The first half of 2025 reminded us that markets don’t move in straight lines. Neither does investor sentiment. The markets began the year on firm footing. A new administration in Washington brought a fresh sense of optimism to many investors. Promises of fiscal discipline, supply chain realignment, and regulatory simplification boosted confidence across industries. Markets responded with enthusiasm, and investors, for a moment, believed we were entering a new era of clarity and control.
Then, the narrative shifted. Sweeping tariff proposals targeting all trading partners sent shockwaves through global markets. Supply chains were in doubt, inflation expectations rose, and companies reliant on global inputs were predicted to face significant margin pressures. The optimism that had carried into the first three months of the year quickly turned to concern. Money began to move defensively. Risk-off sentiment returned. A well-diversified portfolio was not providing sufficient protection, increasing the level of panic.
The pendulum swung again as the administration, responding to political and economic pressure, delayed the tariffs and quickly worked out deals with several partners. Talk of targeted trade enforcement replaced broad barriers. Markets, always hypersensitive to language and intent, quickly adjusted. As we mentioned in our last communication, Strategic Uncertainty, market participants became manic by attempting to reposition after every communication from the White House.
And yet, despite shifting policy winds, market volatility, and global risks, we are poised to finish the first half of the year up nearly 9%, close to the long-term average return for an entire year.
That result may feel counterintuitive to many. But it aligns with something we’ve said for years: markets are resilient. When examining global equity markets over the past 60 years, the 6-month return has been positive more than 75% of the time. When equities experienced a material decline, they surpassed the prior highs within two years on average. Could the next time be different? Maybe. But answering that question after the damage has been done has a very low chance of being the right decision. It’s important to remember that markets adjust, absorb, and eventually recover.
That doesn’t mean it’s easy to stay invested. Quite the opposite. It’s incredibly difficult. When we communicated during the April sell-off that our risk signals suggested that the trade war looked more like Brexit than the Global Financial Crisis, it was not without concern that we were misreading the indicators. When headlines scream the end is near and every portfolio starts to reflect that attitude, even the most seasoned investor can start to second-guess themselves. And it is those times where traditional advice, such as “ride it out,” “stay the course,” “you’re diversified,” often falls flat. Because in moments of deep uncertainty, diversification can feel like it isn’t working, and waiting can feel like passivity.
That’s when many investors become negative historians—remembering only the crises, the drawdowns, the crashes, and forgetting the recoveries, the resilience, and the long upward arc of progress.
At Auour, we try to approach it differently. We consider ourselves positive historians. Not because we’re blind to risk, but because we remember all of history. Not just the gut-wrenching drawdowns, but also the recoveries that followed. The innovations that were born in tough times. The bull markets that climbed out of bear shadows.
We understand the emotional weight of uncertainty. We’ve built our entire investment process to address it so that we can be more confident in being positive historians.
This is where our downside mitigation approach plays such an important role. Our process isn’t built around guessing what will happen next. It’s built around identifying when market conditions have changed in ways that warrant caution. When the reward for taking risks has diminished. Through a series of objective indicators, we monitor for signs of systemic stress and take action only when necessary. We raise cash, reduce exposure, and seek to protect capital in the moments that we think matter most.
Just as importantly, we don’t stay in cash indefinitely. We rely on our indicators to show that conditions are improving and the storm is passing. And when it does, we redeploy confidently rather than reactively.
This approach enables us and our clients to remain optimistic participants in markets, even when sentiment turns sour.
And if you need a real-world example of how critical that can be, look no further than one of the most storied investors in modern history: Peter Lynch.
The Peter Lynch Paradox
During his tenure managing the Fidelity Magellan Fund (1977–1990), Lynch delivered an astonishing 29% average annual return, more than doubling the market’s return. But the average investor in the fund earned just 7% annually, half the market return. Why the gap? Because investors consistently pulled money out after poor performance and rushed in after good years.
The lesson? Even the best strategy can’t overcome poor investor behavior. Timing mistakes—driven by emotion—can erase the benefits of even world-class management.
We don’t bring this up to scold. We cite it because it’s deeply human. People don’t fear volatility; they fear being the last one holding the bag. And when it feels like the bag is getting heavier by the day, they step aside. But often, they step aside just before the rebound.
We believe a strong investment process—one that adapts to risk and leans on evidence rather than emotion—is the best antidote to this cycle.
Being a positive historian means staying engaged and informed. It means remembering that history includes corrections and recoveries. And it means having a framework that allows us to participate in markets thoughtfully, without surrendering to panic.
Markets will always present reasons for worry. Our job is to remember the whole record, not just the valleys, but the many summits. And to use that perspective to keep walking forward, with process, purpose, and optimism while, of course, sprinkling in a fair amount of skepticism, humility, and humor. Being a positive historian doesn’t mean being naïve. It means recognizing the challenges while refusing to be a victim of them.
As we head into the July 4th holiday, it’s worth remembering that one of the privileges of independence—personal or national—is the ability to choose how we respond to the world around us. We can choose to see only the risks and uncertainties, or we can choose to see the progress and resilience that history has consistently delivered.
At Auour, we choose to be positive historians. Not because the road is smooth, but because the journey is worth it.
Wishing you a thoughtful and optimistic Independence Day.
IMPORTANT DISCLOSURES
This report is for informational purposes only and does not constitute a solicitation or an offer to buy or sell any securities mentioned herein. This material has been prepared or is distributed solely for informational purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. All of the recommendations and assumptions included in this presentation are based upon current market conditions as of the date of this presentation and are subject to change. Past performance is no guarantee of future results. All investments involve risk including the loss of principal.
All material presented is compiled from sources believed to be reliable, but accuracy cannot be guaranteed. Information contained in this report has been obtained from sources believed to be reliable, Auour Investments LLC makes no representation as to its accuracy or completeness, except with respect to the Disclosure Section of the report. Any opinions expressed herein reflect our judgment as of the date of the materials and are subject to change without notice. The securities discussed in this report may not be suitable for all investors and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. Investors must make their own investment decisions based on their financial situations and investment objectives.