Weekly Market Update – June 13, 2025

Quick Takes

• U.S. stocks were riding decent gains into Friday but gave those up after Israel launched waves of airstrikes against Iran. The S&P 500 Index ended the week down -0.4%, after falling -1.1% on Friday.
• Before the Israel-Iran attacks, markets were up on news that the U.S. and China had reaffirmed their May trade truce. In addition, U.S. economic reports showed inflation remained subdued in May, plus small business and consumer sentiment improved. 
• Treasury yields declined across the yield curve with the U.S. 10-year Treasury yield ending the week down -11 basis points at 4.40%. The Bloomberg U.S. Aggregate Bond Index returned +0.6% for the week, and the Bloomberg Global Aggregate ex U.S. Bond Index returned +0.9%.

Source: Bloomberg. Data as of June 13, 2025.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

Stocks give up the week’s gains on rising geopolitical risk

Stocks began last week on an upbeat note following the confirmation of the trade truce between the U.S. and China. U.S. trade officials met with Chinese trade officials on Monday and Tuesday, resulting in the affirmation of the framework that the two sides established in May. Tariff levels remain unchanged, with China imposing a 10% levy on U.S. goods while duties on Chinese imports average 55%. The two countries reaffirmed to ease export controls on sensitive goods such as rare earth minerals from China and jet engines from the U.S. Several other positive trade-related headlines also helped boost markets during the week, including comments from Treasury Secretary Scott Bessent that suggested the Trump administration’s 90-day pause on tariffs could be extended for countries negotiating in “good faith.” Beyond the trade developments, the key Consumer Price Index (CPI) and Producer Price Index (PPI) showed that U.S. inflation remained subdued in May. Sentiment was also better than expected among both small business and consumers. The National Federation of Independent Business (NFIB) reported that their Small Business Optimism Index improved in May following four consecutive months of declines. Meanwhile, the University of Michigan reported the preliminary results of their Consumer Sentiment Index for May, which improved more than +8 points, snapping a six-month streak of decreases.

However, investors’ moods quickly soured on Friday morning on news that Israel had launched waves of airstrikes against Iran, targeting its nuclear facilities, missile sites, and key military leaders. The market reaction was immediate as crude oil jumped, along with cryptocurrencies and gold. The U.S. dollar initially slipped but eventually rallied against other major currencies. Equity indexes fell abruptly, giving up the gains from earlier in the week. The S&P 500 Index was down -1.1% on Friday to end the week down -0.4%. The technology-heavy Nasdaq Composite Index fell -1.3% in Friday’s session and -0.6% for the week. And the small-cap Russell 2000 Index dropped -1.9% Friday to finish the week down -1.5%. Foreign stocks fared better than their U.S. counterparts. The MSCI EAFE Index (developed market non-U.S. stocks) was down just -0.2% last week, while the MSCI Emerging Markets Index rose +0.6%.  

The bond market was also up through Thursday on the positive inflation and economic data, but gave some of those gains back on Friday after the Israeli attacks on Iran. Ultimately, U.S. Treasury yields declined across the curve for the week, with the benchmark U.S. 10-year Treasury yield ended the week down -11 basis points at 4.40%, exactly offsetting the prior week’s increase. The U.S. 2-year Treasury yield was down -9 basis points, ending at 3.95%. With Treasury yields down, the Bloomberg U.S. Aggregate Bond Index returned +0.6% for the week. Non-U.S. bonds, as measured by the Bloomberg Global Aggregate ex U.S. Bond Index, were up +0.9% for the week.

Chart of the Week

The rate of inflation for consumer goods and services slowed more than expected again in May. The headline Consumer Price Index (CPI) was up just +0.1% for the month, less than +0.2% Wall Street was forecasting. That was down from an unrevised +0.2% rise the prior month. Year-over-year (YoY), CPI was +2.4%, matching expectations, and down from +2.3% the prior month (unrevised). Core CPI, which excludes the more volatile food and energy prices, also slowed to +0.1% for the month, down from an unrevised +0.2% the prior month, and below expectations for a +0.3% rise. YoY Core CPI was +2.8%, unchanged from the prior month, and below the expected +2.9%. The Federal Reserve and Wall Street generally considers the Core CPI as a better predictor of future inflation. Slumping Energy prices helped keep inflation down, with the group falling -1.0% on a month-over-month basis and -3.5% on a year-over-year basis. The Apparel index decreased -0.4% month-over-month and was down -0.9% year-over-year. Shelter, which is about one-third of the CPI weighting, increased just +0.3% for the month and +3.9% for the year, the smallest gain since 2021. The Food index increased +0.3% month-over-month and +2.9% year-over-year. The bottom line is that both headline and core CPI were lower than expected for the month. While these readings are not likely to convince the Fed to cut rates this week, they should also not cause the market to think that the next cut will be delayed.

