Introduction
On June 30, 2025, U.S. equity markets closed the second quarter with strength, led by technology shares that drove the Nasdaq Composite to a new all-time high of 17,240.78. The S&P 500 also ended the quarter near its record, gaining 0.6% on the day to finish at 5,470.23, while the Dow Jones Industrial Average rose 0.4% to 40,390.11.
This quarter’s rally was powered by a confluence of strong tech earnings, easing inflation, central bank pivot signals, and improving trade dynamics. With the first half of 2025 delivering outsized equity returns, especially in AI, semiconductor, and cloud computing sectors, investors head into Q3 focused on sustainability, valuation, and policy follow-through.
This article reviews Q2’s market performance, the drivers behind the tech-led surge, macroeconomic tailwinds, and key themes to watch in the second half of the year.
Nasdaq Milestone: A Quarter of Dominance
The Nasdaq Composite gained 15.1% in Q2 2025—the best quarterly performance since Q4 2020. Mega-cap tech names drove returns:
- Nvidia (NVDA): +32.4%
- Microsoft (MSFT): +21.7%
- Apple (AAPL): +18.9%
- Amazon (AMZN): +16.2%
- Alphabet (GOOGL): +20.5%
The strength reflects robust cloud revenues, AI deployment acceleration, and digital advertising recovery. Even more notable, Nasdaq breadth improved in June, with small- and mid-cap tech outperforming large-caps in relative terms.
S&P 500 and Dow: Resilience Beyond Tech
- S&P 500 Q2 Gain: +9.4%
- Dow Jones Q2 Gain: +6.1%
Cyclical sectors such as industrials and financials began to catch up as recession fears eased:
- Industrials (XLI): +10.2%
- Financials (XLF): +8.5%
- Consumer Discretionary (XLY): +11.0%
Broad market participation grew in June, aided by improving earnings revisions and economic data stabilization.
Economic Conditions: Disinflation with Growth
The macro backdrop supported equity risk:
- Core PCE (May): 2.8% YoY (steady)
- Headline CPI (May): 2.4% YoY (cooling)
- Unemployment Rate: 4.0% (stable)
- Atlanta Fed GDPNow (Q2 est.): 2.1%
Consumer spending remained solid, job markets resilient, and business investment picked up. These conditions support soft-landing expectations.
Fed Positioning: Two Cuts Projected
The Fed’s June dot plot signaled two rate cuts in 2025. While the first is not expected before September, dovish language and bond market pricing confirm a pivot underway:
- Fed Funds Futures (Dec 2025): Implied rate 4.13%
- Treasury Yields (June 30):
- 2-year: 4.76%
- 10-year: 4.26%
Real yields have started to decline, supporting valuations in growth and duration-sensitive assets.
Equity Sector Breakdown: Q2 Winners and Laggards
Top Q2 sectors (S&P 500):
- Technology: +18.3%
- Consumer Discretionary: +14.6%
- Industrials: +10.2%
Laggards:
- Utilities: -1.2%
- Real Estate: +2.3%
- Energy: +3.4%
Style rotation into growth and innovation was driven by declining rate expectations and strong fundamentals.
Currency and Commodities Snapshot
The dollar weakened marginally over the quarter:
- DXY: -1.6% QTD to 104.55
- EUR/USD: +1.9% to 1.0820
- USD/JPY: -0.8% to 158.1
Commodities were mixed:
- Oil (Brent): +5.7% to $90.25/barrel
- Gold: +2.8% to $2,345/oz
- Copper: +6.4% to $10,180/ton
Softening inflation and reduced geopolitical risk supported stability in commodity-linked assets.
Crypto Assets: Steady Strength
- Bitcoin: +14.3% in Q2, ending at $71,550
- Ethereum: +16.8% to $3,820
The crypto rally was supported by improving sentiment, ETF optimism, and alignment with tech beta. Institutional flows returned, particularly into ETH-focused vehicles.
Investor Positioning and ETF Flows
June saw strong inflows into equities:
- SPY (S&P 500 ETF): +$5.6 billion
- QQQ (Nasdaq ETF): +$3.9 billion
- ARKK (Innovation ETF): +$750 million
Rotation away from defensive bond proxies occurred:
- TLT (Long-Duration Treasury ETF): -$1.1 billion
- XLU (Utilities ETF): -$620 million
Investor sentiment surveys reached 18-month highs, while volatility indexes (VIX: 14.8) remained historically low.
Outlook: Key Q3 Themes
Investors now shift focus to:
- Q2 Earnings Season: Mid-July kickoff
- Fed Communications: Jackson Hole in August
- China Stimulus: Real economy transmission
- U.S. Political Risk: Pre-election fiscal clarity
Top macro themes include:
- Sustainability of tech valuations
- Wage-shelter inflation relationship
- Resilience of global manufacturing and services
Conclusion
June 30, 2025, closed a historic quarter for U.S. equities, led by a resilient and dynamic technology sector. The Nasdaq reached new highs, reflecting investor confidence in secular growth themes and monetary policy support.
While valuations are rich in parts of the market, the improving breadth and data-dependent Fed stance offer a constructive backdrop. The transition into Q3 will test the durability of this rally against earnings results and inflation trajectories.
Key takeaways:
- Nasdaq surged 15.1% in Q2, leading global markets
- Core inflation remains sticky but manageable
- Fed positioned to ease by September if data allows
The next quarter will demand greater selectivity, but for now, markets are celebrating a powerful combination of innovation, disinflation, and investor optimism.
