Cayside Review: 2025 Q2
This newsletter includes our 2025 Second Quarter review, global market update and outlook, key numbers, and announcements.
“The real key to making money in stocks is not to get scared out of them.”
-Peter Lynch
The second quarter of 2025 was defined by two dominant crosscurrents: (1) the powerful momentum behind AI-led innovation and its impact on broader economy and industry, and (2) the persistent drag of the unknown (Tariffs, War, Geo-political, Fiscal Policy, etc,). During the quarter, Equity and Fixed Income markets digested a complex blend of robust technological growth, inflation, and hesitancy around unclear trade policy outcomes.
Overdue fears around trade policy outcomes resulted in nearly a -22% drawdown in equity markets (S&P 500), from peak to trough, from the high in February to the trough in mid-April. However, as the tariff rhetoric turned out to be more negotiation and deal-making rather than a halting of trade, equity markets recovered strongly through the end of the quarter approaching all-time highs. While many markets are making new highs, we continue to emphasize thoughtful investment and portfolio management discipline and the patience to keep a long-term view on investing.
Global Market Update & Outlook
Equities: Volatility Ends in Modest Gains
April brought a surge in volatility driven by rising geopolitical tensions and uncertainty surrounding U.S. trade and interest rate policy.
Despite these headwinds, markets staged a recovery by quarter’s end:
S&P 500 (SPY): Q2: +11.5%, YTD: +6.1%
Nasdaq (QQQ): Q2: +17.7%, YTD: +8.2%
Dow Jones Industrial Average: Q2: +3.5%, YTD: +4.6%
Source: FactSet
The rebound was led by companies at the forefront of Artificial Intelligence innovation, including those in energy infrastructure, data center development, and both hardware and software systems. While much attention remains centered on the “Mega 7” firms, a broader universe of publicly traded companies is emerging as viable participants in this AI-driven growth cycle which is creating fresh opportunities for investors beyond the “popular” names.
Fixed Income: Defensive Yield in Uncertain Terrain
Bond markets produced modest performance amid persistent inflation concerns and shifting interest rate expectations. We continue to favor short-duration assets such as U.S. Treasury Bills, which offer compelling risk-adjusted yields and provide a stable anchor in today’s volatile credit environment.
Additionally, select municipal bond markets remain attractive, offering quality credits and tax-efficient income potential for clients seeking diversification within fixed income.
Commodities: Precious Metals and Digital Assets Perform Strongly
Commodities demonstrated robust performance during the quarter and year to date (YTD):
Gold (GLD): +23.7% YTD
Silver (SLV): +21.9% YTD
These gains reflect ongoing investor concern around inflation and geopolitical instability, reinforcing their traditional role as safe-haven assets.
Meanwhile, Bitcoin (BTC-USD) reached fresh all-time highs, trading above $107,000 per coin and delivering a 13.4% YTD return as of the quarter end. Bitcoin’s continued strength underscores the asset class’s increasing institutional acceptance and its perceived utility in inflationary and unstable macroeconomic conditions.
Important Topics
Artificial Intelligence drives Infrastructure Growth
Artificial Intelligence (AI) remains a dominant narrative, with continued strength in semiconductor stocks and AI infrastructure firms. The evolution of this technology and its use has recently created a shift toward enablers and second-order beneficiaries (i.e., power utilities, data centers and transfer, cloud software, industrial automation) rather than simply semi-conductor leaders.
Rather than viewing AI as a short-term trade, we see it as a capital cycle story with long-term infrastructure implications. Similar to the advent of the internet, AI is disrupting and creating opportunities across nearly every vertical of industry. As adoption and innovation in the area grow, the demand for power generation, computing capacity and data capture creates a capital investment need that will take place over the next decade. Further, AI stands to create new industries that have not been contemplated yet, similar to how the internet gave rise to streaming movies and music, same day delivery of goods and ride sharing services among others.
INVESTMENT OPPORTUNITIES & RISKS
In 2Q 2025, we were able to initiate several new positions across client portfolios in addition to taking advantage of the market drawdown during the quarter by adding high conviction investments. We continue to focus on quality, durability and diversification in our goal to compound capital over the long term.
New Additions:
A Municipal Bond Manager focused on short to intermediate duration tax-free municipal bonds. The portfolio has a preference for municipalities that exhibit demographic and economic growth. We believe certain municipal bond strategies exhibit attractive net yields and credit quality.
