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By Adria Cimino
The three major indexes experienced ups and downs in the first half, but they finished with a gain.
Certain elements may represent catalysts for the stock market in the second half.
You might still be feeling the effects of the first half of 2025, and you may compare that period to a roller-coaster ride. All three indexes started out the year just fine, then slid in April on concern President Donald Trump's import tariff plan would hurt the economy -- finally, the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite bounced back on improving investor sentiment and finished the first half of the year in positive territory.
Smart investing is never about one day, or six months, and you may be wondering whether this momentum will continue or if uncertainty will return and hurt performance. You may be wondering if you should buy stocks in the second half of 2025. Here are three crucial things you need to know before making a decision.
The three subjects that held the market's attention in the first half haven't disappeared: Investors still will be focused on Trump's tariff plan, the future of interest rates, and technology companies' spending plans.
Some tech companies already set out their plans for spending this year and reaffirmed or even lifted them (in the case of Meta Platforms, raising its forecast for capital spending to as much as $72 billion). This is positive, showing they still see plenty of opportunity in areas such as artificial intelligence (AI) and didn't change their strategies even amid the uncertainty that roiled markets a few months ago
As for tariffs and interest rates, these areas could impact market direction. Investors are hoping for trade deals that include manageable tariff levels, so that prices won't soar and negatively impact consumer demand and companies' costs. So far, U.S. agreements with the U.K. and China have spurred optimism. Moving forward, any trade news or impact from trade deals could act as a catalyst for the stock market, sending it up or down.
Interest rates are another point to watch after the Federal Reserve launched cuts in the fall but put moves on hold since December. Some economists expect more decreases ahead. For example, Morningstar predicts rate cuts through 2027 to taking the federal funds rate to a target rate to 2.25% to 2.50%. Any potential movement to lower rates this year may push stocks, especially growth players, higher.
So far, all three of the above points look set to deliver positive news, but it's important to keep in mind that any disappointment in these areas could weigh on stock performance.
Regardless of the economic situation or decisions on tariffs, investors should focus on how a company has done in the past and how it's set to succeed in the future. A company's earnings track record, the quality of its business, and prospects over time are more important than an economic backdrop that will eventually change. Strong companies will excel when times are good and have what it takes to withstand more difficult environments.
And some players, for example healthcare companies that generate steady revenue growth and often pay dividends, often even excel during tough times as investors seek out security.
All of this means that even if tariff or general economic uncertainties persist and weigh on stocks, you shouldn't stop investing. In fact, during these times, when stocks slip, you can find great deals on companies that have proven their earnings strength over time and can go on to deliver growth over the long run.
One of the most important things you can do when investing is focus on the prospects of a particular company or companies over years. And a close look at fundamentals, as mentioned above, will help you select these potential long-term winners.
Why is long-term investing so important? Because it increases your chances of scoring a win. Look at it this way: Even the best of companies encounter challenges from time to time, so if you invest only for a few weeks or months, you might experience one of these rough patches and see your investment sink. In fact, you will see your investments sink if you're in the market for any length of time. But, if you invest over a time frame of years and decades, you accompany a player through many periods and that smooths out those tough spots. Oover 10 years, for example, a bad year or two won't impact your overall return by much.
So, as we start the second half of 2025, it's important to keep an eye on the three subjects, mentioned above, but if one produces a negative surprise and weighs on stocks, this doesn't mean you should stop investing. Instead, seize the opportunity to get in on quality companies for a good price and focus on their potential over the long term.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.
Should You Buy Stocks in the Second Half of 2025? 3 Crucial Things You Need to Know. was originally published by The Motley Fool