Weekly Market Update – June 27, 2025

Quick Takes

• Wall Street had its best week since mid-May and the fourth best week of the year, with the S&P 500 Index and Nasdaq Composite Index both closing at all-time highs. For the week, the S&P 500 climbed +3.4% and the tech-heavy Nasdaq Composite jumped +4.3%.
• Investor enthusiasm was boosted with the end of a 12-day conflict between Israel and Iran. President Trump announced a truce between Israel and Iran on Monday evening. On Friday, stocks got an additional boost from a trade agreement between the U.S. and China.
• The geopolitical and trade news overshadowed a mundane week of economic data. The third estimate of U.S. Q1 GDP growth was unexpectedly revised slightly lower, the Core PCE Price Index was slightly hotter than expected, Personal Spending and Income unexpectedly declined, and Consumer Confidence unexpectedly dropped sharply.

Source: Bloomberg. Data as of June 27, 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.

S&P 500 Index and Nasdaq Composite hit fresh all-time highs

Wall Street had its best week since mid-May and the fourth best week of the year, with the S&P 500 Index and Nasdaq Composite Index both closing at all-time highs. For the S&P 500, it is the first record high since February 19th, and for the Nasdaq, it is the first new all-time high since December 16th of last year. Investor enthusiasm was boosted with the end of a 12-day conflict between Israel and Iran. President Trump announced a truce between Israel and Iran on Monday evening, and by Tuesday, Israel lifted all wartime restrictions on civilian movement and economic activity. The price of Crude Oil fell -8.6% on Monday and another -6.0% on Tuesday, on the way to a weekly decline of -12.6%, the largest one-week drop since March 17, 2023.

On Friday, stocks got an additional boost following the finalization of a trade agreement between the U.S. and China under which tariff rates will come down, and rare earth exports will be expedited. The geopolitical and trade achievements overshadowed an otherwise mundane week of economic data. The third estimate of U.S. Q1 Gross Domestic Product (GDP) growth was unexpectedly revised slightly lower, the Core Personal Consumption Expenditures (PCE) Price Index — the Federal Reserve’s preferred measure of inflation — was slightly hotter than expected, Personal Spending and Personal Income unexpectedly declined, and Consumer Confidence dropped more than 5 points when a 1-point improvement was expected. Moreover, on Tuesday and Wednesday, Federal Reserve Chair Jerome Powell gave his semiannual monetary policy report to Congress, in which he kept a wait-and-see approach with regards to his approach to rates. 

For the week, the S&P 500 climbed +3.4%, the tech-heavy Nasdaq Composite jumped +4.3%, and the small cap Russell 2000 Index rose +3.0%. Foreign stocks kept pace with their U.S. counterparts as the MSCI EAFE Index (developed market non-U.S. stocks) rose +3.1% and the MSCI Emerging Markets Index was up +3.2%. 

U.S. Treasuries generated positive returns during the week as yields were generally down in response to some of the week’s softer-than-expected economic data and dovish comments from several Fed officials indicating rate cuts could be on the table sooner than many have been anticipating. The benchmark U.S. 10-year Treasury yield ended the week down -10 basis points at 4.28%. The U.S. 2-year Treasury yield was down -16 basis points, ending at 3.75%. With Treasury yields down, the Bloomberg U.S. Aggregate Bond Index rose +0.7% for the week (bond prices and yields move in opposite directions). Non-U.S. bonds, as measured by the Bloomberg Global Aggregate ex U.S. Bond Index, were up +1.2%.

Chart of the Week

The preliminary “flash” S&P Global U.S. Composite Purchasing Managers Index (PMI) showed economic activity slowed a tad in May, slipping to 52.8 from 53.0 the month before. That still beat Wall Street expectations, which were for a dip to 52.2. Levels above 50 indicate economic expansion, while levels below 50 indicate contraction. The S&P Global “flash” PMI surveys are among the first indicators of each month to give a sense of how well the U.S. economy is doing. The Manufacturing PMI was flat from the prior month at 52.0, while the Services PMI fell to 53.1 from 53.7 the prior month, still beating expectations for a 53.0 reading. The service side of the economy — such as retailers, banks, and hospitals — employs most Americans and has driven the expansion since the pandemic. Perhaps the largest negative in the report was the resumption of inflation pressures, as virtually every company reported rising costs. “Price pressures rose sharply across both manufacturing and service sectors during June,” S&P said. In a positive sign for the economy, employment held steady and, in some cases, even rose.

