June 16, 2025

“Investing is not about being right all the time; it’s about being right when it matters most.”

Howard Marks

Happy Father’s Day! Summer is in full swing, and we’re wrapping up a volatile but resilient week from June 8 to June 15, 2025. Here are the numbers from last week. The S&P 500 gained 0.62%, after a week of choppy trading, The Dow Jones Industrial Average rose 0.21%, The Nasdaq Composite advanced 0.95%. Internationally, the FTSE 100 was up 0.45%, supported by easing UK inflation at 1.8% in May. The MSCI-EAFE gained 0.75%. The 2-Year Treasury yield held at 3.92%, and the 10-Year Treasury yield ticked up to 4.45%.

So, what happened? The S&P 500 rose for a third consecutive day on June 10, buoyed by anticipation for the May CPI report and progress in U.S.-China trade negotiations in London. Stocks closed higher on June 12, with the S&P 500 up 0.4% after Oracle’s strong AI-driven outlook offset geopolitical jitters from Middle East tensions. The index remains above key support levels and its 50-day moving average, signaling potential for further upside if trade talks deliver. May was a stellar month, with the S&P 500 up 6.2%, the Dow up 3.9%, and the Nasdaq soaring 9.6%—their best monthly gains since November 2023. Will this momentum carry through the summer? Trade relief, earnings, and Fed actions will be key.

The biggest news was on trade and inflation. U.S.-China talks in London fueled optimism for a tariff resolution, with Trump delaying EU tariffs until July 9 and the China tariff truce set to expire August 12. The May CPI report showed inflation cooling to 2.0% annually, down from 2.1% in April, below the 2.2% economists expected, raising hopes for Fed rate cuts in late 2025. NVIDIA’s earnings beat expectations despite a $5.5 billion hit from China chip restrictions, with strong AI spending driving a 4% stock gain and analyst upgrades. Consumer confidence climbed to 101 in June from 98 in May, with the expectations index hitting 75.2, its highest since 2023, thanks to easing tariff fears and falling inflation.

In other news, Elon Musk’s exit from the Department of Government Efficiency (DOGE) on June 4 was due to a 130-day service limit, not a feud with Trump, who praised Musk’s work exposing bureaucratic inefficiencies. The House-passed “Big, Beautiful Bill” to extend 2017 tax cuts is under Senate review, but its $2.8 trillion deficit impact raises concerns after Moody’s U.S. credit rating downgrade on May 16. Corporate earnings showed strength, with Oracle boosting tech, though Boeing weighed on the Dow. S&P 500 Q2 earnings growth is projected at 8.4%, down from 12.1% in 2024 due to tariff costs. Globally, Hong Kong’s Hang Seng rose 2% on Tencent’s earnings, while Japan’s Topix ended a 13-day streak.

Looking ahead, Barron’s Ian Salisbury warns the “summer lull” may give way to volatility. Key dates: July 4, when Trump hopes to sign his tax bill; July 9, when the reciprocal tariff pause expires; August 12, when the China tariff truce ends; and July 30, when the Fed’s next meeting could signal rate shifts if inflation keeps cooling. The Fed’s June 17–18 meeting is expected to hold rates steady, with a 27% chance of a 25-basis-point cut by July 30.

As we close Q2, markets show resilience despite tariff and fiscal concerns, supported by cooling inflation, strong earnings, and trade optimism. The S&P 500’s recovery from April’s 20% drop highlights its ability to rally on “less bad” news. Investors should stay vigilant, as trade policy, Fed decisions, and Washington’s fiscal debates could drive swings. Strong fundamentals suggest 2025 could deliver gains, but diversification and risk management remain key to staying grounded when it matters most. We expect continued strength in Europe as the rate cuts take effect and hope sooner or later the Federal Reserve will begin reducing interest rates for no other reason than help the housing market.

Speaking of the housing Market, the housing market remains challenging but shows signs of stabilization. According to Freddie Mac, the average 30-year fixed mortgage rate dipped to 6.84% on June 12, down from 6.85% the prior week, while the 15-year fixed rate fell to 5.97% from 5.99%. Despite this slight decline, rates remain near 7%, driven by economic uncertainty and volatile financial markets. Zillow reports the national average 30-year mortgage rate at 6.72%, though rates vary by region, with higher-cost cities seeing elevated rates. The Mortgage Bankers Association (MBA) forecasts 30-year rates at 6.7% in Q3 2025, dropping to 6.6% by year-end, while Fannie Mae projects 6.1% by the end of 2025 and 5.8% by 2026.

Home prices continue to pressure affordability. The National Association of Realtors reported the median existing home price in April at $414,000, a record high for the month, with a 6.86% 30-year mortgage translating to a $2,980 monthly payment. Rising homeownership costs, including insurance and property taxes, exacerbate the issue, with median family income lagging housing cost increases. However, home price growth is slowing, and some experts predict a slight easing in value this year, potentially offering buyers some relief. Housing inventory is improving but remains below balanced market levels, and single-family housing starts dropped 12% year-over-year in April.

Mortgage demand is mixed. Purchase applications fell 4% for the week ending June 4 but were 18% higher than a year ago, driven by increased market supply. Refinance activity dropped, with borrowers holding out for larger rate declines. Bank of America notes buyer hesitation due to high rates and prices, though improving inventory and decelerating price growth offer hope for 2025. Experts caution that waiting for rates to drop significantly may not pay off, as rising home prices could offset savings.

Mike