Market Views 2Q25

👉 Click HERE to listen to the call.

After a bruising Q1, the second quarter delivered one of the most powerful post-correction recoveries in decades.

Markets ripped higher—fueled by AI-driven equity returns, resilient earnings, and a 90-day pause in tariff escalation. As of early July, the S&P 500 is up 26% from its April lows, marking the fourth-largest recovery in the past 50 years. But under the surface, the picture is more nuanced. Fed policy remains uncertain, inflation is sticky, and corporate leaders are proceeding cautiously—despite the market’s optimism.

In this quarter’s Market Views, CEO Will Muggia shares what’s powering the rally, what risks remain, and where Westfield is finding alpha amid valuation dispersion and evolving market dynamics.

Inside the episode:

• Breadth is back—but fragile:
  After months of narrow leadership from AI megacaps, the rally is finally broadening. Smid caps, Industrials, and Financials gained momentum late in the quarter, reflecting improving economic sentiment and easing financial conditions. Still, growth vs value leadership remains unbalanced, and it’s too early to call a full regime shift.
• Valuations are elevated—but uneven:
  As of early July, index-level multiples are rich—particularly across large-cap growth and tech. But underneath, valuation dispersion is striking. Equal-weighted and small/mid-cap benchmarks trade at deep discounts to their long-term averages, offering potential entry points for active managers.
• Earnings matter again:
  While we believe 2025 is expected to deliver modest growth, the market is increasingly pricing in a sharp acceleration in EPS by 2026. That improving trajectory is helping justify elevated multiples, especially in tech and large-cap growth, and remains a key pillar of the bull case heading into the second half of the year.
• Retail is all-in—institutions are not:
  Speculative flows into memes, crypto, and levered ETFs have exploded, even as institutional investors remain cautious. This divergence in positioning—highlighted by muted equity inflows from funds and CTAs—creates a strange tension in sentiment. As of early July, retail appetite is a key driver, but it may not be a stable one.

Whether you’re evaluating the impact of AI momentum on portfolio construction, assessing the tariff overhang and inflation tail risk, or searching for valuation-driven opportunities outside the megacaps, this quarter’s call offers timely perspective.