Though economic activity slowed a bit in the U.S., relative to the other G4 economies it had the fastest growth among them in June. It is the twelfth time in the past 14 months the U.S. has led the other G4 economies. Perhaps the biggest contrast to the U.S., manufacturing selling prices fell on average for a second successive month in the eurozone, and rates of inflation remained subdued in the U.K. and Japan, compared to the U.S.

U.S. Reports Fastest Economic Growth of the G4 Economies

S&P Global Flash PMI Output Indicators of G4 Economies

Source: S&P Global PMI with HCOB (Eurozone) and au Jibun Bank (Japan).

The Week Ahead

This week will be a four-day week with markets closed on Friday in observance of the Independence Day holiday. That means the June Employment Situation Report from the Bureau of Labor Statistics will be released on Thursday morning, one day earlier than normal. Jobs growth has cooled off this year, but Fed Chairman Jerome Powell still characterizes it as “solid.”  Investors will be watching nonfarm payrolls to see if there is any weakness that may push the Fed’s attention to the employment side of the Fed’s dual mandate from inflation. The Job Openings and Labor Turnover Survey (JOLTS) is another labor report due on Tuesday.

Other economic data being reported in the shortened week to keep investors’ attention includes the Institute for Supply Management’s (ISM) Chicago Business Barometer, released on Monday, and its Manufacturing Purchasing Managers’ Index (PMI), released on Tuesday, plus its Services PMI on Thursday. S&P Global will report their competing Manufacturing and Services PMIs on those respective dates as well. Construction Spending is set for Tuesday, and Durable Goods on Thursday.

Did You Know?

BEEF: IT’S “HOW MUCH?” FOR DINNER – USDA Ground Beef prices hit a record $5.98 per pound in May as U.S. cattle inventories hit their lowest levels since 1951. Ground beef prices are up +16% year over year and +51% since the end of 2020, compared to overall inflation (U.S. CPI) of 23.4%. (Sources: USDA, Fresno Bee)

DEATH AND TAXES – The House and Senate tax bills both include provisions to increase the exemptions of assets subject to the estate tax. When the estate tax was first imposed in 1934, 0.9% of adult deaths (about 8,600) were impacted. In 2019, the most recent year for which data is available, only 0.08% of deaths (about 2,100) were subject to the tax. (Source: Washington Post)

NUCLEAR UP, SOLAR DOWN – The budget bill working its way through Congress phases out solar energy subsidies while boosting incentives for nuclear power. Since Election Day 2024, the Invesco Solar ETF (TAN) has fallen -23%, while the Van Eck Uranium and Nuclear Energy ETF (NLR) has risen +24%. (Source: Bespoke)

This Week in History

FIRST PENSION – On June 27, 1890, Congress created the first pension in which age was part of eligibility. Any veteran over age 65 was entitled to a monthly payment of between $6 and $12. (Source: All the Right Movies)

