Market Recap - Mega-cap names lead "buy the dip" advance

The equity market regained its footing this week, lifted by a persistent “buy the dip” mentality, resilient earnings sentiment, and renewed leadership from mega-cap stocks.

After last week’s pullback, the S&P 500 rose 2.4% to finish just shy of a new all-time closing high, while the Nasdaq Composite surged 3.9% to notch a new record. The Dow Jones Industrial Average added 1.4%, the Russell 2000 rose 2.4%, and the S&P Midcap 400 advanced 0.6%.

Strong gains in Apple (+8.4% week-to-date), which announced a $100 billion increase in U.S. manufacturing investment, were a major driver of index-level strength. Mega-cap momentum was evident across the board. The market-weighted S&P 500 (+2.4%) far outpaced the equal-weighted S&P 500, which rose just 0.8%, under scoring the narrow leadership of the rally.

Most S&P 500 sectors participated in the rebound. The information technology sector led with a 4.3% gain, followed by the consumer discretionary (+3.8%), communication services (+3.3%), consumer staples (+3.1%), and materials (+2.4%) sectors. The financial sector rose 0.7%, and utilities added 0.4%. Real estate (-0.1%), energy (-1.0%), and health care (-0.8%) were the only sectors to post losses. The PHLX Semiconductor Index increased a modest 0.8% despite early-week excitement following President Trump’s announcement that chipmakers committed to Week Ending 08/08/2025 domestic production would be exempt from upcoming 100% tariffs. NVIDIA hit a new record high, while enthusiasm around domestic tech investment helped offset weakness in several names following mixed earnings results.

Treasury yields rose modestly this week, giving back some of their post-nonfarms payrolls report gains. The 2-year yield increased six basis points to 3.76%, and the 10-year yield rose seven basis points to 4.29%. St. Louis Fed President Musalem, a current FOMC voter, said inflation pressures may persist due to tariffs and that it appears appropriate for the Fed to maintain its current policy rate, though he added he remains open-minded.

There were notable developments regarding President Trump’s anticipated Federal Reserve Board nominations this week.

Reports indicated that Fed Governor Christopher Waller is emerging as a top candidate for Fed Chair, though no official announcement has been made. President Trump also appointed Dr. Stephen Miran to fill the recently vacated Fed Board seat of Adriana Kugler temporarily through January 31, 2026, while the search for a permanent replacement continues.

Additionally, reports surfaced that James Bullard, former St. Louis Fed president, and Marc Summerlin, a former economic adviser under the Bush administration, have been added to the shortlist for Fed Chair consideration alongside Kevin Hassett, Waller, and former Fed Governor Kevin Warsh. Treasury Secretary Bessent has reportedly withdrawn his name from consideration.

These moves underscore ongoing uncertainty about the Fed’s leadership direction amid a complex economic environment shaped by tariffs and inflation concerns.

While the week lacked major macro catalysts, the market digested a steady flow of earnings and trade headlines, including the rollout of higher tariff rates on several key trading partners and a tentative summit scheduled between President Trump and President Putin. Reports that U.S. Customs may begin imposing a 39% tariff on certain gold bars briefly unsettled markets, though the White House later clarified that standard bullion would be exempt.

Altogether, this week marked a clear return to risk-on sentiment, driven primarily by mega-cap tech and resilient consumer demand. Still, the widening gap between market-weighted and equal-weighted performance points to a rally that remains heavily dependent on a handful of names.

• Nasdaq Composite +3.9% for the week/ +11.0% YTD
• S&P 500 +2.4% for the week / +8.6% YTD
• Russell 2000: +2.4% for the week/ -0.5% YTD
• DJIA: +1.4% for the week/ +3.8% YTD
• S&P Mid Cap 400 +0.6% for the week/ +0.1% YTD

Market Recap - Monthly Market Commentary August 2025

Market Update

U.S. stocks posted solid gains in July on trade optimism and better than expected economic data.

The S&P 500 rebounded to a new all-time high in July, recovering from a sharp contraction earlier in the year. The mid-year rally in stocks has been driven by positive trade policy developments, better than expected corporate earnings, and continued strength in the labor market. Against this backdrop:

• U.S. large cap stocks were boosted by the magnificent seven: Large caps (S&P 500 Index) gained +2.2% and topped small cap stocks (Russell 2000 Index) which returned +1.7%. Amazon, Alphabet, Apple, Microsoft, Meta, NVIDIA, and Tesla collectively returned +5.6% as investors focused on solid earnings and growth in Artificial Intelligence (AI).

• Bond prices declined modestly as interest rates rose: Bonds (Bloomberg U.S. Aggregate Bond Index) declined -0.3% as the 10-year Treasury yield increased from 4.24% to 4.37%. Investment grade corporate bonds gained +0.1% and outperformed mortgage-backed securities (-0.4%) and U.S. Treasuries (-0.4%).

