After a volatile first half of 2025, markets are showing signs of stabilization—but investors shouldn’t get too comfortable. In the latest episode of RHP Market Talk, Royal Harbor Partners CIO Glenn Royal and CXO Natalie Picha break down the state of the markets, Federal Reserve policy, and how portfolios are being positioned for a potentially uncertain second half of the year.
The Trade War Ripple Effect
Back in April, headlines were dominated by tariff tensions and market volatility. Fast forward to June, and while some of that noise has quieted, the effects are still unfolding. Glenn notes that although trade tensions initially caused dramatic market dips and supply chain disruptions, much of the economic impact has now been “baked into the system.”
Glenn explained that tariffs have had an effect, but it’s been more like a “slow boil.” Some costs have been absorbed by manufacturers; others passed on to consumers. The question is how this will show up in the data over time.
Shipping activity has slowed, retail sales have declined, and auto sales, after a brief surge, have pulled back. While inflation hasn’t yet spiked dramatically, all eyes remain on whether continued pressure will push core inflation and unemployment higher, setting off new market concerns.
Will the Fed Cut Rates?
Despite softening inflation and steady employment, the Federal Reserve has held interest rates steady for four consecutive meetings. But Glenn believes the next move is likely to be a cut—especially if unemployment ticks up toward 4.5%.
“We’re positioned in shorter-duration bonds,” Glenn says. “That part of the yield curve is controlled by the Fed, and we believe rate cuts could offer return potential in fixed income.”
The central bank’s dual mandate of stable prices and full employment means any notable increase in joblessness could trigger a response, even if inflation is still hovering below targets.
Geopolitics, Oil, and Global Risk
Markets may be calm now, but global uncertainty looms large. The ongoing conflict between Israel and Iran, and the potential threat to shipping through the Strait of Hormuz could trigger spikes in oil prices and renewed inflation fears.
“If oil hits $120 or $200 a barrel because of shipping disruptions, that’s going to ripple through the economy,” Glenn cautions.
Fortunately, increased domestic energy production and global shifts toward electric vehicles may buffer the worst-case scenario. But it’s still a critical risk on the radar.
Portfolio Strategy: Navigating Cautious Optimism
At Royal Harbor Partners, portfolio positioning reflects both optimism and caution. Glenn emphasizes the importance of flexibility and discipline, noting that while the U.S. equity market appears rich—trading at 22–23 times forward earnings—opportunities still exist.
“Valuations are high, no question. But if earnings growth materializes in the second half, the market can support that,” he says.
For investors in balanced portfolios, there’s reason for cautious confidence:
- Bonds may offer 3–5% total return if rates are cut
- Equities could benefit from a “friendly Fed” and improving earnings
- International investments, particularly in value and financial sectors, offer diversification and attractive relative valuations
Key Risks to Watch
Looking ahead, investors should keep an eye on:
- The July 8 tariff deadline – Will the 90-day moratorium expire without resolution?
- Rising deficits – Fiscal discipline remains a long-term challenge
- The proposed “revenge tax” on foreign investors – Could trigger capital outflows
- Persistent inflation – Especially if energy prices spike due to geopolitical shocks
Final Thoughts: Stay Disciplined, Stay Informed
Markets are moving fast, and news cycles are even faster. Glenn offers a reminder from a bond trading desk: don’t react instantly to headlines, especially not to political tweets. Instead, give it 72 hours. Let volatility settle before making big decisions.
Glenn described the current market as a “yellow-light” environment—cautious but not bearish. The team is focused on collecting dividends and income, holding some cash, and waiting for clarity on tariffs and earnings.
For clients and investors alike, staying informed and aligned with a long-term strategy is essential. At RHP Wealth Management, we remain committed to adjusting our approach as conditions change and, as always, to providing guidance rooted in clarity and confidence.
Ready to Talk Strategy?
Schedule a fit meeting with our team and find out how we can help position your portfolio for the path ahead.