A Tale of Two Quarters: Wall Street Weathers Tariff Whiplash

The stock market transitioned from a bust and contraction to a boom and expansion.

Stock market numbers are displayed on the floor of the New York Stock Exchange during morning trading in New York, on June 23, 2025. Michael M. Santiago/Getty Images

It was a tale of two quarters on Wall Street and the broader economy, transitioning from a bust and contraction to a boom and expansion.

U.S. stocks opened the June 30 trading session higher, capping off a raucous second-quarter performance, driven by a solid May and June rally.

The blue-chip Dow Jones Industrial Average rose more than 100 points, or 0.3 percent. The index registered a gain of nearly 4 percent in June and posted a quarterly increase of about 4.6 percent. The Dow Jones is now up more than 3 percent this year.

The tech-heavy Nasdaq Composite Index and the broader S&P 500 Index reached fresh record levels to end the quarter, with each climbing about 0.2 percent. In the April–June period, the Nasdaq and S&P 500 surged 17 percent and 10 percent, respectively, and are up 5 percent year to date.

President Donald Trump’s sweeping tariff plans rocked and shocked Wall Street in 2025. In March and April, investors worried that the administration’s aggressive trade agenda would spark a recession and reignite inflation pressures, triggering consternation that the leading benchmark indexes would enter bear market territory.

The S&P 500 sank 5 percent and the Nasdaq tanked 11 percent in the first three months of 2025. Wall Street’s fear metric, the CBOE Volatility Index, soared to levels only observed during the 2008 global financial crisis of 2008–09 and the coronavirus pandemic that began in 2020.

Safe-haven assets also endured immense bouts of instability.

Yields on U.S. Treasury securities were on a roller coaster ride. The benchmark 10-year yield, for example, cratered as low as 3.99 percent—before spiking to 4.6 percent. It has since stabilized, hovering around 4.25 percent.

Global investors dumped the greenback, a symbol of steadiness, and the losses continue to mount. The U.S. Dollar Index, a gauge of the dollar against a weighted basket of currencies including the Japanese yen and the British pound, posted a quarterly loss of nearly 7 percent, adding to its year-to-date decline of almost 11 percent.

“The fall from grace was sharp and painful,” said Adam Turnquist, the chief technical strategist at LPL Financial, in a note emailed to The Epoch Times.

“Peak panic and peak policy uncertainty triggered indiscriminate selling, as the administration’s reciprocal tariff announcement created ’sell now, ask questions later' sentiment among most investors.”

A social media post from the president provided a signal of what was to come.

“This is a great time to buy!” Trump wrote in a Truth Social post on the morning of April 9.

Hours later, the president announced a 90-day pause on his April 2 reciprocal tariffs and revealed a more moderate trade stance, allowing U.S. trading partners to negotiate new trade agreements.

Investors became more optimistic as the worst of the market’s tariff-related fears subsided, and volatility that was prevalent on the New York Stock Exchange eased into a calm ocean of stability.

“If the market registers a new high, the next obvious question from investors is, what happens next? As the saying goes, momentum often begets momentum,” Turnquist added.

President Donald Trump holds a chart next to Secretary of Commerce Howard Lutnick as Trump delivers remarks on tariffs in the Rose Garden at the White House in Washington, D.C., on April 2, 2025. Reuters/Carlos Barria/File Photo

While tariff rates are still uncertain, the administration has presented more flexible and softer positions on trade policy.

Peeking at the 3rd Quarter

Tariffs are likely to continue playing a pivotal role in the financial markets during the third quarter.

The president’s July 9 deadline on reciprocal tariffs is approaching, and Trump has confirmed that the administration sent letters to countries informing them of the upcoming date.

During an appearance on Fox Business Network’s “Sunday Morning Futures” on June 29, the president was asked if he would be willing to extend the deadline.

“I don’t think I'll need to. I could, there’s no big deal,” he said. “What I wanted to do is, and what I will do just—sometime prior to the ninth—is we'll send a letter to all these countries.”

In a June 30 interview with Bloomberg Television, Treasury Secretary Scott Bessent stated that tariff rates—the current effective tariff rate is 15 percent, the highest since the 1930s—could return to the April 2 levels outlined by Trump.

“We have countries that are negotiating in good faith, but they should be aware that if we can’t get across the line because they are being recalcitrant, then we could spring back to the April 2 levels. I hope that won’t have to happen,” Bessent said.

If trade agreements are not established by next week, U.S. tariff rates on foreign goods could return to as high as 50 percent. However, Bessent and other administration officials have indicated a flurry of trade deals would be unveiled ahead of the July 9 deadline.

Heading into the July–September period, investors have ostensibly shrugged off the prospects of higher tariffs. Instead, market participants have cheered a U.S.-China trade agreement that the White House quietly announced last week.

In addition, Wall Street is monitoring incoming data to determine if there are any adverse reactions to the president’s tariffs—and so far, the coast is clear.

The Federal Reserve Bank of Atlanta’s widely monitored GDPNow Model estimates second-quarter growth coming in at 2.9 percent, a sizable rebound from the 0.5 percent contraction in the first three months of the year.

On the inflation front, the Cleveland Fed’s Inflation Nowcasting suggests the Consumer Price Index (CPI) and the central bank’s preferred Personal Consumption Expenditures (PCE) price index will rise 0.3 percent and 0.2 percent, respectively.

“Markets now appear to be pricing in greater clarity on trade policy from the Trump administration, along with modest support from Congress and the Fed. Our base case assumes that tariffs will trigger a one-time price adjustment rather than sustained, broad-based inflation,” said strategists at Invesco Global Market Strategy Office in a June 30 note.

Indeed, price pressures could be forming based on underlying data. Prices for durable goods—key manufacturing products like electronics, automobiles, and furniture—increased for the first time since June 2023.

Truflation, a running real-time estimate that uses a treasure trove of data for its inflation index model, indicates modest price increases.

The debate centers on whether tariff-driven inflation will result in a one-time price adjustment or persistent costs for businesses and consumers.

Appearing on Capitol Hill for his two-day semiannual monetary policy report, Fed chair Jerome Powell said this is why the central bank is taking a wait-and-see approach to interest rates.

Federal Reserve Chairman Jerome Powell testifies during a hearing before the House Committee on Financial Services on Capitol Hill in Washington, on June 24, 2025. Madalina Kilroy/The Epoch Times

“Policy changes continue to evolve, and their effects on the economy remain uncertain,” Powell said. “The effects of tariffs will depend, among other things, on their ultimate level.”

“We’re just trying to be careful and cautious,” he continued. “We really think that’s the best thing we can do for the people that we serve.”

Interest rates are another factor for investors in the third quarter.

The Fed is expected to restart its easing cycle at the September policy meeting, following through on a quarter-point rate cut.

According to the updated Summary of Economic Projections, a quarterly survey of Fed officials’ expectations for the economy and policy, signals two rate cuts by the year’s end.