• Emerging market equities topped non-US developed markets: Emerging market stocks (MSCI EM Index) gained +2.0% and topped non-U.S. developed markets (MSCI EAFE Index) which declined -1.4%. Chinese stocks (+4.8%) boosted emerging markets on hopes of additional economic stimulus.

Equities

Technology stocks continued to march higher as corporate earnings beat expectations. 

Domestic stocks rallied for the third consecutive month on optimism around U.S. trade policy and better than feared corporate earnings. 

• Corporate earnings have largely exceeded forecasts: 66% of firms in the S&P 500 have reported financial results for Q2 2025. 82% have reported earnings-per-share results above estimates, which are above the 5- and 10-year average1. The strong results may have provided relief to investors given the uncertainty around tariffs and the geopolitical environment.

• Small cap stocks lagged for much of 2025 but have performed well in recent months: Positive developments for small caps include a possible rate cut in September and potential benefits from recent tax legislation. Small caps tend to carry higher debt loads compared to large caps and lower rates translate into lower financing costs. Additionally, tax code changes to interest expense could result in larger deductions that boost profits for small caps.

• Technology stocks led the S&P 500 higher for the fourth consecutive month: Continued demand for AI related products and services supported further growth in the tech sector. Alphabet (Google), Amazon, Meta Platforms (Facebook), and Microsoft plan to spend nearly $400 billion in 2025 to build out AI infrastructure.

Fixed Income

Bond returns were strong as conflict in the Middle East contributed to demand. 

Treasury yields rose in July as inflation ticked higher and the Federal Reserve (Fed) left short-term rates unchanged. The 10-year Treasury yield has traded in a range of 4.0 – 4.5% since early April as investors seek clarity on trade policy, the Fed, and the direction of the U.S. economy. 

• Long-term rates rose more than short-term rates: Longer-term yields increased in part due to higher inflation in recent months, a longer than expected pause in rate cuts from the Fed, and growing concerns about the U.S. budget deficit.

High yield (HY) corporate bonds topped fixed income returns in July: HY bonds benefitted from less interest rate sensitivity and higher yields compared to other bond sectors. However, credit spreads (the yield premium compared to a Treasury bond of the same maturity) are near 20-year lows, an indication investor risk appetite has increased.

Tariffs

The U.S. made several key trade agreements in July prior to the President’s August 1st deadline. 

The U.S. reached key trade deals with the European Union (EU), Japan, Vietnam, and South Korea in July. In each case, the agreed upon tariff rate was below the “reciprocal tariff” rate announced in early April, but above the 10% baseline rate set during the negotiation period. 

• Multiple trade deals have been reached, but several remain unsettled: Mexico and Canada rank 2nd and 3rd in terms of total trade dollars with the U.S (behind the EU) and deals have not been reached. China accounts for the largest U.S. trade deficit and has an August 12th deadline to reach a new deal. However, many analysts expect a 90-day extension for China2.

• Inflation has ticked higher in recent months, suggesting tariffs have had an impact: Tariff costs are often passed on to consumers by businesses to lessen the impact on profitability. CPI inflation increased +2.7% (annualized) in June, well above May (+2.4%). Although the increase was in line with forecasts, it was the second consecutive monthly increase and the highest annual rate since February.

• Tariffs boosted U.S. revenue in 2025: The U.S. Treasury estimated that tariff revenue may reach $300 billion in 2025 (compared to $80 billion in 2024). However, importers will absorb a portion of the cost which will likely affect future economic growth. Tariffs are expected to lower overall GDP growth in the U.S. by -0.8% in 2025 and -0.4% longer term3.

U.S. Tax Bill 

New tax bill makes expiring tax cuts permanent and introduces new, temporary deductions.

The legislation is designed to expand tax relief to individuals and businesses, with a focus on middle-income households and economic growth. 

• The tax and spending bill could be additive to GDP growth: For individuals, the standard deduction was increased to $15,750 for single filers and $31,500 for joint filers, while the child tax credit rose to $2,200 per qualifying child. A new $6,000 deduction was introduced for taxpayers over age 65 and the deduction cap on state and local tax (SALT) was temporarily raised to $40,000 but phases out at higher income levels. Additional provisions include deductions for qualified tip income and overtime pay, both subject to income limits. For businesses, the corporate income tax rate remains at 21%, the bill reinstates 100% bonus depreciation and restores full and immediate deductibility of domestic R&D expenses which could provide a pro-growth boost to the U.S. economy.

• The Congressional Budget Office stated the tax bill will lead to a higher U.S. budget deficit: The increase in government spending and tax cuts for individuals and businesses is projected to add over three trillion dollars to the U.S. budget deficit over the next 10 years4. The bill could push the deficit-to-GDP ratio to more than 7%5 by 2026, well above the 50-year average of 3.8%.

Economic Calendar

U.S. economic growth rebounded while the labor market remained resilient. 

The U.S. economy showed signs of recovery in July as second quarter gross domestic product (GDP) rose by +3.0% (annualized), following the -0.5% contraction in Q1. The labor market continued to be resilient as applications for unemployment declined for the fifth consecutive week to the lowest level since mid-April. 

