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July 1, 2025
June market review
Dear Clients and Friends:
Equity markets continued to march higher in June, seemingly unfazed by heightened Middle East tensions (which were short-lived) and the looming July 8 deadline for the administration’s pause on reciprocal tariffs. Despite an interim bout of volatility, it was a record-breaking month for the S&P 500 and the tech-heavy NASDAQ as both indices ended the month with new all-time highs. The Dow Jones Industrial Average was up 4% for June.
Nine out of the 11 sectors delivered positive returns, with Consumer Staples and Real Estate lagging.
Signs of an economic slowdown continued to mount, fueled by weak housing data, further cooling in the labor market and an unexpected deceleration in consumer spending. Lower oil prices have put downward pressure on inflation in recent months; however, the impact from tariffs is still expected to affect prices in the months ahead. The risk of higher inflation has kept the Federal Reserve (Fed) in wait-and-see mode, with policymakers holding the benchmark interest rate steady at 4.25%-4.5% in June, as expected.
While this month’s decision was easy, future policy actions are likely to become more challenging as the Fed will need to balance the risks of softening growth and a murkier outlook for inflation. The market still has two rate cuts priced in by year-end 2025.
Bond yields edged lower in June, with the 10-year Treasury falling to a two-month low of 4.25% as signs of economic weakness began to emerge. Adding to the positive sentiment in the bond market were comments from several Fed officials, which pushed forward the expectations for a Fed rate cut to September, one month earlier than expected.
We’ll get to the details below, but first, a look at the numbers year-to-date:
Equities grind higher
Equity markets have been in a slow grind over recent weeks, drifting slightly higher toward February’s all-time highs. Consensus GDP estimates have stabilized around 1.4% for 2025 and have moved toward 1.6% for 2026. Corporate earnings expectations are moderate, despite tariffs.
Oil prices spike temporarily
Amid nonstop news on Iran, oil prices briefly approached 52-week highs in June after hitting a four-year low in May. With a ceasefire in place, oil prices have receded.
Meanwhile, China has agreed to maintain a steady supply of rare earth exports to the US, reversing its earlier restrictions – but its commitment is limited to six months. The US already mines more than enough rare earths for its domestic needs, but doesn’t yet have sufficient processing capabilities, which leaves them as a bargaining chip for China.
US economy weakening but shows resilience
The large rebound in the stock market in May wasn’t enough for the Leading Economic Index to show a positive print last month. The Conference Board indicated it expects further weakening in economic activity for 2025 and 2026 under the pressure of tariffs, but is not expecting a recession this year.
The trade deficit in goods and services declined to levels not seen since 2023 as the front-loading of imports during the first quarter of the year gave way to more normal levels. The recent weakness in the US dollar is also benefiting goods exports, which increased last month. Import prices were higher than expected in May, but the year-over-year rate continued to fall, which is good news for inflation going forward.
The market for new homes is deteriorating faster than expected, but lower new housing inventories should keep home prices stronger than they would be otherwise. Existing home sales were better than expected in May, but prices showed signs of plateauing.
Job numbers were stronger than expected in April and the Employment Index improved in May. Despite a net downward revision of 95,000 jobs during the previous two months, job growth remains healthy.
Washington remains focused on tax cuts
The reconciliation bill was a key issue in June, with the Senate proposal permanently extending the 2017 Tax Cuts and Jobs Act, enhancing the Child Tax Credit and introducing provisions of no tax on tips and overtime. While the July 4 deadline for passing the provisions isn’t impossible, it is ambitious. Bill passage may be pushed closer to the debt limit “X date,” which is expected to fall between mid-August and early October.
Economic strain in the UK
As the July deadline nears, the UK and US are close to finalizing a largely symbolic trade deal which the UK is motivated to secure in light of its weakening economy. Chancellor of the Exchequer Rachel Reeves recently delivered a very tight Spending Review, sticking to previous budget plans but cutting most departmental budgets except for defense, healthcare and education. With little room left in the budget, tax hikes could be forthcoming this fall if productivity doesn’t improve. Meanwhile, the Bank of England held interest rates steady at 4.25% in June, signaling a possible rate cut in August to support the economy.
The bottom line
It’s safe to expect some give-and-take on tariffs and for the resulting negative headlines to spur volatility in the near future.
“Historically, when there’s a geopolitical event, the market reacts quickly and then tends to look through the ‘noise,’” said Raymond James Chief Investment Officer Larry Adam. “Ultimately, it’s the fundamentals that matter.”
We hope this update finds you well and, if you have any questions, that you will not hesitate to reach out at your convenience.
Broadening Our Horizons - Celebrating National Disability Independence Day
On July 26, 2025, the Americans with Disabilities Act (ADA) turns 35! We’re celebrating National Disability Independence Day with the ADA this year – and would love for you to join in.
People with disabilities didn’t always have the same civil rights as today. But, in 1990, the ADA was passed, prohibiting discrimination against individuals with disabilities in all areas of public life, including jobs, schools and transportation.
It’s a testament to the persistent advocacy for people with disabilities, which started as a small, grassroots movement in U.S. cities and towns in response to delayed regulations regarding Section 504 of the Rehabilitation Act of 1973. This was the most important law to date to give people with disabilities equal rights. Still, disability and discrimination had to be defined, and enforcement procedures and timelines had to be developed.
People with disabilities grew weary of waiting. They rightly demanded fair treatment for themselves, and parents of children with disabilities refused to let their children be treated differently. They and their allies protested, marched, lobbied and fought to see this piece of legislation through.
Today, we have protections in place and countless role models to admire, revered for their success and exceptionalism. Increased visibility has brought people like Stephen Hawking into popular consciousness. The famed theoretical physicist, astrophysicist, cosmologist and author was diagnosed with Lou Gehrig’s disease at 21, and he went on to develop a theoretical argument for black hole evaporation, subsequently named Hawking radiation.
Consider John Nash, whose experience with paranoid schizophrenia was captured in the movie, “A Beautiful Mind.” He led a successful academic career culminating in a Nobel Prize in economics. Or think of the National Women’s Soccer League professional Carson Pickett, who is an extremely skilled defender and was born without a left hand and forearm.
The ADA has created a toolkit that you can access at adaanniversary.org if you’re interested in resources to celebrate with us. There are educational materials, like webinars and training courses, as well as social media posts to share your support. If you would like to discuss any of these topics, please feel free to contact us. We would be honored to help.
Please note that our office will be closed July 3 and 4 for the Independence Day holiday. Raymond James, along with the financial markets, will be closed July 4. Of course, you can access your account(s) using Client Access anytime, year-round. We hope you enjoy the holiday!
Sincerely,
Tricia L. Tripp, CPA, CFP®
Financial Advisor
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