Midyear Outlook 2025: Pragmatic Optimism, Measured Expectations
Last Updated: July 08, 2025
Recently, the LPL Research team published the 2025 Midyear Outlook: Pragmatic Optimism, Measured Expectations. A check-in on where the markets have been and where they seem to be headed, the report is a great guide to help steer personal portfolios. If you haven’t read it yet in its entirety, take a minute to tap into some of the key takeaways.
Economy
In the second half of the year, the delayed effects of trade policy will begin to take a more noticeable toll on the economy, resulting in slower growth, weakening labor demand, and a modest uptick in inflation. These emerging challenges will create a more complex landscape for the Federal Reserve, requiring them to maintain a cautious stance on monetary policy and further delay rate cuts. Tariff headlines will continue to drive market sentiment, adding complexity to both growth and inflation forecasts.
Stocks
Stock market performance will center around trade negotiations, AI, interest rate volatility, and the tax bill, among other things. Stock valuations reflect a lot of good news amid so much policy uncertainty. Given the limited room for multiple expansion, we expect only modest gains by year-end. Episodic periods of volatility are likely amid a challenging macro environment, but market pullbacks should be viewed as opportunities to selectively increase equity exposure. LPL Research’s year-end 2025 fair value target range on the S&P 500 is 6,000 to 6,100. The S&P 500 Index set a new all-time high on June 27, 2025.
Bonds
Treasury yields face multiple headwinds, including policy uncertainty, fiscal concerns, de-dollarization, and rest of the world yield trends. Despite obstacles to a sustained rate rally, yields largely depend on growth and inflation expectations. If economic data — especially labor market figures — show more material weakness, yields should come under pressure, but volatility in the bond market is expected to persist. High-quality bonds remain valuable for portfolio risk mitigation and potential gains in times of broader uncertainty and economic stress.
Alternative Investments
As economic and policy uncertainty is expected to persist, we continue to stress the importance of diversification and the integration of stability-enhancing strategies in portfolios. Our preferred approaches include equity market-neutral, nimble discretionary global macro, and a range of managed futures strategies. Additionally, select niche strategies — such as volatility arbitrage and cross-asset focused tail risk — can also offer value. In private markets, infrastructure, secondary private equity market investments, and private credit remain top choices, though with tempered total return expectations in the current environment.
Commodities
Longer-term growth drivers for the broader commodities complex remain intact. How trade policy unfolds in the second half will ultimately dictate the global growth outlook and performance of commodity markets. China’s economic recovery remains a wild card, and until a trade deal is inked, the probabilities for a broader commodities rebound remain subdued. Gold remains a bright spot, with an array of catalysts supporting the rally, leaving us positive on the precious metals group.
Currencies
Significant fiscal support has revitalized growth prospects abroad while U.S. trade policy remains fragile. The administration’s goal of reducing the U.S. trade deficit could have a meaningful impact on global trade and ultimately reduce demand for the dollar. Threats to U.S. leadership in technological innovation have further weighed on the American exceptionalism narrative. Sanctions on foreign assets after Russia’s invasion of Ukraine have also underpinned a shift away from dollar reserves among global central banks. Collectively, these factors have reduced the dollar’s valuation, but its status as the world’s reserve currency will remain unrivaled.
These are just some of the high-level takeaways from our 2025 Midyear Outlook: Pragmatic Optimism, Measured Expectations. For in-depth commentary and analysis, read the full report today. Or for insights and action steps investors and their financial professional may want to discuss, read the recap.