• Job growth has been resilient but moderated in July: Nonfarm payrolls increased by +147k in June, well above the forecast (+110k) as state and local government jobs posted a large gain. However, July nonfarm payrolls (reported on August 1st) were +73k, below the forecast of +104k. Additionally, job growth for May and June was revised lower.

• June retail sales were strong following a sharp decline in May: Consumer spending increased by +0.6% in June following a -0.9% decline in May. Economists were expecting an increase in sales of +0.1%. The report was strong overall and tempered concerns the U.S. consumer had weakened and pulled back spending due to tariffs.

• As expected, the Fed left short-term rates unchanged at their July policy meeting: The Fed has been slower to cut interest rates than expected early in the year. The committee continued to take a “wait and see” approach as they digest further information on how tariffs have affected inflation and economic growth. Interest rate futures reflected a 60% probability the Fed will cut rates by -0.25% at their next meeting in September6.

Market Recap - Earnings and Trade Deal Optimism Propels to Record Highs

The stock market extended its rally this week, with the S&P 500 and Nasdaq Composite hitting record intraday and closing highs on Friday.

The S&P 500 reached a high of 6,395.82 and closed at 6,388.64, while the Nasdaq hit 21,159.80 intraday and settled at 21,108.32.

Strong earnings fueled optimism, led by Alphabet’s solid results and a notable increase in capital expenditures focused on AI development, underscoring the company’s commitment to advancing artificial intelligence technologies.

This earnings strength, combined with trade deal optimism and moderating Treasury yields, supported the bullish sentiment. Progress on trade agreements with Japan and potential deals with the EU and China eased investor concerns ahead of the August 1 tariff deadline.

All 11 sectors finished higher for the week, led by healthcare (+3.4%), materials (+2.4%), industrials (+2.3%), communication services (+2.2%), and real estate (+2.2%). Financials (+1.7%), energy (+1.4%), and consumer discretionary (+1.2%) also posted solid gains, while defensive sectors saw modest upside: utilities (+0.9%), information technology (+0.7%), and consumer staples (+0.01%).

Looking ahead, the market faces a pivotal week with roughly 38% of the S&P 500 by market cap reporting earnings, which is more than double this week’s weight. Key tech giants Microsoft, Meta, Apple, and Amazon will all post results midweek, likely shaping market direction. In addition, important jobs data and a critical Federal Reserve meeting are expected to test the current optimism.

Overall, it was a strong week for risk assets as earnings momentum and improving trade prospects propelled markets to new highs, but next week’s slate of data and earnings could bring renewed volatility.

• S&P 400: +1.5% for the week/ +3.1% YTD
• S&P 500: +1.5%% for the week / +8.6% YTD
• DJIA: +1.3%% for the week / +5.6% YTD
• Nasdaq Composite: +1.0% for the week / +9.3% YTD
• Russell 2000: +0.9% for the week / +1.4% YTD

Market Recap - Tariff Talk And Profit Taking Keeps Market In Check

The stock market had a losing week this week, but not by much.

The difference was Friday’s session, which culminated with modest, but broad-based losses linked ostensibly to inflation concerns driven by tariff actions.

This week featured a string of tariff letters to trading partners indicating that they will be facing higher tariffs starting August 1 if they cannot work out better trade terms for the U.S. That included Japan and South Korea, which face a 25% tariff rate.

The market managed to hold up fine amid the threat of higher tariff rates, largely because most of the countries receiving the letters were not consequential trading partners, other than Japan and South Korea.

That changed late in the week, with Brazil getting a tariff letter announcing a 50% tariff rate, and then Canada getting one that sets a 35% tariff rate on imported goods not covered by the USMCA. For good measure, it was reported that the EU will be getting a letter; and President Trump declared that most trading partners will see a tariff rate of 15% to 20%, which is higher than the current 10% baseline tariff.

All things considered, the indices held up relatively well, as market participants embraced the notion that the tariff letters were being used as a negotiating leverage, cognizant that there is still time to work out less onerous terms.

Nonetheless, the tariff overhang, which also featured a 50% tariff on copper imports starting August 1 and the threat of a potential 200% tariff on pharmaceutical imports, dulled some of the market’s bullish enthusiasm.

That enthusiasm was not entirely diminished, however. The S&P 500 and Nasdaq Composite climbed to new record highs this week, aided by a better-than-expected Q2 earnings report and reassuring outlook from Delta Air Lines and AI giant NVIDIA surpassing a $4 trillion market capitalization.

The mega-cap stocks, as a class, showed resolve, which was an underpinning factor for the stock market.

The week, at times, featured some favoritism of small-cap and mid-cap stocks, but that favoritism unraveled on Friday, sending the Russell 2000 and S&P Midcap 400 Index to losses for the week.

In terms of the S&P 500, its best-performing sectors were energy (+2.5%), utilities (+0.8%), industrials (+0.6%), information technology (+0.2%), and consumer discretionary (+0.1%). The biggest laggards were the financials (-1.9%), consumer staples (-1.8%), and communication services (-1.2%) sectors.