Economic Review

• The final reading of the June University of Michigan Consumer Sentiment Index improved to 60.7 from the preliminary reading of 60.5 two weeks ago, where it was expected to stay. That is up from 52.2 the prior month. In the same period a year ago, the index stood at 68.2. The Current Economic Conditions component rose to 64.8 from the preliminary reading of 63.7, and 58.9 the prior month. The Consumer Expectations component was down to 58.1 from the initial estimate of 58.4 and up from the prior month’s final reading of 47.9. One-year inflation expectations slipped to +5.0% from the preliminary reading of +5.1% and are down from +6.6% from the previous month. The five-year inflation expectations declined to +4.0% from the +4.1% preliminary reading and +4.2% the prior month. The bottom line is that the June report showed overall improvement in current sentiment, aided by an improved view of personal finances, business conditions, and the inflation outlook that followed the pause on the reciprocal tariff rates.
• The cost of goods and services rose in May, matching expectations at +0.1%, which is the same rate as the prior month. For the year, the Personal Consumption Expenditure (PCE) Deflator (aka PCE Price Index) was up +2.3%, also matching expectations. However, that was a slight acceleration from the +2.2% annual rate the prior month (which was revised up from +2.1%). The Core PCE Price Index, which excludes food and energy and is the Fed’s preferred inflation gauge, was up +0.2% for the month, higher than expectations for +0.1% which was also the rate the prior month (unrevised). Year-over-year, the Core-PCE Price Index was up +2.7%, above expectations for +2.6%, which was the annual rate the prior month after being revised higher from the originally reported +2.5%. The key takeaway from the report is that it suggested stagflation, meaning the growth outlook was poor and the inflation trend was up. That makes it difficult for the Federal Reserve, given their concern over inflation, but slowing growth could negatively impact the labor market.
• Personal Spending fell -0.1% in May, the first negative reading in four months, which was below expectations for a +0.1% rise and down from +0.2% the prior month (unrevised). However, after adjusting for inflation, Real Personal Spending fell -0.3% for the month, above expectations to be flat (0.0%) and down from +0.1% the prior month (unrevised). The results show that Americans cut spending in May after buying lots of new cars and other goods earlier in the year to beat U.S. tariffs. Personal Income also declined, down -0.4% for the month, following a +0.7% rise the prior month (revised down from the originally reported +0.8%). Real Disposable Income declined -0.7% month-over-month but was up +1.7% year-over-year. The Personal Savings Rate declined to +4.5% from +4.9% the prior month, which was the highest level in almost a year.
• The Conference Board’s Consumer Confidence Index slumped to 93.0 in June from an upwardly revised 98.4 in May (originally 98.0). That was well below Wall Street expectations for an increase to 99.8. The Present Situation gauge fell to 129.1 from 135.5 (which was revised lower from the originally reported 135.9). The Expectations gauge — which reflects consumers’ six-month outlook — sank to 69.0 from 73.8 the prior month (revised higher from 72.8). Sustained levels below 80 on the expectations index can signal a recession within the next year, while in good times the index can top 120 or more. Responses showed that consumers were less positive about business conditions and job availability, which is a perception that could lead to reduced discretionary spending activity.
• The Commerce Department reported Durable Goods Orders for long-lasting items such as televisions, appliances, and transportation equipment surged +16.4% in May, the largest monthly increase in 11 years, as a flood of new Boeing plane contracts masked otherwise sluggish activity. Wall Street was expecting an +8.5% increase while the prior month was revised down from the originally reported -6.3% to -6.6%. Durable Goods Orders Excluding Transportation were up a modest +0.5%, above expectations for a flat reading, which the prior month was revised down to (from the originally reported +0.2%). The important Core Capital Goods Orders (capital goods excluding volatile sectors like transportation and defense), a proxy for business spending, was up +1.7%, well above an expected +0.1% and up from -1.4% the prior month (revised up from -1.5%). Core Capital Goods Shipments, which are factored into GDP, rose +0.5%, beating expectations for a -0.1% dip and up from a flat 0.0% reading the month before (revised up from -0.1%). The bottom line from the report is that there was a strong rebound in business spending after the big decline in April. 
• The U.S. economy slowed more than originally estimated in the first three months of 2025. The third and final estimate of real Gross Domestic Product (GDP) for Q1 2025 was revised lower to -0.5% from the previous estimate of -0.2%, which is where Wall Street expected it to stay. The economy officially shrank for the first time in three years because of surging imports that pushed the trade deficit to record highs. Trade deficits detract from GDP. The record trade deficit in March shaved a substantial -4.9 percentage points off GDP. They will likely reverse materially in the second quarter after Trump relaxed and extended many of the tariffs to allow for negotiations. Economists forecast GDP to expand around +2% for this quarter. The GDP Price Index (GDP Price Deflator) was a tick higher at +3.8%, up from the prior estimate of +3.7% where it was expected to stay. Consumer spending, the main engine of the economy, drove the downward revision with Personal Consumption Expenditures (PCE) reported at +0.5%, revised down from +1.2% in the prior estimate and below Wall Street consensus estimates for +1.2%. At +0.6%, Government Spending declined from the prior estimate of +0.7% and is down from +3.1% in the fourth quarter. The Personal Saving Rate held steady at 4.3%, up from 4.1% in the third quarter. 
