June market review

June market review

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.

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.

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.

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.”

Pendle Hill
Advisors is proud to contribute to the Montgomery County News with our weekly
curated financial news and topics. If you have any questions about the markets,
your financial plan, or anything, please feel free to reach out to our office
for a no cost initial consultation.

Kent Pendleton, AAMS®

Financial Advisor, RJFS

Pendle Hill Advisors LLC

14375 Liberty St, Ste 109 | Montgomery,
TX 77356

T 936-297-8267

Kent.Pendleton@raymondjames.com | www.raymondjames.com/pendlehilladvisors

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created by Raymond James for use by its advisors. Securities offered
through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment
advisory services are offered through Raymond James Financial Services
Advisors, Inc. Pendle Hill Advisors is not registered broker dealers and is
independent of Raymond James Financial Services.

Investing
involves risk, and investors may incur a profit or a loss. All expressions of
opinion reflect the judgment of the Raymond James Chief Investment Officer and
are subject to change. There is no assurance the trends mentioned will continue
or that the forecasts discussed will be realized. Past performance may not be
indicative of future results. Economic and market conditions are subject to
change. Diversification does not guarantee a profit nor protect against loss.