The Treasury market, for its part, had a similar showing. It traded with a resilient tone through most of the week, which included $119 billion in new supply, but came under selling pressure on Friday in a curve-steepening trade led by losses in the inflation-sensitive back end of the curve. The 2-yr note settled the week at 3.91%, while the 10-yr note yield settled at 4.41%.

Some of Friday’s selling was linked to ruminations that the push for higher tariff rates starting August 1 could leave the Fed in a sticky wait-and-see mode that forestalls a rate cut.

The U.S. Dollar Index seemed to reflect that view, having increased 0.7% this week to 97.87.

• Nasdaq Composite: -0.1% for the week / +6.6% YTD

• S&P 500: -0.3% for the week / +6.4% YTD

• Russell 2000: -0.5% for the week / +0.2% YTD

• S&P Midcap 400: -0.6% for the week / +1.6% YTD

• DJIA: -1.0% for the week / +4.3% YTD

Market Recap - One Big, Beautiful Week For The Stock Market

With Independence Day right around the corner, the "One Big, Beautiful Bill," having passed a key procedural vote in the House after the Senate approved its version of the bill earlier in the week, looks destined to be signed into law by President Trump on July 4.

That will put an end to the negotiating phase in Congress but not necessarily to the debate phase. Market participants (and the economy) will be digesting the implications of the bill for some time, but it is fair to say that neither the stock market nor the Treasury market are living in fear of deficit forecasts.

The fact of the matter today is that the S&P 500 and Nasdaq Composite are at record highs and the 10-yr note yield, at 4.35%, is 23 basis points lower from where it started the year. The CBO, for one, forecasts the bill will add $3.3 trillion to the deficit over the next decade. 

Treasury yields did go up this week. The 2-yr note yield increased 14 basis points to 3.88%, and the 10-yr note yield added six basis points to 4.35%. The bulk of those moves followed a better-than-expected employment report for June. That report was released before Thursday's open, and it featured a drop in the unemployment rate to 4.1% from 4.2% and a relatively solid 147,000 increase in nonfarm payrolls. Granted nonfarm private payrolls were up just 74,000, which falls to the softer side of things, along with the dip in the average workweek and the year-over-year pace in average hourly earnings growth. In sum, the June employment report could have been better, but it was not rate-cut bad.

The fed funds futures market subtracted the bulk of its budding expectations for a July rate cut following the report. According to the CME FedWatch Tool, the probability of a 25-basis point cut at the July FOMC meeting sits at just 4.7% now versus 23.8% the day before the report.

The employment report was the headliner for a busy day of economic reporting on Thursday, which wrapped up a fairly busy, albeit shortened week of trading. It also wrapped up an encouraging week of trading that included news of a trade deal with Vietnam and saw broad-based gains being led by the small-cap and mid-cap stocks, and value stocks outperform growth stocks.

To be fair, large-cap stocks and mega-cap stocks did well in their own right, too, just not as well as their smaller-sized brethren. Apple was an exception there, as it gained 6.2% this week, rallying on reports that it is considering using outside AI sources to help drive its new version of Siri. 

The Russell 2000 surged 3.4% this week, while the S&P Midcap 400 Index advanced 2.9%, versus a 1.7% gain for the market cap-weighted S&P 500. The equal-weighted S&P 500, for its part, jumped 2.4% as the "other 493" stocks found some rotational wind at their back to begin the third quarter.

The S&P 500 materials sector (+3.7%) topped the list of sector winners this week but it had ample company. Other outperformers included the information technology (+2.4%), financials (+2.4%), and energy (+2.1%) sectors, while the industrials sector (+1.7%) performed in line with the S&P 500. 

The only sector to lose ground was the communication services sector (-0.2%), which was pressured by a 2.0% decline in Meta Platforms after the stock rallied 53% off its April low coming into the week.

• Russell 2000: +3.4% for the week / +0.8% YTD

• S&P Midcap 400: +2.9% for the week / +2.3% YTD

• DJIA: +2.3% for the week / +5.4% YTD

• S&P 500: +1.7% for the week / +6.8% YTD

• Nasdaq: +1.6% for the week / +6.7% YTD

Market Recap - Monthly Market Commentary – July 2025

Market Update

U.S. stocks reached an all-time high in June even as geopolitical risks remained elevated.

Despite heightened tensions between Israel and Iran, weak U.S. retail sales data, and a Federal Reserve (Fed) that remained on hold, domestic stocks rallied as investors focused on strong jobs data and better than expected corporate earnings. Against this backdrop:

• Domestic small caps outpaced large caps: Small cap stocks (Russell 2000 Index) gained +5.4% and outperformed large caps (S&P 500 Index) which returned +5.1%. Smaller stocks may have outperformed on hopes of future rate cuts and easing geopolitical tension.

