Date: June 30, 2025
Period Covered: June 1-30, 2025
Monetary Policy
The Federal Reserve maintained its restrictive stance throughout June, with Chairman Powell emphasizing the central bank's "obligation to prevent inflation" during congressional testimony. Despite market expectations for potential rate cuts, Fed officials signaled patience given persistent inflationary pressures in services sectors.
The 10-year Treasury yield declined to 4.29% by month-end, reflecting market expectations for eventual policy normalization rather than imminent changes. The yield curve remained inverted, with the 2s10s spread at -12 basis points, indicating continued recession concerns despite equity market strength.
Fed officials expressed particular concern about wage inflation in technology and professional services sectors. With unemployment near historical lows at 4.2%, labor market tightness continues to pressure wage growth across skill categories.
Economic Growth
Economic data showed mixed signals in June. The S&P 500 posted its best monthly performance since 2023, with 78% of companies beating earnings estimates. This performance eased recession fears that had dominated earlier in the year.
Consumer spending patterns revealed underlying weakness in discretionary categories. Hamptons summer rentals declined 30% year-over-year, suggesting high-income consumers are moderating luxury spending. However, overall consumer resilience remained intact, supported by continued employment growth.
Business investment showed strength in technology infrastructure, particularly AI-related capacity. Meta's nuclear energy partnership with Constellation Energy exemplifies corporate commitment to long-term technology infrastructure development.
Trade and Geopolitics
Geopolitical tensions influenced market sentiment throughout June. The Iran-Israel ceasefire negotiated by President Trump provided temporary oil market stability, with crude prices declining from elevated levels. However, underlying tensions in the Middle East continued to create supply risk premiums.
Trade policy remained a key uncertainty. Metal tariffs increased to 50%, while businesses began raising prices preemptively even on goods not directly affected by tariffs. This behavior suggests inflationary expectations are becoming embedded in corporate pricing strategies.