The Nasdaq rose 17.7% in Q2 while the S&P 500 jumped 10.6%.
The second quarter of 2025 was a wild one, starting with tariffs that saw the markets tank, but ending with two strong months that lifted growth stocks to their best quarter since 2020.
The Nasdaq Composite led the way, rising 17.7% in Q2, buoyed by a 6.6% gain in June. It finished the first half of the year at a record 20,370. The Nasdaq, after dropping below 15,000 on April 8, gained roughly 34% since that low point. Year-to-date, the Nasdaq begins the second half up 5.5%.
The large cap S&P 500 index rose 10.6% in the second quarter, fueled by a 4.9% gain in June. This was the best quarter for the S&P 500 since the fourth quarter of 2023. The S&P 500 also sits at an all-time high of 6,205 and has the same YTD return as the Nasdaq, 5.5%, as of June 30.
The Dow Jones Industrial Average lagged the other major indexes in Q2 but still returned a robust 5%. In June, the blue-chip index returned 4.3%. The Dow Jones is up 3.6% YTD to 44,095.
The Russell 1000 index, which consists of large and midcap stocks, returned 10.8% in the second quarter, after rising some 4.9% in June. The Russell 1000 has gained 5.4% YTD, rising to 3,396.
Small and midcap stocks play catch up
Small and midcap stocks are still in the red for 2025, but they made strong gains in the second quarter.
The Russell 2000 small cap index jumped 8.1% in Q2 to 2,175. It had the best month of June of any major index other than the Nasdaq Composite, rising 5.3% for the month. The Russell 2000 is still down 2.4% YTD.
The S&P 400 midcap index returned 6.3% in Q2, increasing to 3,103. The midcap index posted a 3.4% return in June. However, it remains in the red, down 0.6% YTD through June 30.
Growth beats value
Value stocks still hold a slight edge over growth stocks year-to-date, but growth stocks closed the gap in a big way in Q2.
The Russell 1000 Growth index, which tracks large and midcap growth stocks, returned 17.6% in the second quarter, nearly matching the Nasdaq’s Q2 performance. The Russell 1000 Growth index gained 6.3% in June and ended the month at 4,275.
After a difficult first quarter, the index enters the second half of the year up 4.8%.
The Russell 1000 Value Index is performing slightly better, with a year-to-date return of 5.1%. However, its gains were muted in the second quarter, as the index returned 3.2%. It had the same 3.2% return for the month of June.
Value stock are not prone to wild swings, so the steady growth the index exhibited in Q2 is generally in line with its mandate and expectations.
S&P 500 at 6,500?
As we enter the second half of the year, tariff concerns have eased, but have not yet been resolved, only paused, so that is worth monitoring. Plus, the baseline tariffs still represent an increase and that could impact inflation.
Corporate earnings have been strong and should continue to be in the near future. But investors should keep an eye on rising stock valuations.
Morgan Stanley analysts predict the S&P 500 to be at 6,500 at the end of the year, and Goldman Sachs projects a similar number. That would suggest another 5% gain, for a 10% annual return for the large cap index.