• Bond returns were positive as interest rates declined: Bonds (Bloomberg U.S. Aggregate Bond Index) returned +1.5% as the 10-year yield dipped from 4.41% to 4.24%. Investment grade corporate bonds gained +1.9% during June to outpace mortgage-backed securities (+1.8%) and U.S. Treasuries (+1.3%).

• Emerging markets beat non-US developed markets: Emerging markets stocks (MSCI EM Index) gained +6.0% and topped non-U.S. developed markets (MSCI EAFE Index) which returned +2.2%. Taiwan (+9.4%) outperformed due to exposure to the rising technology sector while Brazil (+7.8%) benefitted from stability in monetary policy and fiscal reforms.

Equities

U.S. equities posted gains on easing trade tension between the U.S. and China. 

Domestic stocks rallied for the second consecutive month on optimism around global trade. The S&P 500 Index has now fully recovered from a -18.8% correction earlier this year. 

• The U.S. and China agreed to a trade deal in principle: Terms of the deal provide the U.S. with access to rare earths required for key technologies while the U.S. would lift restrictions on certain U.S. goods entering China. Tariffs on Chinese goods would expand to 55% (up from 30%) while Chinese tariffs on U.S. goods would remain at 10%. The deal is pending approval from both countries. The U.S. warned in June that countries without a trade deal in place could face tariff hikes on July 9th.

• Strong demand for artificial intelligence (AI) pushed technology stocks higher: The tech sector outperformed for the third consecutive month. Semiconductor “chip” stocks led returns in June as more firms raised expectations for AI applications and cloud computing infrastructure continued to expand.

• Rising oil prices boosted the energy sector: Israeli air strikes on Iran and the potential for global supply disruptions sent oil prices higher by 9.1% in June. Further, the demand for natural gas has increased due to its potential as a power source for data centers supporting AI.

Fixed Income

Bond returns were strong as conflict in the Middle East contributed to demand. 

Treasury yields moved lower in June following the unrest in the Middle East, but it was not a dramatic decline that can often follow geopolitical events. The rising budget deficit and recent downgrade of U.S. Treasury debt could be balancing out some of the downward pressure on yields. 

• Long-term rates fell more than short-term rates: Shorter-term yields, which are highly sensitive to Fed policy, were relatively flat as the Fed continued to take a “wait and see” approach to lower rates. Longer-term yields likely declined due to increased demand for safe-haven assets due to rising geopolitical tension and slowing economic data.

Corporate bonds of all qualities posted gains: Strong fundamentals and attractive yields have supported demand for corporate debt. In the event of an economic slowdown, established firms with high credit ratings and low refinancing risk may be better positioned.

Federal Reserve

As expected, the Fed held short-term rates steady during its June policy meeting.

The Fed stated that economic activity has continued to expand at a solid pace although wide swings in exports have affected the data. During June, the unemployment rate remained low, and labor market conditions remained solid, but inflation remained somewhat elevated. 

• The Fed projected two 0.25% rate cuts this year at their June meeting: This forecast is in line with the last two policy meetings. However, there have been growing differences among FOMC participants in recent months, as seven of the 19 members forecasted zero rate cuts this year during the June meeting, up from only four in March1.

• Chair Powell said a higher inflation outlook has led to the Fed’s inactivity: The central bank is waiting for more clarity on the economic effect of the President’s tariffs before lowering interest rates. The inflationary effect of tariffs is largely dependent upon where tariff rates settle. For now, the Fed believes the economy is well-positioned to see if inflation stabilizes.

• The Fed lowered their GDP growth estimate while revising their inflation estimate higher: The Fed’s summary of economic projections released in June suggested the U.S. economy may be headed for a period of stagflation, a period of slowing growth and rising inflation. The Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) Price Index, is expected to end 2025 at 3%, well above the Fed’s December projection (+2.5%).
  

Israel-Iran Conflict 

Conflict between Israel and Iran escalated and has raised concerns about the risk of a broader war. 

First and foremost, our thoughts go out to those affected by recent events in the Middle East. The conflict between Israel and Iran is far too complex to cover in detail here and therefore we focused on the possible market implications of recent events. 

• The Israel-Iran conflict intensified in June: Israel launched an air attack targeting nuclear weapon facilities in Iran on June 13th. The U.S. became involved on June 21st by leading air strikes targeting three Iranian nuclear facilities in an attempt to prevent Iran from developing a nuclear weapon. A ceasefire between Israel and Iran was announced on June 24th.

• Oil prices jumped 9% in June on potential supply disruptions: Iran accounts for 4% and the Middle East accounts for almost one-third of the global oil supply. If the region becomes divided, the impact to the global oil supply is uncertain. Additionally, the Strait of Hormuz supports almost 20% of the global oil supply and Iran’s proximity to the area poses the risk of transport and supply disruptions.

• Investors should prepare for uncertainty but maintain their investment discipline: Historically, geopolitical events have led to market volatility in the initial stages, but it often subsides over longer periods. Maintaining a diversified portfolio aligned with investor goals and risk tolerance has been an effective approach historically.
  

Economic Calendar

U.S. job growth slowed but remained in economic expansion territory. 

