Columbus Wealth Management Quarterly Update – 2025 Q2

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Market Update & Investment Commentary

Data as of 06/30/2025 (unless stated otherwise)

US Markets

2025 has taught us yet another lesson in the importance of staying invested! As can be seen from the first chart below, the S&P 500 has posted a year-to-date return of 6.2%, after hitting a low of -15% on April 8^th (six days after implementation of the tariffs). Exiting US Equities in April likely meant missing a swift and substantial recovery since then. The same chart highlights that a balanced portfolio comprising 70% stocks (MSCI ACWI) and 30% bonds (US Aggregate Bond) outperformed the S&P 500 by over 2% year-to-date and experienced a drawdown of just over half that of the S&P 500.

The top seven stocks in the S&P 500 (Apple, Amazon, Google, Meta, Microsoft, Nvidia, and Tesla) now make up 21% of the share of S&P 500 returns, down from a high of 63%. We’ve also seen a significant narrowing in the gap between returns of the Russell 1000 Value and Russell 1000 growth (6% and 6.1% respectively). We continue to implement strategies to reduce the impact of a small number of companies on our overall returns.

International Markets

The next chart provides an overview of the performance across four major asset classes year-to-date and underscores the prominent role international equities have played in driving returns for diversified portfolios. The MSCI EAFE index, which tracks developed market equities outside the US and Canada, has delivered an impressive return approaching 20% so far in 2025. This performance stands out in comparison to US equities and other asset classes, highlighting the importance of global diversification. Several factors have contributed to the strength of international equities this quarter, including resilient corporate earnings in Europe and Asia, improved economic outlooks in several developed markets, and a favorable currency environment for US-based investors (discussed further below). As a result, balanced portfolios with meaningful international exposure have not only captured higher returns but also benefited from the dampening of volatility that global diversification provides.

A continued weakening of the US dollar has played a significant role in enhancing returns for US-based investors who hold international securities. This trend is clearly demonstrated in the next chart, which highlights not only the performance of foreign equities but also the impact of currency fluctuations. Specifically, the MSCI EAFE index—a broad measure of developed international equities—posted a remarkable return of 19.9% year-to-date when measured in US dollars. The same index yielded only 8.3% in local currency terms, underscoring the powerful effect that dollar depreciation has had on foreign investment returns.

Over the same reporting period, the Euro strengthened by 12.8%, contributing notably to the outperformance of European investments for US investors. Similar trends were observed in other major currencies, such as the Japanese Yen and British Pound, each playing their part in amplifying returns when converted back to dollars. This phenomenon serves to illustrate the importance of global diversification—not only across asset classes but also geographically and through currency exposure. While international equities have been robust performers in their own right, the additional boost from favorable currency movements has magnified total returns in US dollar terms. Investors should be mindful, however, that currency trends can be volatile, offering both the potential for gains and for future headwinds.

Economy

Our main economic focus this quarter is on the Bill currently making its way through congress. The Senate-revised version has been sent back to the House, and the president has imposed a deadline of July 4^th to get the bill to his desk, though acknowledged it might not get done by then. Here are the key provisions under consideration:

• Permanent extension of the 2017 tax cuts.

• State and Local Tax (SALT) deduction cap set at $40,000, with a 1% annual increase through 2029; reverts to $10,000 in 2030. An income cap of $500,000, also rising by 1% annually, will apply.

• Introduction of a $6,000 senior deduction, subject to an income phaseout.

• Deduction available for $25,000 in tips and $12,500 in overtime pay for tax years 2025–2028, limited to specific professions. Income phaseout begins at $150,000. Payroll taxes remain applicable.

• Increase in the child tax credit to $2,200, indexed to inflation.

• Estate tax exemption raised to $15 million, becomes permanent and indexed for inflation.

• $10,000 deduction permitted for auto loan interest on new vehicles assembled in the US, subject to phaseouts.

• Expiring tax credits for electric vehicles and residential clean energy improvements.

• Increased allocations for defense and border security spending.

• Reductions in healthcare, nutrition assistance, and clean energy credits.

Perhaps a significant consideration: the Bill is likely to be retroactive to 1/1/2025, which means workers who have their tax withholdings set based on the old rules could receive a substantial refund in 2026, potentially boosting consumer spending next spring.

Trade negotiations have brought the average tariff rate down to about half of what it was on April 8^th (see next chart), which has played a significant role in the recovery seen in U.S. markets since then. As these changes get implemented, we are keeping a close eye on consumer spending, economic growth, and inflation. We expect the Federal Reserve will also maintain their wait-and-see approach until the effects of the new policies filter their way through the economy. Until then, the federal funds rate remains at a range of 4.25% - 4.5%.

Otherwise, it’s mostly business as usual for the US Economy. The latest inflation reading was 2.4% (US Consumer Price Index, year-over-year), with housing still being the largest contributor. We saw a Real GDP reading of -0.5% for Q1, largely due to net exports since companies were in a hurry to import goods before the new tariffs took effect. The last monthly payroll gains figure was 139,000, which is hovering right around the 3-month average, and we have 7.7M job openings against 6.2M job seekers. The unemployment rate is at 4.2%. WTI Crude Oil is down to about $66/barrel from a high of $123.7 in March of 2022, resulting in lower summer gas prices. Lastly, the housing market is still quite soft with the average rate for a 30-year mortgage at 6.8% keeping many buyers on the sidelines. Our last chart shows a spike in inventories, but little change in existing home sales.

Sources: Bureau of Labor Statistics, Bureau of Economic Analysis, Federal Reserve, Freddie Mac

Summary

In conclusion, with so many changes and evolving legislation influencing the financial environment, it is imperative to engage in careful planning and to maintain a disciplined investment strategy. We remain committed to staying well-informed and responsive to the implications of policy changes and market trends to ensure our clients continue on the trajectory towards financial success. We also believe that with thorough analysis and proactive measures, we can turn challenges into opportunities. We are enthusiastic about the potential for growth and prosperity, and we firmly believe that the right approach can yield positive outcomes.

Important Disclosure Information:

Please remember that past performance is no guarantee of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Columbus Wealth Management, [“CWM”]), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from CWM. CWM is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of our current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.cbuswm.com. Please Remember: If you are a CWM client, please contact CWM, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our advisory services.  Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please also remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results.  It should not be assumed that your CWM account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your CWM accounts; and, (3) a description of each comparative benchmark/index is available upon request.