Q2 2025 Earnings Season: Management Teams Cautiously Optimistic

Slightly over 20% of S&P 500 companies have reported earnings for the second quarter (less if measured by market cap) and so far, it appears that results are good enough. The rate of results outpacing earnings expectations is near 90%, with average upside surprises around the historical average of approximately 7% on earnings per share (EPS), while about 2% upside on sales is coming in ahead of historical averages of roughly 1.2%. Investors are primarily focused on forward-looking guidance commentary; however, an earnings surprise on the quarter will only go so

Small cap equities remain one of the most paradoxical asset classes — frequently dismissed yet frequently cited as a contrarian buying opportunity on attractive valuations but often dissed by markets. This intrinsically intriguing enigma is rooted in certain market dynamics that are on full display right now. As such, we thought it would be appropriate to highlight key small cap themes that grant them both interest and an undertone of caution.

Tax Provisions in the One Big Beautiful Bill Act (OBBBA)

Beginning with tax years starting after December 31, 2024, businesses are once again permitted to fully deduct domestic r

Key Talking Points

• The Federal Reserve (Fed) — ironically, our country’s third attempt at central banking — has a representative nature to it, desirous in protecting investors from politicized policy-making.

• We shouldn’t be surprised that the executive branch is lobbying for lower rates. That’s been the case during various administrations from Reagan to Obama.

• The Committee, which sets interest rate policy, consists of 12 members, including presidents from five different district banks. The Chair only has one vote.

• There is no reason to aggressively cut rates down

In the first half of 2025, several key market forces we identified at the start of the year — rising uncertainties tied to the new U.S. administration’s policy shifts, increased market volatility, and the testing of elevated U.S. equity valuations — began to take shape. As such, broadening portfolio diversification beyond the traditional 60/40 framework was crucial for effectively navigating the shifting market environment. Looking ahead, we anticipate continued bouts of broad market volatility and varied performance within and across asset classes. While the current administration appears willing to work with international p