June Monthly Market Update
By Opal Wealth Advisors | July 11, 2025June added to the reward for equity market investors who held steady throughout the tariff induced volatility of early April as the overall economy remained resilient and policy developments created incremental positive momentum.
From a policy perspective, while tariffs and trade negotiations remain in flux, the U.S. continued to soften its stance regarding the July 9th deal deadline and appears to be on a path leading toward less onerous tariff taxes on U.S. businesses and consumers for foreign goods. The U.S. and China secured a framework incorporating rare earth minerals and a tariff truce extension to August 11th while the U.K. negotiated a 27.5% tariff down to 10% in an announced deal in June. Fiscal policy also pivoted to a marginally stimulative stance with Congress voting to make permanent the 2017 TCJA tax cuts without causing any bond market angst and also clearing any tax policy uncertainty going forward. Geopolitical developments also closed out the month in a place of relative calm with conflict in the Middle East in a holding pattern strategically and oil prices falling 13% from mid-June highs.
The economic landscape remains relatively resilient as hard and soft economic data continued to work through the tariff induced shock in early April with activity pulled forward in anticipation and subsequent air pockets and policy uncertainty leading to a confounding business and policy landscape. Inflation has yet to reflect the full impact of pending tariff tax policies while both CPI and PCE remain above the Fed’s target of 2%. While growth contracted 0.5% in the first quarter, second quarter growth is forecasted in the 1.5%-2.5% range while unemployment of 4.1% and healthy job creation bode well for the U.S. consumer strength.
Stock markets built on the April/May recovery with a 5% rally in June pushing the S&P 500 to new record highs. U.S. markets were led by a strong bounce in growth and technology stocks while international developed (+2.4%) and emerging markets (+7.0%) were helped by continued weakening in the USD which fell 2.7% in June and over 10% for the first six months of the year, its weakest first half since 1973. Year to date returns on international equity markets in local currency terms of 8% is dwarfed by currency adjusted returns for U.S. investors of the same international equity markets of 19%. Bond yields fell slightly in June on a prevailing narrative of a measured slowdown in growth across U.S. and developed market economies coupled with little evidence of any notable or persistent uptrend in inflation pressures. The past three months have seen long term yields move higher while short term yields fell but for the year, short term yields have fallen more sharply reflecting markets pricing in expectations for fewer rate cuts from the Fed.
Market Anecdotes
- With the first half of the year in the book, stocks and bonds have generated respectable returns albeit with vastly different paths while the USD’s -10.7% is the worst since the GFC.
- An important deregulation initiative is taking shape. U.S. banking regulators revealed the annual stress test observations and also a framework for rolling back GFC era capital requirements by reducing the eSLR from 5% to somewhere in the 3.5% to 4.5% range.
- An analysis of EUR/USD returns by trading session show clear USD weakness during Asian and European trading hours while fundamental and interest rate differential driven pattern during U.S. trading hours, suggesting non-U.S. institutional allocators may be reducing U.S. assets.
- A note from Apollo highlighted the current record high foreign ownership of U.S. equities which is a direct result of running high trade deficits. If trade deficits are reduced, as intended, this will translate to a commensurate reduction in foreign demand for U.S. assets (stocks, bonds, etc..).
- In a reminder that private equity is no silver bullet to outperformance, the State Street private equity index through year end 2024 is underperforming the S&P 500 over 1-, 3-, 5-, and 10-year periods.
Bullish Asset Allocation Narratives
- Business friendly deregulation and a marginally stimulative U.S. budget deal are taking shape in D.C. which should bolster growth dynamics in the U.S.
- Growth, employment, and the business cycle look to be simply cooling rather than falling into prevailing recession narratives.
- While not over, peak tariff panic is likely in the rear view. Trump has demonstrated a finite pain threshold with tariff policy induced angst as administration officials, financial markets, and public opinion press for resolutions to trade disputes and policy uncertainty.
Bearish Asset Allocation Narratives
- The Fed may be required to maintain restrictive monetary policy with inflation still running above target, tariff inflation pressures, and resilient growth and labor market.
- Potential for longer term upward pressure on U.S. interest rates due to fundamental and technical factors may present challenges for the broad economy.
- Policy uncertainty leading to negative business and consumer sentiment poses risks to employment (deferred hiring), business capital expenditures, and personal consumption.
Outlook
Recommended equity market positioning remains modestly constructive, as it has throughout the year, with a tilt toward value stocks relative to growth. That said, some near term consolidation may be expected given the short-term overbought nature of the equity markets on the back of a 25% rally off the April 8th low and an expectation that tariff related volatility is not yet fully behind us, particularly with regard to China. However, until we see tangible deterioration in hard economic data (growth, jobs, inflation), it is a stay the course message with routine rebalancing into strength. From a duration standpoint, we see bond yields as relatively range bound and are maintaining a neutral stance at this time and credit spreads, while tight, do not seem to be signaling any meaningful fundamental risks.
Summary of Recent Economic Reports
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