Outlook 2025: Mark Sherlock (Federated Hermes Limited) & Stephen Auth (Federated Hermes)
Outlook 2025: Mark Sherlock (Federated Hermes Limited) & Stephen Auth (Federated Hermes)

By Mark Sherlock, Head of US Equities, Federated Hermes Limited, and Stephen Auth, Chief Investment Officer Equities, Federated Hermes
‘What will the second half of the year bring? To date, it’s all been about the White House with tariff talk dominating headlines. But could that be about to change?
Sentiment has been dominated by executive orders, policy announcements, and tariff uncertainty. However, this may now have peaked, with the possibility of less volatile times ahead. While volatility may continue for a few weeks as individual tariff arrangements are agreed, we believe we are past the worst and that the second half of the year may prove more profitable for investors than the first.
The second half of the year may prove more profitable for investors than the first.
We anticipate a temporary pause in consumer and corporate spending as the ‘rules of engagement’ emerge, but US small- and mid-cap (SMID) companies are somewhat insulated from US-imposed tariffs due to their domestic focus. If tariffs force a re-alignment of the global supply chain, domestic small and midcaps should benefit from increased economic activity and demand.
While volatility remains unnerving for investors, market ups and downs are neither unusual nor unwelcome. Data shows that since the inception of the Russell 2500 Index in 2004, investors have experienced average intra-year drops of 17.8%. Importantly, year-end annual returns have been positive in 16 of the last 21 years.
Navigating the trade war was never going to be easy. We anticipated volatility, though maybe not to this degree! We advocate for a moderate overweight in equities, while waiting for a sign that the fog is beginning to lift or at least get less dense. Clearer days may be ahead. With the near-term voyage still fraught with pitfalls, the probability of a market-reset seems relatively high.’