2025 Midyear Market Outlook: What Retirement Savers Need to Know

By Rohan Rashid, CFP® and David J. Blount, CFP®

As we reach the halfway point of 2025, we’ve reviewed several midyear market updates from trusted research sources to better understand what lies ahead for investors — especially those focused on retirement. Below are some key takeaways to help you navigate the current landscape with more clarity and confidence.

Slower Growth, But No Major Recession in Sight

The U.S. economy has slowed but remains on steady ground. After a slight dip in Q1, a modest rebound is expected in Q2, bringing projected annual growth to around 1.6% — a step down from recent years. Trade tensions and policy uncertainty are contributing to this slowdown, but most economists aren’t forecasting a deep recession.

For long-term investors, this signals a period of modest growth rather than dramatic market shifts — a potentially stable environment for retirement planning.

Job Market: Still Strong, Just Less Hot

Employment remains a source of economic strength. While job creation has slowed and unemployment has ticked up slightly to around 4.1%, the labor market is still considered healthy. Layoffs are low, and businesses are adjusting hiring in line with cooling economic momentum.

This stability supports consumer spending and lowers short-term financial risks, though slower hiring could be a sign that the post-pandemic boom is behind us.

Inflation and Interest Rates: A Holding Pattern

Inflation has dropped closer to the Federal Reserve’s 2% target, but trade-related price pressures could nudge it upward later in the year. For now, the Fed is expected to keep interest rates steady.

That means today’s elevated yields on savings, money markets, and short-term bonds — in the 5–6% range — are likely to persist in the near term. However, if the economy weakens and inflation stays in check, rate cuts could be on the horizon, which would push those yields lower.

Market Outlook: Stay Invested, Stay Grounded

Stocks have been volatile this year following strong performance in 2023. Most outlooks expect modest gains for the remainder of 2025, with continued choppiness. High valuations and global trade issues are keeping investors cautious.

Retirement savers should remain invested and take a long-term view. Rebalancing portfolios and buying during market pullbacks can help manage risk while still participating in future growth.

Bonds and Income: A Bright Spot for Savers

After years of low yields, bonds are once again providing meaningful income. Intermediate-term Treasuries are yielding 4–5%, and many analysts expect this range to hold for the rest of the year.

If interest rates eventually fall, today’s bond yields will become even more valuable. Bond ladders or income-focused bond funds can offer retirement savers both stability and consistent cash flow.

What Retirement Investors Should Focus On

1. Prioritize Income and Safety

With bond yields at multi-year highs, consider allocating a greater portion of your portfolio to high-quality fixed income. This helps support retirement income without taking unnecessary risk.

2. Diversify Thoughtfully

Avoid over-concentration in any one asset class. A balanced mix of stocks, bonds, and alternatives can help weather market ups and downs.

3. Use Volatility to Your Advantage

Instead of fearing market pullbacks, use them as opportunities to invest gradually through dollar-cost averaging or rebalance toward long-term targets.

4. Focus on Capital Preservation

In a slower-growth environment, emphasize stability over aggressive growth.

Protecting what you’ve built is just as important as growing it.

For Further Reading

If you're interested in a deeper dive, here are links to the full midyear reports we referenced in this blog:

• City National Rochdale Mid-Year Review

• LPL Research 2025 Midyear Outlook

• Charles Schwab 2025 Economic & Market View

• Capital Group 2025 Midyear Investment Outlook

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. Bonds are subject to credit, market, and interest rate risk if sold prior to maturity.

Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.