U.S. GDP data slowed somewhat but has remained resilient. Jobs continued to grow at a steady pace, the unemployment rate has shown little evidence of weakness, and although inflation edged higher, it remained near a three-year low. Also in focus is the President’s $3.3 trillion tax and spending package. A modified version of the bill passed the Senate, but it now returns to the House for another vote as both chambers must pass the same legislation. 

• Job growth exceeded expectations: nonfarm payrolls increased by +139k in May, above the forecast (+125k), but slightly below the +147k new jobs created in April (revised down from +177k). Employee wages, a closely watched inflation indicator, rose +3.9% on an annualized basis, exceeding the forecast (+3.7%).

• Retail sales declined more than anticipated: Spending declined in May by -0.9% even as consumer confidence rebounded. It was the worst decline in monthly sales since January. However, excluding auto dealerships, building materials suppliers, and gas stations, sales rose +0.4%. This positive reading, referred to as the control group, is the input in calculating GDP1.

• The Consumer Price Index (CPI) increased modestly but was in line with the forecast: Prices rose by +2.4% (annualized) in May as expected. This was a modest increase over the +2.3% rise in April but still one of the lowest prints over the past several years. Although inflation continued to register above the Fed’s 2% target, investors took some relief in the data as the impact from new tariffs appeared modest.

Market Recap - A Fitful Week With Geopolitical And Central Bank Decision Making In Play

The market had a shortened week of trading but also a fitful week of trading that revolved around headlines pertaining to the Israel-Iran conflict, central bank decisions, and economic data.

In the end, the major indices finished the week little changed, reflecting in part the indecision over the Israel-Iran situation. There was some speculation early in the week that the U.S. could get directly involved in the conflict, with President Trump demanding Iran's "unconditional surrender" and saying that his patience with Iran is wearing thin. By the end of the week, he allowed that there was still time for Iran to negotiate and that he will decide on a final course of action with respect to Iran over the course of the next two weeks.

There were several key central banks decisions this week, all of which were expected. The Bank of Japan held its key policy rate steady at 0.50%, the Federal Reserve left the target range for the fed funds rate unchanged at 4.25-4.50%, and the Bank of England stood pat with its policy rate at 4.25%.

The Fed decision was accompanied by a Summary of Economic Projections that featured an increase in the median estimate for PCE inflation, core PCE inflation, and the unemployment rate in 2025, a decrease in the median estimate for real GDP growth, and an unchanged median estimate for two rate cuts by the end of the year.

The overarching message from Fed Chair Powell at his press conference was that the Fed is going to stick by its wait-and-see stance, largely because the labor market is still in pretty good shape and because the Fed is concerned that tariffs will lead to higher prices. Fed Chair Powell, for his part, said he is expecting a meaningful increase in inflation in the coming months because of the tariffs.

The Treasury market took that inflation talk in stride, as yields across the curve settled modestly lower from the prior week's closing levels. Fed Governor Waller (FOMC) caused a stir on Friday when he said he didn't think there would be lasting tariff inflation and that the Fed, based on his view, could cut rates in July. The fed funds futures market, though, barely moved on his view, with the probability for a rate cut in July edging up to only 16.5% from 12.5% the previous day.

Sector action this week featured only three sectors finishing higher: energy (+1.1%), which followed oil prices higher, information technology (+0.9%), and financials (+0.8%). The health care sector (-2.7%) was the biggest laggard, followed by communication services (-1.7%), and materials (-1.2%). The consumer discretionary sector (-0.7%) also underperformed for the week, which included a report showing total retail sales down 0.9%, and sales excluding autos down 0.3%, in May.

• S&P 500: -0.2% for the week / +1.5% YTD

• Nasdaq: +0.2% for the week / +0.7% YTD

• DJIA: flat for the week / -0.8% YTD

• S&P 400: +0.6% for the week / -3.1% YTD

• Russell 2000: +0.4% for the week / -5.4% YTD

Market Recap - Modest Loss Masks Busy Week

This week's action in the stock market was underscored by persistent resilience to selling efforts, but ultimately the market could not avoid a lower finish with the S&P 500 losing 0.4% for the week.

The modest loss masked a week that was jam-packed with news developments, starting with some optimism surrounding trade talks between officials from the U.S. and China, followed by an encouraging CPI report for May, indications of trade deals with India, Mexico, and Canada taking shape, and ending with concerns about the impact of an escalating conflict between Israel and Iran.

Like stocks, Treasuries finished the week on a lower note, but unlike stocks, they held onto a portion of their gains from this week.

A Big Macro Week Ends On A High Note (And The S&P 500 at 6,000)

There was a lot of drama in the market this week, the most prominent of which was the reconciliation bill feud between Elon Musk and President Trump that blew up on Thursday, triggering a 14.3% decline in Tesla's stock price.

Fortunately, none of that really derailed the stock market, which enjoyed another winning week behind the leadership of the small-cap stocks and mega-cap stocks.

