Quarterly Investment Foundations Third Quarter 2025

Mastering The Subject

Rebalance and Refocus on Fundamentals

As the saying goes, “In like a lion, out like a lamb.” April came roaring in with surprise tariff news, but by June, the markets had steadied, and investors were once again focused on what truly drives returns. The second quarter of 2025 brought plenty of headlines, market swings, and policy shifts—but also a timely reminder to stay grounded in the fundamentals.

At Grand Wealth, we used this moment of volatility to refocus on long-term investment discipline. Let’s take a look at what happened in the quarter, what it means for your portfolio, and how rebalancing and diversification continue to guide our strategy.

Market Recap: The Value of Diversification

Diversification between U.S. and international markets continued to add value in the second quarter. Even after a strong first half of the year, we believe international and emerging market stocks remain attractively priced, especially compared to U.S. stocks, which are still trading above historical valuation averages. Returns for all asset classes benefited from solid corporate earnings and hope for a softer tariff policy.

_{Data as of 6/30/2025. Past Performance is no guarantee of future results. U.S. Stocks, International Developed Stocks, Emerging Market Stocks, Real Estate Stocks represented by Russell 3000, MSCI World ex USA, MSCI Emerging Markets, and Dow Jones US Select REIT indices. U.S. bonds and Global bonds represented by the Bloomberg U.S and Global Aggregate indices. The 60/40 Portfolio refers to a portfolio that holds 60% stocks and 40% bonds and is a calculated representation of the categories and their performance notes above.}

On the economic front, the U.S. is showing signs of a mild slowdown with a slight negative growth rate of -0.2% in the first quarter. Economic growth will likely be inconsistent while businesses and consumers adjust to tariff, immigration, and tax policies that both hurt and help their situations. For investors, this environment reinforces the importance of staying diversified— geographically, and across market sectors and asset classes.

Using Volatility to Rebalance with Purpose

April’s sudden volatility—fueled by unexpected tariff announcements—created an opportunity to act, not react. We rebalanced client portfolios during this downturn, selling what had become overweight and buying what was underweight. This approach keeps portfolios aligned with long-term targets while also positioning them to benefit from future recoveries.

Back to the Fundamentals: What Drives Returns

So far this year, it has been easy to be distracted by the headlines. But headlines have less to do with stock performance than you may think - what really drives your long-term stock returns comes down to three simple ingredients:

•   Profits – The profit of a company provides value to shareholders in the form of dividends, share repurchases, or investments to grow the business.

•   Earnings Growth – As companies grow revenue and become more profitable, their stock values tend to rise.

•   Valuation Changes – How much investors are willing to pay for a company’s earnings. This component incorporates future expectations about a company’s ability to grow and create profits.

In simple terms: Expected Return = Profits + Growth + Valuation Change

Right now, we’re seeing better opportunities outside the U.S. because international and emerging market stocks offer these ingredients at more reasonable prices. While U.S. stocks are nearly at a 20-year peak, international and emerging market stocks are fairer and close to their 20-year averages (see below). Over the next several years, maintaining diversification will be beneficial as the expected return is higher for international and emerging market equities.

Keep Focused, Stay Disciplined

As we move into the second half of 2025, uncertainty is still part of the picture—but so are opportunities. We believe the best way to capture long-term returns is to stick to the fundamentals: stay diversified, pay fair prices for investments, and rebalance when markets give us the chance.

At Grand Wealth, we’ll continue to focus on the things we can control and help our clients stay on track through every season of the market.

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_{Disclosure:
The opinions expressed herein are those of Grand Wealth Management (“GWM”) and are subject to change without notice. This material is not financial advice or an offer to sell any product. This article is for informational purposes only and does not constitute investment, legal or tax advice and should not be used as a substitute for the advice of a professional legal or tax advisor. GWM reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. This is not a recommendation to buy or sell a particular security. Past performance does not indicate future results. GWM is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about GWM including our investment strategies, fees and objectives can be found in our Form ADV Part 2 and Form CRS, which are available upon request.}