Markets Defy Worries as Major Asset Classes Deliver Gains — Evening Brief – 07.15.25
Despite headlines brimming with geopolitical tensions, tariff spats, and ongoing rate cut debates, markets are delivering a surprisingly resilient message in 2025: optimism is running broad and deep. Judging by year-to-date results across the major asset classes, there are no outright losers — a testament to steady interest rates and investor confidence in continued earnings strength.
So far, the U.S. 10-year Treasury yield has remained comfortably rangebound, closing at 4.47% today and staying below the key 4.60% level that could rattle sentiment. This range stability has helped anchor risk appetite even as worries persist that tariff-driven inflation could eventually push yields higher.
Within equities, the leadership story this year is all about factors — with the momentum and high beta styles in particular outperforming. The iShares MSCI USA Momentum Factor ETF (MTUM) has surged 15.5% in 2025 to date, more than twice the gain posted by the SPDR S&P 500 ETF (SPY). While the April tariff shock dented all major indices, MTUM’s quick rebound shows the power of sticking with leaders, especially as investors rotate into sectors aligned with AI, clean energy, and tech-enabled growth.
Another standout is the Invesco S&P 500 High Beta ETF (SPHB), which is quickly closing the gap with momentum. SPHB, which tracks stocks with the highest market sensitivity, is up 13.9% year to date — with most of that surge coming in the last few weeks. Over the past month alone, SPHB has outpaced MTUM by a wide margin, delivering a 9.2% gain compared to MTUM’s 3.0% climb. This may signal a brewing leadership shift in the factor race for the back half of the year.
For investors watching the evolving macro backdrop, the question is whether this steady optimism will hold. A breakout in yields above recent highs could challenge the buoyant mood, but for now, market breadth and steady rates continue to support risk-on positioning.
The resilience of the momentum and high beta factors also underscores how quickly sentiment can swing back when policy uncertainty lifts — and how investor psychology is prone to chase performance when leadership is clear. If SPHB’s surge continues, this could be the strategy to watch as capital rotates into the highest-beta plays for the rest of 2025.