There were a lot of gains to go around, however, with NVIDIA and the semiconductor stocks pacing the pack. The week ended on a high note, too, as the S&P 500 reclaimed the 6,000 level in the wake of a pleasing employment report for May. It did so with Treasury yields rising sharply, suggesting perhaps that some rebalancing out of bonds and into stocks might have been providing a tailwind.

In any case, the stock market did not look overly concerned on Friday as the 10-yr note yield rose to 4.51%. The May employment report was a welcome end to a week that was filled with notable macro developments:

• OPEC+ agreed to raise production by 411,000 barrels per day in July.

• The OECD downgraded its 2025 global GDP growth forecast to 2.9% from 3.1% and its U.S. GDP growth forecast to 1.6% from 2.2%.

• President Trump said that President Xi is "very tough, and extremely hard to make a deal with." That view preceded a phone call between the two leaders, a summary of which sounded more conciliatory than combative and included an agreement to have their respective trade teams meet again soon.

• The ADP Employment Change Report for May indicated that there were only 37,000 jobs added to private-sector payrolls (Briefing.com consensus 115,000) and none for small businesses, which lost 13,000 jobs.

• The ISM Services PMI for May printed a contractionary reading (49.9%) for only the fourth time in the last 60 months.

• Elon Musk decried the one big, beautiful bill on social media and urged lawmakers to "kill the bill."

• The European Central Bank voted to cut its key interest rates by 25 basis points, as expected, and officials suggested that might be the end of the rate cuts.

• The trade deficit plunged in April to $61.6 billion (Briefing.com consensus: -$117.2 billion) from an upwardly revised deficit of $138.3 billion (from -$140.5 billion) in March. Exports were $8.3 billion more than March exports, but imports were $68.4 billion less than March imports.

• President Trump said his top trade representatives, who include Treasury Secretary Bessent, Commerce Secretary Lutnick, and U.S. Trade Representative Greer, will meet Monday in London with representatives from China in reference to the trade deal.

• The May employment report was better than feared and also, frankly, good enough to lend confidence to the idea that the U.S. economy has enough labor market footing to remain on a growth trajectory.

The communication services (+3.2%), information technology (+3.0%), and energy (+2.2%) sectors were the best-performing sectors this week. The consumer staples (-1.6%), utilities (-1.1%), and consumer discretionary (-0.6%) sectors were the only sectors that did not show a gain for the week.

• Russell 2000: +3.2% for the week / -4.4% YTD

• Nasdaq: +2.2% for the week / +1.1% YTD

• S&P Midcap 400: +1.7% for the week / -2.2% YTD

• S&P 500: +1.5% for the week / +2.0% YTD

• DJIA: +1.2% for the week / +0.5% YTD

Market Recap - Monthly Market Commentary – June 2025

Market Update

Equities posted strong returns in June as global trade tensions eased.

Global stocks posted solid gains during the month as the U.S. and China agreed to a 90-day tariff reduction. After declining to its 2025 low on April 8th, the S&P 500 Index rallied +18.9% through the end of May. Against this backdrop, risk assets performed well as U.S. job growth remained steady, and inflation continued to decline.

• U.S. stocks rebounded during the month as trade tension de-escalated: Large cap stocks (S&P 500 Index) rose +6.3% and outperformed small caps (Russell 2000 Index) which gained +5.3%. In addition to easing trade tensions, U.S. firms posted first quarter financial results and provided forward guidance that were largely more positive than expected.

• Bonds (Bloomberg U.S. Aggregate Bond Index) declined as longer-term rates rose: The widely followed bond index lost -0.70% as the 10-year U.S. Treasury yield increased from 4.17% to 4.41% (+0.24%).

• International stocks trailed U.S. stocks for the first month since November: Developed market stocks (MSCI EAFE Index) gained +4.6% and topped Emerging Markets (MSCI EM Index) which returned +4.3%. Taiwan, a 17% weight in the EM Index, gained +12.5% on trade policy optimism and sensitivity to recent strength in the U.S. technology sector.

Equities

Technology stocks were the top performing sector for the second consecutive month. 

Equity market volatility subsided in May on mostly positive trade policy developments. The S&P 500 reversed its losses from early in the year, and the index is now positive year-to-date (+1.1%). 

• Large cap technology stocks led the broader market higher: Tech-related mega cap stocks (Amazon, Alphabet, Apple, Meta, Microsoft, NVIDIA, and Tesla) rebounded and collectively returned +13.5% in May. After falling out of favor early in the year, the “Mag 7” stocks have now returned +29.5%, collectively, since the tariff pause on April 9th.

• Policy uncertainty weighed on health care stocks: The health care sector declined -5.6% and is one of the worst performing sectors in 2025 (-3.1%). UnitedHealth, the nation’s largest healthcare insurer, saw its stock drop -27% on a CEO departure and suspension of its 2025 financial guidance due to higher medical costs.

