Tax management

Tax management update – Q2 2025

July 30, 2025 - 5 min

SVP, Client Portfolio Manager, Integrated Portfolio Implementation – Natixis Investment Managers Solutions

Q2 2025 represented a classic example of how a proactive, year-round harvesting process can add value for clients.

– Peter Klos, CFA^®

Investors experienced a true roller-coaster ride in the second quarter of 2025. Wide-ranging tariff announcements in early April led to significant volatility and a sharp drop in equity markets. This volatility persisted for the early/mid portion of April until the Trump administration placed a 90-day pause on the implementation of the tariffs.

Equity markets continued to trend higher in Q2 when it became increasingly clear that some of the massive tariff increases may not play out. As such, some of the potential worst-case scenarios from an overall economic activity perspective were removed, and markets reacted accordingly. Equity markets ended the quarter higher both from a quarterly and year-to-date perspective.

Highlights of the One Big Beautiful Bill Act

Although tariffs drove the majority of the volatility in late Q1 and early Q2, the headlines shifted toward congressional negotiations and the ultimate passage (start of Q3 2025) of President Trump’s One Big Beautiful Bill (OBBB) Act. This piece of legislation was designed to extend and make permanent a number of elements in the Tax Cuts and Jobs Act of 2017.

Included in the law are changes to taxes, federal spending, funding for administration priorities and a $5 trillion debt ceiling increase. For many, the law will mean they won’t face scheduled tax increases on January 1, 2026, while others will receive additional tax relief – including on some tipped and overtime wages, through enhanced state and local income-tax exemptions, and higher standard deductions for some seniors. For an extensive update on the details, read Kari Grant’s update on tax legislation.

Winners and losers

The number of stocks in the S&P 500^® posting positive year to date (YTD) returns improved during the quarter, as markets rebounded significantly over the course of the period. Although the overall S&P 500^® rose 6.2% for the quarter, a little over half of the stocks, 57%, were up in value. After experiencing a difficult start to the year, growth stocks have rebounded significantly, and many of the Magnificent 7–type names have reestablished leadership. NVIDIA (+46%), Microsoft (+33%), Broadcom (+65%) and Meta (+28%) were the four largest contributors from a performance perspective within the S&P 500^®, given their combination of strong performance and relatively large weight. Other top 10 index names, such as Apple (-8%) and Berkshire Hathaway (-9%), were notable detractors, along with UnitedHealth (-40%), which had a significant stock-specific impact.

Winners, losers and total return for the S&P 500^® by calendar year

Source: FactSet, Natixis Investment Managers Solutions
The performance data shown represents past performance and is no guarantee of future results.

Proactive tax loss harvesting continues to add value

Q2 2025 represented a classic example of how a proactive, year-round tax loss harvesting process can add value for clients. Markets tended to fall somewhat significantly in the early part of the quarter but rebounded by the end of the period. There were some stock-specific or industrywide impacts, but much of the turbulence was driven by tariff-related volatility. Longer-term investors in US stocks might still have good-sized gains, but new investors likely had the opportunity to harvest losses to offset gains in other parts of their portfolios. Non-US markets have held up better in 2025 due to stock and currency reasons, but there were still pockets of weakness at the country or individual stock level as tariff-related volatility led to broader dispersion across individual names. Bond markets (especially higher-quality investment grade) rose during the period, leading to fewer opportunities in that space compared to what we’ve seen over the past number of years. A proactive and systematic tax loss harvesting process that looks for opportunities through the year was likely able to take advantage of some harvesting opportunities, especially for new investors within the US large-, mid- and small-cap universes. This harvesting opportunity will vary based on client-specific events (when the client invested, cash flows, etc.) along with manager changes.

Tax management update – Q2 2025

3.39 MB

Tax-efficient investing in SMAs

Direct indexing separately managed accounts (SMAs) can help address key issues facing tax-sensitive investors. All accounts are actively managed to optimize tax loss harvesting while providing beta exposure to an index. Our tax-managed SMAs include:

S&P 500^® Strategy (Large Cap)

S&P 400^®Strategy (Mid Cap)

S&P 600^®Strategy (Small Cap)

S&P 1500^® Strategy (All Cap)

S&P Global 500 Strategy (Large Cap)

S&P ADR/International Strategy

What is tax loss harvesting?

Tax loss harvesting is a strategy for saving on taxes. It involves intentionally selling a stock at a loss for tax purposes. These realized losses can be used to offset current or future realized capital gains, which reduces or may even eliminate the investor’s tax liability.

Direct indexing strategies

Want more information on tax-managed investment strategies?

Natixis Investment Managers does not provide tax or legal advice. Please consult with a tax or legal professional prior to making any investment decisions.

CFA^® and Chartered Financial Analyst^® are registered trademarks owned by the CFA Institute.

The S&P 500^® Index is a widely recognized measure of US stock market performance. It is an unmanaged index of 500 common stocks chosen for market size, liquidity, and industry group representation, among other factors. It also measures the performance of the large-cap segment of the US equities market.

The views and opinions expressed may change based on market and other conditions. This material is provided for informational purposes only and should not be construed as investment advice. There can be no assurance that developments will transpire as forecasted. Actual results may vary.

Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Natixis Investment Managers or any of its affiliates.

Indexes are not investments, do not incur fees and expenses, and are not professionally managed. It is not possible to invest directly in an index.

Beta measures the volatility of a security or a portfolio in comparison to the market as a whole.

A tax liability is the total amount of tax debt owed by an individual, corporation or other entity to a taxing authority.

Tax loss harvesting is a strategy for selling securities that have lost value in order to offset taxes on capital gains.

Capital gain is a rise in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price.

Investing involves risk, including risk of loss. Investment risk exists with equity, fixed income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided.

This document may contain references to copyrights, indexes and trademarks that may not be registered in all jurisdictions. Third-party registrations are the property of their respective owners and are not affiliated with Natixis Investment Managers or any of its related or affiliated companies (collectively “Natixis”). Such third-party owners do not sponsor, endorse or participate in the provision of any Natixis services, funds or other financial products.

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