Forecasts Have Missed the Mark, Our Discipline Has Not
“Doubt is not a pleasant condition, but certainty is absurd.” – Voltaire
Every June, we find ourselves doing the same thing: reviewing the first half of the year and comparing reality to expectations. Not because we believe predictions drive portfolios, but because the gap between what people thought would happen and what actually happened is often the most instructive part of the investing process.
Take small caps, international stocks, or interest rates — all areas where prevailing forecasts heading into 2025 have missed the mark.
Although we think they can be foolish, this isn’t necessarily a critique of the forecasts themselves. It’s a reminder that the most important thing in investing isn’t being right — it’s about having a process and being prepared regardless of what happens.
That’s why at Spartan Planning Group, we design systems that can adapt to shifting conditions without relying on foresight. When small caps looked poised for a breakout, our models stayed cautious. When international equities still seemed out of favor, our systematic investing process told us to lean in.
In this month’s Note, we reflect on what’s unfolded so far in 2025 — not to pat ourselves on the back or call out misplaced predictions, but to reinforce the value of a systematic, long-term mindset in a world that keeps trying to throw curveballs.
But first, here’s a summary of our take on what transpired in the markets in June.
Disclaimer: This note is for general update purposes related to the general strategy and approach of Spartan Planning portfolios. Every client’s situation including Risk Profile, Time Horizon, Contributions, and Distributions is different from other clients. Your exposure to any given asset class will depend on your goals, risk profile, and how tactical or static your risk profile calls for. Adjustments can vary across strategies depending on each strategy’s objectives. What’s illustrated above most clearly reflects allocation adjustments for the Growth Strategy. If there have been changes to your risk profile and/or goals or if you wish to discuss them in more depth, please contact your advisor.
Asset-Level Overview
Equities & Real Estate
It feels like it has been a while since stocks have had a low-volatility month. In fact, measured by the standard deviation of daily returns, June has been the month with the lowest volatility in 2025 thus far. Historically, muted volatility is highly correlated with positive returns (and positive trends), and so it’s no surprise that returns have indeed been positive for the month. Broad U.S. equity indexes notched new all-time high closes to finish the month, and the continuation of uptrends leaves our strategies in an overweight position for U.S. equities heading into July.
International stocks also continued to maintain their positive trends in June, though foreign developed stocks overall lagged both U.S. and emerging markets. The segment remains the strongest among equities and quasi-equities. As a whole, our strategies are fully allocated to international equities, with a continued tilt towards foreign developed markets.
Among the equity and quasi-equity buckets, real estate remains weakest. Trends were slowly heading in a positive direction before a sharp retracement left them in negative territory. A combination of high rates and a slightly softening economy is proving to be a ceiling on further price advancement at the moment.
Fixed Income & Alternatives
While short-term fixed income instruments have been stable, prices have been shakier as you move up the curve, with long-duration bonds remaining in downtrends across all timeframes. The intermediate-term picture improved just enough in U.S. bonds that our portfolios will see small increases in exposure for July; however, overall domestic bond exposure remains underweight. International bonds continue to perform relatively well and, as a result, will be held at their baseline level. Any remaining exposure will be held in cash equivalents that provide yield.
Within the multi-asset trend alternatives bucket, short-term fixed income futures and other related instruments remain the most significant in terms of allocation. Longer-duration bonds continue to be primarily held in short positions. Commodities, such as gold and cocoa, also make up noteworthy positions. Meanwhile, the continued strength in stocks globally has caused net long exposure to increase there as well. The U.S. Dollar’s steady decline has caused this segment to increase allocations to foreign-denominated currencies.