• Non-U.S. stocks continued to perform well: European stocks have returned +20.6% in 2025 as several countries focused on an economic revitalization due to policy uncertainty. German stocks (+31.3% YTD) led returns in the wake of a large economic stimulus plan. Even after its outperformance in 2025, the MSCI EAFE Index price-to-earnings ratio (16.2) remains at a deep discount to the S&P 500 (24.2)1.

Fixed Income

Bond returns were mixed as longer-term Treasury yields rose. 

The Federal Reserve held short-term rates steady in May and remained cautious due to the risks of higher unemployment and inflation. However, the 10-year Treasury yield rose +0.24% in May, which may be due to concerns around the U.S. budget deficit or easing trade tension which could result in stronger than expected economic growth.

• Longer-term rates rose more than short-term: Demand for government bonds was soft in May as Treasury auctions had low volume. This may be due to concerns about the U.S. fiscal outlook, as investors demand higher yields to compensate for rising credit risk.

• High yield (HY) bonds outperformed as investor risk appetite increased: Investors may believe the threat of tariffs to economic growth fell as HY bonds (rated BB and below) gained +1.7%. Further, HY bonds generally have lower duration than IG bonds and were therefore less sensitive to rising yields in May.

U.S. Debt Downgrade

Moody’s downgraded U.S. Treasury bonds due to a continued rise in U.S. government debt.

Moody’s is one of the primary ratings agencies that evaluates the credit worthiness of governments and corporations. On May 16th, Moody’s lowered its U.S. credit rating from Aaa to Aa1, joining Fitch Ratings and Standard and Poor’s (S&P) to downgrade U.S. debt from the top available rating (“triple A”)2. 

• Moody’s rating still represents a low default probability for the U.S.: The U.S. national debt is approaching $37 trillion and is expected to expand by nearly $2 trillion per year. Moody’s recognizes that the U.S. remains a dependable borrower but no longer believed it was worthy of the top rating.

• Fitch and S&P Global Ratings have both previously downgraded U.S. credit quality: S&P took similar action to downgrade U.S. debt in 2011, and Fitch lowered their U.S. credit rating in 2023. Each firm lowered their rating one notch below their top rating and cited similar reasons for the downgrade (fiscal challenges, a growing debt burden, and repeated debt limit standoffs).

• Stocks rebounded after prior downgrades: The S&P 500 declined -2.6% the week after the recent Moody’s downgrade. In similar fashion, stocks were negative the first week after the Fitch and S&P downgrades, but these losses ended up being short-lived. A resilient labor market, easing trade tensions, and solid quarter for corporate profits could be potential catalysts that lead stocks higher longer-term.

Tariffs 

Trade tensions eased in May as the U.S. and China agreed to lower tariffs for 90 days. 

Tariff rhetoric has driven market volatility in recent months. However, the rollback of tariffs with China and recent advancements with the European Union led to investor optimism in May. 

• The U.S. and China agreed to lower tariff levels for 90 days: The U.S. rate on Chinese imports was reduced from 145% to 30%, and Chinese levies on U.S. goods fell from 125% to 10%. The news provided hope of a potential trade deal between the #1 and #2 economies.

• Tariffs to remain in effect following court ruling: Several U.S. businesses filed petitions recently to halt tariffs. On May 28th, the U.S. Court of International Trade ruled President Trump exceeded his authority on many of the new tariffs levied on U.S. trading partners. However, the administration appealed, and a federal court temporarily reinstated tariffs the next day. The levies will remain in place while judges weigh the underlying legal justification.

• Tariffs were a source of market volatility during the first Trump administration: 2018 was a volatile period as the S&P 500 Index declined as much as -13.5% from its high and lost -4.4% for the year. However, the index rose sharply in 2019 (+31.5%) as trade deals were made and consumer spending remained steady. It is important to note tariffs are only one input into asset prices and equity markets have been resilient over longer time periods3

Economic Calendar

Consumer confidence jumped the most in four years on tariff pause. 

U.S. consumer confidence rebounded in May from a near five-year low with the improvement being broad-based across income and age ranges4. Individuals were more upbeat about the health of the labor market and business conditions, especially following the rollback of U.S.-China tariffs in mid-May. 

• New job growth exceeded expectations: +177k jobs were created in April, above the forecast (+133k), and the 12-month average (+152k). The unemployment rate was steady at 4.2%. A strong labor market could be the key to the U.S. avoiding an economic recession. A steady decline in new jobs or a rise in weekly jobless claims could be cause for concern.

• The Consumer Price Index (CPI) declined for the third consecutive month: Prices rose by +2.3% (annualized) in April, below the forecast (+2.4%) and lowest reading since February 2021. Prices declined for gasoline, groceries, and air fares. The upcoming May report will be heavily scrutinized as it is expected to capture the initial effect of new tariffs.

• The House passed the President’s new tax bill, which is now headed to the Senate: The bill would extend Trump’s first-term tax cuts, provide certain individuals with new tax relief, and incentivize small businesses to create jobs and expand operations. However, the bill is also expected to increase the U.S. debt burden, and some economists believe it has the potential to worsen economic inequality2.