by David Young, President
The first half of 2025 reminded us how quickly sentiment can shift—and why disciplined investing is so important.
In March, the S&P 500 was down nearly 19% from its February high. Media outlets were predicting an imminent bear market, as geopolitical tensions, trade concerns, and inflation dominated headlines. Fear was spreading, and many investors considered stepping to the sidelines.
However, as has often been the case, reality turned out to be far less dire than the narrative had suggested.
A combination of stronger-than-expected economic data, a 90-day pause on reciprocal tariffs with China, steady interest rates, and growing optimism about artificial intelligence sparked a significant turnaround. U.S. stocks surged in Q2, ending June at record highs and wiping out earlier losses.
The lesson: market timing is nearly impossible, but time in the market continues to be one of the most powerful drivers of long-term success.
Market Snapshot: Year-to-Date as of June 30, 2025
Here’s how major indexes performed:
- S&P 500: +5.5%
- Nasdaq Composite: +5.5%
- Dow Jones Industrial Average: +3.6%
- Russell 2000: –2.5%
- Bloomberg U.S. Aggregate Bond Index: +4.0%
(Source: Wall Street Journal, MSCI, Bloomberg, MarketWatch)
The highlight this quarter was large-cap technology. The Nasdaq 100 increased by 17.8%, marking its best three-month performance in two years, driven by AI-related growth and strong corporate earnings. Despite a rough start to the year, the Nasdaq has rebounded significantly, underscoring the resilience of specific growth sectors in the current market.
Paragon Portfolio Performance
We’re happy to report that Paragon’s strategies delivered strong results despite endless gloom and doom. From January 1 through June 30, 2025, our year-to-date returns (net of all fees) are:
- Top Flight Portfolio: +10.90%
- Fast Movers Portfolio: +21.69%
- Fundamental 20 Portfolio: +7.47%
- Liquidity Factor Portfolio: +14.55%
- Managed Income Portfolio (Conservative): +2.21%
(Please see page 7 for all performance disclosures.)
These results reflect a mix of tactical discipline and strategic diversification. For example, Fast Movers capitalized on upward momentum in high-conviction names, while Liquidity Factor benefited from broader market participation and a shift toward smaller, more liquid companies. Fundamental 20 remained focused on core earnings strength. Meanwhile, our Managed Income portfolio stayed conservative and income-oriented, helping reduce volatility for risk-sensitive clients.
Our investment process is dynamic—we continuously monitor global macro trends, earnings data, and technical indicators to refine allocations and pursue performance without compromising the integrity of our long-term strategy.
Perspective: From Panic to Progress
In early April, investor sentiment was near its lowest point of the past year. Heightened geopolitical risk, particularly between Israel and Iran, raised fears of global energy disruption. At the same time, stalled trade negotiations and lingering inflation pressures led many analysts to downgrade growth forecasts.
However, several of those concerns proved to be overstated. The conflict in the Middle East was short-lived and had minimal impact on global oil supplies. Inflation held steady rather than rising, and the Federal Reserve maintained its interest rate policy, signaling confidence in the economic outlook. In addition, the feared collapse in corporate earnings never materialized—many sectors, including industrials and technology, posted stronger-than-expected results.
These shifts in the data—and in perception—fueled the market’s rally. The turnaround from a near bear market to all-time highs in just over two months is a testament to how quickly conditions can improve when fear subsides.
Why We Stay Invested
Trying to guess the right time to exit or re-enter the market is notoriously difficult. That’s why our philosophy is built around long-term planning, not short-term predictions.
Since 1928, the S&P 500 has finished higher on any given day just 53% of the time. But over one-year periods, it has been positive 75% of the time—and over ten-year periods, that number rises to 95%.
(Source: Bespoke Investment Group)
Markets don’t rise in straight lines. Volatility is part of the journey. But history shows that those who stay the course are far more likely to capture the gains that follow uncertainty.
Looking Ahead: Staying on Course
As we enter the second half of the year, we remain mindful of both risk and opportunity. The July 9 expiration of the tariff pause could renew trade tensions. The upcoming election cycle may increase market volatility. And corporate earnings will once again be a key test of economic resilience.
But instead of reacting emotionally to headlines, we encourage clients to focus on what they can control:
- Stay aligned with your long-term goals
- Ensure your portfolio reflects your current risk tolerance and life stage
- Review your plan regularly, especially after life changes
- Make strategic use of tax planning tools like Roth conversions or donor-advised funds
A strong financial strategy isn’t just about market performance—it’s about being prepared for both the expected and the unexpected.
At Paragon, we’re here to help with all of it.
Final Thoughts
The first half of 2025 showed us once again: uncertainty does not equal unprofitability.
While headlines may have created fear, fundamentals ultimately carried the day. And investors who stayed patient were rewarded. As always, our goal is not just to help you grow your wealth—but to help you feel confident and informed through every stage of your financial journey.
We’re proud to be your partner in that journey. If you’d like to discuss your portfolio or explore planning opportunities for the second half of the year, we’d love to hear from you.
We’re always here to help.