A Consumer-Technology company that has exhibited industry-leading operations, low competition and “wide moats” with a sticky customer base. Additionally, the company has excelled in implementing AI into their products.
We have made a Global Uranium and Nuclear Energy allocation as the energy demands of AI infrastructure—particularly data centers—are becoming a major focal point for long-term investors. Nuclear energy is emerging as a key solution for several key reasons. This strategy provides diversified exposure to the global nuclear energy value chain—including uranium miners, reactor developers, and utility providers.
Removals:
We have made the decision to remove a Growth Equity Manager after numerous meetings, diligence calls and updates with the company. In our ongoing efforts to ensure the quality of our investments and portfolios, we constantly review the developments and changes in people, business, asset growth, portfolio constitution and performance. In this case, the investment portfolio has had large swings in sector and investment exposure due to fears over tariffs alongside a growing style drift from what was originally underwritten. In addition, the firm’s AUM growth has been drastic, making it more difficult for the portfolio manager to deploy capital and keep a consistent approach to investing. For these reasons, we chose to reinvest capital in other areas of higher conviction.
WEALTH PLANNING
In 2025, significant changes in U.S. tax policy and estate planning are underway, particularly affecting high-net-worth families. The “One Big Beautiful Bill Act” (OBBBA), which is under Congress consideration, proposes notable adjustments:
Estate and Gift Tax Exemption Increase: The bill aims to permanently raise the federal estate and gift tax exemption to $15 million per individual (or $30 million for married couples), adjusted annually for inflation. This move would prevent the exemption from reverting to approximately $7 million per individual at the end of 2025, as scheduled under the Tax Cuts and Jobs Act .
SALT Deduction Cap Adjustment: The state and local tax (SALT) deduction cap is proposed to increase from $10,000 to $40,000 for taxpayers earning less than $500,000, providing relief to residents in high-tax states.
Additional Tax Benefits: The bill includes provisions such as a new tax deduction for tips and overtime, and the creation of “Trump Accounts” tax-advantaged savings accounts for parents, offering a one-time $1,000 credit per child .
Implications for Families
These proposed changes offer an opportunity for families to reassess their estate planning strategies. The increased exemption could allow for greater wealth transfer without incurring federal estate taxes. However, the bill’s final outcome remains uncertain, and we will help you to stay informed about legislative developments.
Given the potential for significant tax implications, we are actively consulting with tax and estate planning professionals to navigate these changes for clients.
Business Update & Personnel News
As we continually improve our infrastructure and product offering, we have added an additional investment and market data provider to optimize our analysis, decision-making and communication both internally and among clients. We have reached several major growth milestones including our firm managing or advising on assets now exceeding $450 million, reflecting the trust and confidence of our clients.
FAMILY OFFICE AND ADVISORY RECOGNITION
In May, Cayside Partners was honored Top Multi-Family Office New Entrant by ClearView Publishing at the Family Wealth Report Awards held in New York City. This recognition reflects our relentless commitment to client-centered innovation, tailored generational education, and a forward-thinking approach to wealth stewardship. Thank you to our clients, partners, and team for making this milestone possible. We are just getting started and we will continue to strive to do our best for our clients.
We appreciate your support and confidence in our process and are excited to keep adding value for each of our client families.
Disclosures: Cayside Partners, LLC ("Cayside") makes no warranty as to the accuracy or completeness of any data herein. Information presented in this report is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Past performance is not indicative of future results. This report is intended for the recipient(s) only and not for further distribution without written consent. Investment advice offered through Cayside Partners, LLC, a Securities and Exchange Commission registered investment advisor able to provide investment advice in states where it is registered, exempt, or excluded from registration. Content contained herein should not be construed as an offer or solicitation for investment advice or for the purchase or sale of any security, insurance, or other investment product. Investments involve the risk of loss, including possible loss of principal. Please consult with a qualified financial, tax, accounting, or legal professional before implementing any ideas or strategies discussed here. Content provided is obtained from sources believed to be reliable but cannot be guaranteed as to its accuracy or completeness. Our firm's AUM figures are reported on a gross U.S. Dollar basis and may include assets managed on a discretionary and non-discretionary basis. Past performance is not indicative of future results, and AUM figures are subject to change. For further information regarding our firm's AUM or to obtain a copy of our most recent Form ADV, please contact us.