Sourcing for this section: Barchart.com, S&P 500 SPDR (SPY), 1/2/2025 to 6/27/2025; Barchart.com, S&P 500 SPDR (SPY), 1/22/1993 to 6/27/2025; and Barchart.com, Total Stock Market ETF Vanguard (VTI), 5/24/2021 to 6/27/2025
3 Potential Catalysts for Trend Changes
Back to Status Quo: The U.S. economy has returned to neutral with the policy shifts and economic data that have emerged over the last few weeks. Consumer spending hasn’t collapsed, but the latest data shows that it has weakened significantly. The labor market is also softening. Annualized growth in gross domestic product is likely expected to be around 0.8% during the first two quarters of 2025, but that is down sharply from 2.5% in 2024. While the stock market is not the economy, it reflects investors’ sentiments about growth, profits, interest rates, and risk. Companies were cautious about the economic outlook a few months ago, but recent profit guidance has tended to be better than analysts expected.
Tale of Two Reports: Depending on which poll you read, Americans are either more confident or less confident in the economy. The University of Michigan announced its index of consumer sentiment for June was 60.7, up from a May reading of 52.2, though the June reading is still low by historical standards. Before the pandemic, for example, the index hovered around 100. Post-pandemic – a period marked by the cost of almost everything increasing – consumer sentiment has experienced a broad decline. On the other hand, U.S. consumer confidence slipped in June, reversing its improvement from May, according to the Conference Board; their index fell to 93, from 98.4 in May. The survey’s forward-looking expectations index fell to 69, from 73.6 the month prior. The survey’s closely watched labor-market indicator also deteriorated, which is calculated by subtracting the share of consumers who think jobs are “hard to get” from those who think jobs are “plentiful.”
Housing: U.S. home prices rose at the slowest annual pace in nearly two years, with mortgage prices continuing to stretch affordability. Mortgage rates remained in the mid-6% range throughout April, which kept monthly payment burdens near generational highs, pricing out many potential buyers. Sales of existing homes rose slightly in May (0.8% versus the prior month) but held near historically low levels. This is another sign that buyers are avoiding the market due to high prices. Spring is usually the busiest time of year for the housing industry, but this year has been a bust. According to an analysis by NAR and Realtor.com, households earning $100,000 a year could afford to buy 37% of the homes listed on the market in March. In contrast, six years ago, when mortgage rates and typical home prices were lower, they could afford 65% of available listings.
Sourcing for this section: The Wall Street Journal, “The U.S. Economy Pushes Through the Trade War,” 6/27/2025; The Wall Street Journal, “American Consumers Felt Better in June Than They Did in May,” 6/27/2025; The Wall Street Journal, “Survey Shows U.S. Consumer Confidence Worsened in June,” 6/24/2025; The Wall Street Journal, “U.S. Home Price Growth Cools to Near-Two-Year Low,” 6/24/2025; and The Wall Street Journal, “Home Sales Rose in May, but Housing Market Is Still Sluggish,” 6/23/2025
Comparing Reality To Expectations
“The only function of economic forecasting is to make astrology look respectable.” – John Kenneth Galbraith
Each year, as June comes to a close, it is common for us to reflect on the year’s first half and begin envisioning possible scenarios for how it will unfold. For example, this time last year, we were generally seeing one of the best-ever periods for U.S. stocks, not knowing that a slowdown was on the horizon, with 2024 becoming a tale of two halves.
Once again, we find ourselves reviewing the first six months and marveling at how the markets defy predictions and keep our clients on their collective toes.
Rewinding back to late 2024:
- The election of President Donald Trump and his America-first agenda appeared to be a possible death knell for the performance of international stocks compared to their U.S. counterparts, after years of underperformance.
- Further, the promises of fewer regulations and lower taxes had mid- and small-cap stocks temporarily rallying and poised for a run.
- The fixed income picture was murkier, but public pressure from the President-Elect had the market pricing in multiple rate cuts for 2025.
Fast forward to today, and reality is much different than the predictions:
- International stocks (and bonds) have vastly outperformed U.S. equivalents in 2025. Using the Vanguard FTSE All World ex US ETF (ticker: VEU), one would have to go back to 2017 to find the last year that international stocks broadly outperformed the S&P 500. That stretch has been separated by multiple years of double-digit, or close to double-digit, underperformance.
