CCA Investment Research Commentary – June 2025

JUNE MARKED A STRONG MONTH FOR GLOBAL MARKETS, WITH U.S. AND INTERNATIONAL EQUITIES REACHING NEW ALL TIME HIGHS.

Despite geopolitical tensions and mixed economic data, both risk assets and fixed income showed resilience, rewarding diversified investors.

Equity Markets: Record Highs and Renewed Optimism

  • U.S. Equities surged, with all major indices posting robust gains:
    • S&P 500: +5.09%
    • Dow Jones Industrial Average: +4.47%
    • Nasdaq Composite: +6.64%
  • Growth stocks outperformed Value, propelled by strength in the technology sector
    • Russell 1000 Growth: +6.38%
    • Russell 1000 Value: +3.42%
  • Wide sector performance dispersion, as technology benefited from strong earnings and renewed enthusiasm for AI, while consumer staples declined amid weak earnings and tariff related concerns
    • S&P 500 Technology: +9.77% (best performing sector)
    • S&P 500 Consumer Staples: -1.89% (worst performing sector)
  • Global Equities also hit new highs, though regional performance diverged:
    • MSCI Emerging Markets: +6.01%
    • MSCI EAFE (Developed International): +2.20%
    • Developed International  remains the performance leader year-to-date despite trailing US markets in June

Fixed Income: Yields Down, Spreads Tighter

  • Treasury yields declined across the curve, as market participants grew more confident that the Federal Reserve could begin easing policy later this year.
  • Credit spreads (the compensation for credit risk in bonds) narrowed, reflecting risk appetite:
    • Investment Grade: -5 bps
    • High Yield: -35 bps
  • Municipal bonds rebounded strongly after three months of weakness, supported by stabilizing rate expectations and renewed demand.

Currencies & Crypto

  • The U.S. Dollar Index declined for a sixth consecutive month, now down over 10% year-to-date, amid tariff and deficit/debt concerns
  • Bitcoin rose approximately 3% in June, continuing its steady year-to-date performance.

Macro & Policy Developments

  • Geopolitical Risk: A series of targeted Israeli strikes on Iran, followed by U.S. strikes on key nuclear facilities, caused temporary spikes in volatility across equities, Treasuries, and oil. However, markets stabilized quickly after a muted response from Iran and an agreed ceasefire.
  • Legislative Progress: The long-debated “Big Beautiful Bill” edged closer to resolution in the Senate by month-end. Key sticking points include Medicaid, SALT deduction, and fiscal implications for the national debt and deficit.
  • Federal Reserve: No change to policy in June. The Federal Funds target range remains at 4.25%–4.50%.
    • Chair Powell emphasized patience, noting that policy is appropriately positioned to assess further economic data.
    • Market expectations for rate cuts by year-end increased, reflecting a potential shift in the monetary policy outlook.

Economic Data: Mixed Signals

  • Labor Market:
    • May Non-Farm Payrolls rose by 139,000 (above expectations), though April’s numbers were revised down.
    • Initial jobless claims declined in June, while continuing claims stayed elevated, hinting at some underlying weakness in labor market dynamics.
  • Consumer & Inflation Trends:
    • Real consumer spending declined in May, suggesting a more cautious consumer.
    • Inflation trends continued downward, with both headline and core metrics showing moderation.

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