U.S. inflation rises less than expected again in May

U.S. Consumer Price Index (CPI, Jan. 2021 – May 2025)

Source: U.S. Bureau of Labor Statistics, CNBC.

The Week Ahead

It will be a holiday-shortened week with markets closed on Thursday for Juneteenth. The main event for the week is the two-day Federal Open Market Committee (FOMC) monetary-policy meeting, which concludes Wednesday afternoon with Fed Chairman Jerome Powell’s press conference and rate announcement. Wall Street is not expecting any change in the Fed Funds rate, but will be watching for Powell’s view on the balance of risks to the Fed’s dual mandate of inflation stability and employment. 

Other economic reports to watch during the week include the U.S. Census Bureau release of Retail Sales on Tuesday and Housing Starts on Wednesday. Tuesday will also bring reports on Import and Export Prices, Industrial Production, and Homebuilder Confidence from the NAHB. 

Of course, markets will be closely watching the Israel-Iran conflict as the strikes and counterstrikes continued Sunday.

Did You Know?

TO PASS THE BUCK OR NOT – In the Federal Reserve’s New York district, one-third of firms in the manufacturing sector and 45% in the services sector reported that they fully passed on all tariff-related cost increases to customers. Conversely, roughly a quarter of firms in both sectors said they fully absorbed all tariff costs. (Source: New York Fed)

NO AI DOCTORS (YET) – The two industries that have seen job postings fall the most (>37%) from their pre-COVID baseline (Feb. 2020) are software development and information design and documentation, which are both threatened by Artificial Intelligence (AI). The category that has seen the largest increase during the same period is physicians and surgeons. (Source: Indeed)

TRANSFERRING WEALTH (AND FINANCIAL ADVICE) – Between now and 2048, Gen X, Millennials, and Gen Z are poised to inherit $83.5 trillion from their parents. Along with the transfer of assets, 81% of next-generation high-net worth investors plan to switch from their parents’ wealth management firm within two years of receiving their inheritance. (Source: Capgemini)

This Week in History

DOW 7,500 – On June 9, 1997, the Dow Jones Industrial Average closed above 7,500 for the first time. The Wall Street Journal noted that the market’s climb “seems to inspire equal parts awe and dread among many investors.” The Dow closed Friday at 42,197, or +464.3% higher, which represents a +8.8% annualized total return with dividends reinvested. (Source: The Wall Street Journal)