- For small-cap stocks, using the iShares Core S&P Small-Cap ETF (ticker: IJR) as a proxy, we see that not only are they NOT outperforming the S&P 500, but they are flirting with negative territory on a year-to-date basis as we hit the midpoint of 2025. If the year ends in a similar position, it would mark the 12th consecutive year of small caps underperforming large caps.
- Regarding interest rates, there have been zero interest rate cuts in 2025 thus far. Time remains for these to occur, but the Fed has been content to stand pat thus far. The next several weeks could be crucial to determining what happens next, as the Fed meets at the end of July.
The point of this review is to remind readers of our perspective and purpose. Spartan Planning Group believes that the best way to help our clients reach their long-term goals is to have a long-term mindset. While important, this is not particularly profound. The uniqueness of our approach stems from combining a long-term mindset with a systematic investment approach that enables a plan for navigating the shorter-term market fluctuations. The goal of this combination is to help our clients stick to their long-term plan. For example, when the circumstances earlier this year had us wondering if the predictions for international equities and small caps would prove to be correct, we never wavered from following our plan. Despite the negative news, following our process meant increasing exposure to international stocks and remaining underweight in small caps.
Disclaimer: this note is for general update purposes related to the strategy and approach of Spartan Planning portfolios. Every client’s situation including Risk Profile, Time Horizon, Contributions, and Distributions is different from other clients. Your particular exposure to any given asset class will depend on your goals, risk profile, and how tactical or passive your risk profile calls for. If there have been changes to your risk profile and/or goals or if you wish to discuss them in more depth please contact your advisor. This email and the data herein is not a solicitation to invest in any investment product nor is it intended to provide investment advice. It is intended for information purposes only and should be used by investment professionals and investors who are knowledgeable of the risks involved. No representation is made that any investment will or is likely to achieve results comparable to those shown or will make any profit at all or will be able to avoid incurring substantial losses. While every effort has been made to provide data from sources considered to be reliable, no guarantee of accuracy is given. Historical data are presented for informational purposes only. Investment programs described herein contain significant risks. A secondary market may not exist or develop for some investments portrayed. Past performance is not indicative of future performance. Investment decisions should be made based on the investors specific financial needs and objectives, goals, time horizon, tax liability, risk tolerance and other relevant factors. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Investors should consider the underlying funds’ investment objectives, risks, charges and expenses carefully before investing. The Advisor’s ADV, which contains this and other important information, should be read carefully before investing. ETFs trade like stocks and may trade for less than their net asset value. Spartan Planning Group, LLC (“Spartan” or the “Advisor”) is registered as an investment adviser with the United States Securities and Exchange Commission (SEC). Registration does not constitute an endorsement of the firm by the SEC nor does it indicate that the Adviser has attained a particular level of skill or ability. Indexes are unmanaged and do not incur management fees, costs, and expenses. Spartan’s risk-management process includes an effort to monitor and manage risk, but should not be confused with and does not imply low risk or the ability to control risk. There are risks associated with any investment approach, and Spartan strategies have their own set of risks to be aware of. First, there are the risks associated with the long-term strategic holdings for each of the strategies. The more aggressive the Spartan strategy selected, the more likely the strategy will contain larger weights in riskier asset classes, such as equities. Second, there are distinct risks associated with Spartan Strategies’ shorter-term tactical allocations, which can result in more concentration towards a certain asset class or classes. This introduces the risk that Spartan could be on the wrong side of a tactical overweight, thus resulting in a drag on overall performance or loss of principal. International investments may involve additional risks, which could include differences in financial accounting standards, currency fluctuations, political instability, foreign taxes and regulations, and the potential for illiquid markets. Investing in emerging markets may accentuate these risks. Diversification strategies do not ensure a profit and do not protect against losses in declining markets.