Mutual Fund and ETF Performance

For mutual fund and exchange-traded fund investors, the second quarter turned out to be a decent one. Growth-tilted stock funds retook the lead after value had a brief first-quarter run in the spotlight. In the bond market, portfolios titled toward risker fare led the way on returns.