Economic Review

• Like consumer inflation, wholesale inflation was also lower than expected in May. The headline Producer Price Index (PPI) was up +0.1% for the month, below expectations for +0.2%. That was up from the prior month’s -0.2% reading (revised higher from -0.5%). Year-over-year (YoY) PPI increased at a +2.6% rate, matching expectations and up slightly from the prior month’s +2.5% annual rate (revised higher from +2.4%).  Core PPI, which strips out volatile food and energy costs, was up +0.1% for the month, below expectations for a +0.3% rise. That was up from +0.2% the prior month (revised higher from -0.4%). YoY Core PPI was up +3.0%, under expectations for +3.1% and down from the prior month’s +3.2% annual rate (revised up from +3.1%). The index for final demand goods rose +0.2% after ticking up +0.1% in April, while the index for final demand services ticked up +0.1% after decreasing -0.4% in April. The bottom line is that the report shows inflation for wholesalers was cooler than feared again, although the prior month saw many items revised higher.
• The preliminary reading of the University of Michigan Consumer Sentiment Index for June improved to 60.5 from the 52.2 final reading the prior month and was far above the expected 53.6. In the same period a year ago, the index stood at 68.2. The Current Economic Conditions component grew to 63.7 from the prior month’s final reading of 58.9 and was well above expectations for a 59.3 reading. It was 65.9 a year ago. The Consumer Expectations component rose to 58.4, up from the final reading of 47.9 the month before, and was far above expectations for 49.7. It was 69.6 a year ago. One-year inflation expectations fell to +5.1% from +6.6%, well below the expected +6.4%. 5–10-year inflation expectations dipped to +4.1% from +4.2% the prior month, where they were expected to stay. The report continues to reflect a vastly improved outlook and optimism by U.S. consumers amidst several advancements in trade negotiations. 
• The National Federation of Independent Business (NFIB) reported that their Small Business Optimism Index rose to 98.8 from an unrevised 95.8 the prior month. That was far ahead of expectations of 96.0. Of the 10 component indexes, seven increased, two declined, and one was unchanged. The improvements came from Expect Real Sales Higher, which was up +11 points to a net +10%, and Expect Economy to Improve, which rose by +10 point to +25% . Current Job Openings was unchanged at +34%. The biggest decline came from Earnings Trends, which fell -5 points to -26%. Plans to Increase Employment was the only other negative component, slipping -1 point to +12%. The separately produced Uncertainty Index that was released with the Small Business Index improved +2 points to 94 as small companies grew less worried about the tariffs and felt better about the odds of the business tax cuts passing. “While owners are still trying to fill a high number of current job openings, their outlook on business conditions is less supportive of future business investments,” said NFIB Chief Economist Bill Dunkelberg.
• U.S. Household Net Worth fell for the first time in a year and a half as stock markets fell in the first quarter. Wealth fell $1.6 trillion to $169.3 trillion following a $638 billion gain in the fourth quarter (revised up from $164 billion). Household Liabilities slipped slightly to $20.775 trillion from $20.837 trillion the prior quarter. The Household Debt-to-Asset ratio was up +0.6% to 10.93%, just above the lowest level since 1973. Prospects for the second quarter are better as equity prices have recovered most of their first-quarter losses.
• The U.S. Treasury Department recorded a Federal Budget Deficit of $316.0 billion in May, compared to a +$347.1 billion deficit the same month last year, but slightly worse than expectations for a -$314.0 billion shortfall. Receipts were $371.2 billion, up +14.7% from the year earlier, while Outlays were $687.2 billion, a +2.5% annual increase. The increase in receipts was largely due to the Individual Income Taxes ($142 billion) and Social Insurance & Retirement receipts ($134 billion), while outlays were driven by Medicare ($149 billion), Social Security ($132 billion), Net Interest ($86 billion), and Health ($80 billion). The cumulative budget deficit for the first eight months of fiscal 2025 has widened to -$1.365 trillion, 13.5% higher than in the same period in fiscal 2024. The Treasury Budget data are not seasonally adjusted, so the current month cannot be compared to the prior month but rather needs to be compared to the year earlier data. The key takeaway is that the year-to-date deficit is still up a sizable +13.6% year-over-year, though it is down from +22.0% in April, +23.0% in March, and +38.5% in February.
• The Census Bureau reported Wholesale Inventories rose +0.2% to $908.7 billion in April, below expectations for a flat (0.0%) reading, which was the prior month’s unrevised level. Year-over-Year (YoY) inventories were up +2.1%, unchanged from the annual rate the prior month. That is still well below the typical +4% to +6% annual increase in strong economies. Inventories are goods produced for sale that have not been sold yet. Wholesale Trade Sales rose +0.1%, down from the prior month’s +0.8% (revised down from +0.6%) and below expectations of +0.3%. Wholesale inventories data isn’t adjusted for inflation. The Inventory-to-Sales Ratio was steady at 1.30 months, unchanged from 1.34 a year earlier. The ratio reflects how long it would take a company to sell all the goods sitting on warehouse shelves. 
• Weekly MBA Mortgage Applications jumped +12.5% for the week ending June 6, following a -3.9% drop the prior week. The Purchase Index was up +10.3% after falling -4.4% the prior week. The Refinance Index rose +15.6% after declining -3.5% the prior week. The average 30-Year Mortgage Rate rose to 6.93% from 6.92% the prior week.
• Weekly Initial Jobless Claims were unchanged at 248,000 for the week ending June 7, worse than expectations for 242,000. The prior week was revised higher by +1,000. The number of people already collecting unemployment claims (i.e., Continuing Claims) jumped by +54,000 to 1,956,000 for the week ending May 31, worse than expectations for 1,910,000 claims. Last week’s reading was revised lower from 1,904,000 to 1,902,000.

Asset Class Performance

Source: Bloomberg.
Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (Vanguard Total International Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by 24% US Bonds, 10% International Bonds, 6% High Yield Bonds, 13.8% Large Growth, 13.8% Large Value, 3.6% Mid Growth, 3.6% Mid Value, 1.2% Small Growth, 1.2% Small Value, 16.8% International Stock, 4.2% Emerging Markets, 1.8% Real Estate.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.