June 23, 2025

“Those that fail to learn from history are doomed to repeat it!”

—Winston Churchill

Summer is in full swing, and we are wrapping up another volatile yet resilient week in the markets. Here are the numbers from last week: S&P 500: Gained 0.78%, extending its rally despite late-week profit-taking. Dow Jones Industrial Average: Up 0.32%, buoyed by financial sector strength. Nasdaq Composite: Advanced 1.12%, led by tech and AI optimism.

Internationally, the FTSE 100: Rose 0.51%, supported by steady UK inflation at 1.8% in June. MSCI-EAFE: Gained 0.82%, with European markets lifted by ECB rate cut hopes. Treasury Yields: The 2-Year Treasury yield held at 3.90%, while the 10-Year Treasury yield edged up to 4.47%.

So, What Happened? The biggest news is over the weekend the US successfully destroyed Iran’s nuclear capability with a precision attack after repeatedly trying to get Iran to the negotiation table, The president called their bluff and did not allow the delay which Iran was employing to expedite their nuclear capability timetable. Israel did the dirty work removing all air defenses and providing accurate intelligence to allow the stunning success and demonstration to our advisories the US Military capability. (I suspect that was also one of the primary reasons for the US participation).

Before all of these international developments, The S&P 500 climbed for a fourth consecutive day on last Tuesday, up 0.5%, fueled by progress in U.S.-China trade talks in London. Markets wavered last Thursday amid renewed Middle East tensions but rebounded by last Friday, with the Nasdaq hitting a record intraday high, driven by NVIDIA and Alphabet. The S&P 500 remains above its 50-day moving average, signaling potential for further upside if trade talks deliver. June’s year-to-date gains are 12.4% for the S&P 500, 7.8% for the Dow, and 18.1% for the Nasdaq, marking strong momentum as we approach Q3. Will this carry through the summer? Trade outcomes, earnings, and Fed policy will be pivotal. Some of the other significant news placed the spotlight was on trade and inflation. U.S.-China negotiations showed promise, with a potential tariff rollback framework emerging, boosting global markets. President Trump extended the EU tariff pause to July 15, while the China tariff truce holds until August 12.

Inflation? The June CPI report showed inflation steady at 2.0% annually, meeting expectations, though core CPI rose 2.3%, slightly above forecasts, dampening hopes for an immediate Fed rate cut. The Fed’s June 17–18 meeting kept rates steady, with a 30% chance of a 25-basis-point cut by July 30, per CME FedWatch. Causing some cat calls from the White House, however We believe there are now bigger priorities. The tech sector came alive with Apple’s Q2 earnings exceeded expectations, driven by iPhone sales and services, lifting tech stocks. Tesla surged 5% after Musk’s AI-focused posts on X, while NVIDIA gained 3% on continued AI demand.

Not surprising with the good economic news especially on the blue-collar wage record increases, Consumer confidence rose to 103 in June, up from 101, with the expectations index at 76.1, a two-year high, reflecting trade relief and stable inflation.

In other news, the Senate began reviewing the “Big, Beautiful Bill” to extend 2017 tax cuts, but its $2.9 trillion deficit impact drew scrutiny after Fitch’s U.S. credit rating warning on June 18. You can expect continued criticism until its passage, we believe the threat of increasing deficits is political theater, Economic benefits for DOGE (which is continuing out of the spotlight now) and other cost cutting and bloated bureaucracy spending will offset those deficit fears.

Globally, Japan’s Nikkei rose 1.1% on tech strength, and Germany’s DAX gained 0.9% amid ECB rate cut speculation. Middle East tensions briefly pushed Brent crude to $81/barrel, but markets stayed focused on trade and earnings. S&P 500 Q2 earnings growth is now projected at 8.6%, slightly up from prior estimates, though tariff costs could weigh on 2026 outlooks. Emerging markets underperformed, with Brazil’s Bovespa down 0.4% on commodity weakness.

As mentioned last week, looking ahead Barron’s warns the “summer lull” could give way to volatility. Key dates to watch: July 4: Trump’s target to sign the tax bill. July 15: EU tariff pause expires. August 12: China tariff truce ends. All are still very much in play, one other thing, July 30: Fed’s next meeting, with potential rate cut signals if inflation cools further. So far this year, the markets show resilience despite trade and fiscal concerns, supported by stable inflation, strong earnings, and trade optimism. The S&P 500’s 22% recovery from April’s low underscores its ability to rally on positive developments. Investors should stay vigilant, as trade policy, Fed decisions, and fiscal debates could drive swings. Strong fundamentals suggest 2025 could deliver gains, but diversification and risk management remain key. We expect continued strength in Europe as rate cuts take effect and hope the Federal Reserve will soon ease rates to support the housing market.

Speaking of the housing market, the housing market remains challenging but shows stabilization signs. According to Freddie Mac, the average 30-year fixed mortgage rate fell to 6.82% on June 19, from 6.84%, while the 15-year fixed rate dipped to 5.96% from 5.97%. Zillow reports a national average of 6.70%, with regional variations. The Mortgage Bankers Association forecasts 30-year rates at 6.6% in Q3 2025, dropping to 6.5% by year-end, while Fannie Mae projects 6.0% by Q4 2025 and 5.7% by 2026. Home prices continue to strain affordability. The National Association of Realtors reported May’s median existing home price at $418,000, up 4.8% year-over-year, with a 6.82% 30-year mortgage translating to a $3,010 monthly payment. Rising homeownership costs, including insurance and taxes, outpace median family income growth. However, home price growth is slowing, with some analysts predicting a modest easing in 2025. Housing inventory rose 5% month-over-month but remains below balanced levels, and single-family housing starts fell 10% year-over-year in May. Mortgage demand is mixed. New home starts also plunged last week.

So, in conclusion the developments in the Middle East will cause some jittery feeling today but as it plays out should have little effect. The global supply of oil may be temporarily affected but the US change in energy policy and Iran’s decreased capabilities for disrupting traffic in the Straits of Hormuz should be easily overcome. We therefore continue to believe the second half of 2025 will see some rate cuts, good earning, stable inflation, and hopefully peace initiatives settling things down for a good second half of 2025.

Mike