• According to the Case-Shiller S&P CoreLogic 20-City Home Price Index, U.S. housing prices declined -0.31% in April, marking the second straight monthly decline — last month was the first negative reading since January 2023. April was far short of expectations for a -0.2% dip and decrease from a downwardly revised -0.16% dip the prior month (originally -0.12%). On a year-over-year (YoY) basis, the 20-city index was up +3.42%, below expectations for +3.90% and down from the prior month’s 4.08% annual pace (revised higher from +4.07%). Of the 20 cities tracked by the index, 10 fell over the month, and San Francisco was the weakest-performing market (-1.20%) for the month while New York was the strongest (+0.63%). On an annual basis, house price appreciation was the strongest in New York (+7.95%) and Chicago (+6.02%) and weakest in Tampa (-2.15%) and Dallas (-0.21%).
• The National Association of Realtors (NAR) reported that Existing Home Sales rose +0.75% in May to a seasonally adjusted annual rate of 4.03 million units, far better than expectations for a -1.3% drop to 3.95 million units and a big improvement from the -0.5% drop of 4.00 million units reported the prior month (unrevised). Year-over-year existing sales were down -0.74%. The Median Existing Home Price rose to $422,800. Year-over-year, home prices slowed to a +1.3% rate compared to a +1.8% annual rate the prior month. It is the fifth consecutive month of annual prices slowing. The Inventory of Homes for Sale increased +6.2% from the prior month to 1.54 million units, the largest supply of homes for sale since May 2020. Unsold Inventory ticked up to a 4.6-month supply, up from 4.4 the previous month. This still lags the 6.0-month supply typically associated with a more balanced market. Homes Listed for Sale remained on the market for 42 days on average, up from 41 days the previous month. First-Time Buyers were 30% of sales in the month, down from 34% the month before. Historically, these buyers make up closer to 40% of home sales, but affordability has been hit hard in the last two years due to fast-rising home prices and higher mortgage rates. All-Cash Sales ticked up to 27% of transactions from 25% the prior month. For the month, sales rose +4.2% in the Northeast, +2.1% in the Midwest, and +1.7% in the South, but were down -5.4% in the West.
• The Commerce Department reported New Home Sales plunged -13.7% in May to a 7-month low rate of 623,000 units after the prior month’s +9.6% increase, or a 722,000 units annual rate (revised down from +10.9% and 743,000 units). That was far above expectations for a -6.7% decrease to a 693,000-unit annual rate. New Home Sales data tend to be volatile month-on-month and are often revised. New-home sales remain far below the recent peak of over 1 million units in August 2020 but are running above the pre-pandemic average of 600,000. Year-over-year, sales of new homes were down -6.3% following a +3.3% annual rate the prior month. By region, sales in the South were down -21.0% for the month and -15.5% for the trailing year. In the Northeast, sales were up +32.1% for the month and +48.0% for the year. The West was down -5.4% for the month and up +8.9% for the year. The Midwest saw sales fall -7.1% for the month and -3.7% for the year. The Median New Home Price increased +3.0% to $426,600 from the prior year. The months of supply at the current rate of sales was 9.8, up from 8.3 the prior month. The key takeaway from the report is that supply of new homes for sale is plentiful, yet overall sales were weak, even as builders threw discounts at buyers, as high prices and high mortgage rates stifle demand.
• The National Association of Realtors (NAR) reported that Pending Home Sales rose +1.8% in May after last month’s -6.3% slump (unrevised), which was far above Wall Street expectations for a +0.1% increase. Year-over-year sales were down -0.3%, also better than expectations for a -0.4% annual rate and up from the -3.6% rate the prior month (revised down from -3.5%). From a regional perspective, the Midwest was up +0.3%, the South rose +1.0%, the West jumped +6.0%, and the Northeast saw a modest gain of +2.1%.
• Weekly MBA Mortgage Applications rose +1.1% for the week ending June 20, following a -2.6% dip the prior week. The Purchase Index was down -0.4% after falling -3.0% the prior week. The Refinance Index rose +3.0% after slipping -2.1% the prior week. The average 30-Year Mortgage Rate rose to 6.88% from 6.84% the prior week.
• Weekly Initial Jobless Claims were down -10,000 to 236,000 for the week ending June 20, matching expectations. The prior week was revised higher by +1,000. The number of people already collecting unemployment claims (i.e., Continuing Claims) rose by +37,000 to 1,974,000 for the week ending June 13, worse than expectations for 1,950,000 claims. Last week’s reading was revised lower from 1,945,000 to 1,937,000.

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.