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Market Brief: June 2025

June 3, 2025

The Markets (as of market close May 30, 2025)

May proved to be one of the best months for stocks in quite some time. During May, equities ebbed and flowed in response to uncertainty over U.S. trade policy and the impact of tariffs. May got off to a good start on the heels of strong corporate earnings data and a solid jobs report. The month brought some progress in the U.S.-China trade war, with an agreement for a 90-day reduction in tariffs while the parties continued talks aimed at a trade resolution. However, at the end of the month, President Trump accused China of breaching their recent trade deal. Middle East investment deals also helped push tech shares higher. The S&P 500 and the NASDAQ had their best months since 2023. Nine of the 11 market sectors ended May with gains, led by information technology, communication services, and consumer discretionary. Health care and energy closed in the red.
 
The latest inflation data was encouraging, however, it did not reflect the potential impact of global reciprocal tariffs, nor has it reached the Federal Reserve's 2.0% inflation objective. Both the personal consumption expenditures (PCE) price index and the Consumer Price Index declined over the 12 months ended in April, while core prices (excluding food and energy prices) for both indexes remained steady. In light of the potential impact of tariffs, it is likely that the Federal Reserve will maintain a cautious approach as it continues to assess the balance of risks to the economy.
Growth of the U.S. economy was muted in March. The gross domestic product (GDP) fell 0.2% in the first quarter following a 2.4% increase in the fourth quarter. The widening of the trade deficit has had a substantial impact on economic growth in the first quarter. However, consumer spending rose 1.8%, the weakest increase since mid-2023. GDP's annual growth rate slipped 0.4% to 2.1% for the 12 months ended in March.
 
Job growth exceeded expectations in April. Wages rose 3.8% over the past 12 months ended in April. The number of job openings fell by 288,000 in March to 7.2 million, which was the lowest total in six months and well below expectations. However, this data does not reflect the layoffs and cuts sanctioned by the Trump administration. The latest unemployment data showed total claims paid through mid-May increased by 121,000 from a year earlier.
 
 According to FactSet, during the first quarter of 2025, the healthcare sector reported the highest earnings growth of the 11 market sectors. Of the companies of the S&P 500, 68 firms reported negative earnings per share (EPS), above the five-year average of 57. However, 78% of S&P 500 companies exceeded EPS estimates. Overall, the S&P 500 reported earnings growth of 12.9%, the second straight quarter of double-digit growth. Nevertheless, tariffs and their potential impact on international trade have concerned companies. For instance, 381 companies indicated uncertainty with respect to future earnings, well above the five-year average of 224, while 121 companies cited the term "recession" during their earnings calls for the first quarter, which is above the five-year average of 79.
 
The real estate market had mixed results in April, with sales of existing homes falling, while new home sales rose. Mortgage rates remained elevated. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.81% as of May 15. That's up from 6.76% one week before but down from 7.02% one year ago. Over the last few months, rates for 30-year fixed mortgages have remained stable and have fluctuated less than 20 basis points over that time.
 
Industrial production was unchanged in April but rose over the last 12 months. Manufacturing output, utilities, and mining each increased since April 2024. Purchasing managers reported manufacturing was unchanged in April, signaling only a slight increase in activity. Activity in the services sector slowed in April.
 
Ten-year Treasury yields closed the month higher as traders assessed developments in the trade war and government spending cuts. The two-year note closed May at about 3.9%, down 30 basis points from a month earlier. The dollar index fell for the fifth straight month, its longest losing streak in five years. Gold prices rose in May, marking their fifth straight monthly gain. Crude oil prices increased for the month, although trade tensions and supply concerns pressured prices for much of May. The retail price of regular gasoline was $3.160 per gallon on May 26, $0.027 below the price a month earlier and $0.417 lower than the price a year ago.


Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark the performance of specific investments.

Looking ahead

Most of the attention during June will be focused on President Trump's tax and immigration legislation, as well as the impact of tariffs on worldwide trade.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI, Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). News items are based on reports from multiple commonly available international news sources (i.e., wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Forecasts are based on current conditions, subject to change, and may not come to pass. U.S. Treasury securities are guaranteed by the federal government as to the timely payment of principal and interest. The principal value of Treasury securities and other bonds fluctuates with market conditions. Bonds are subject to inflation, interest-rate, and credit risks. As interest rates rise, bond prices typically fall. A bond sold or redeemed prior to maturity may be subject to loss. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

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