Retirement Architects Weekly Market Review: June 13th, 2025

Weekly Market Report: June 6th, 2025

Last week equity markets welcomed a soft inflation print as strengthening the case toward future Fed rate cuts but a significant escalation of conflict in the Middle East on Friday quickly dampened risk appetite globally. WTI oil spiked 13% to $72.98 and UST yields closed lower across the curve. Global equity markets closed lower for the first time in three weeks while emerging markets (0.40%) were up.

Market Anecdotes

• Armed conflict escalated in the Middle East last week as U.S.-Iranian diplomatic efforts failed and Israel launched strikes on Iranian military assets and nuclear infrastructure. Markets responded logically with surging oil prices and a risk-off tone across equity markets.
• Treasury auctions last week saw a relatively healthy 10yr where it traded through pre-auction yield for a fourth consecutive issuance. However, the FT highlighted the notable rise in long-term government bond yields and the weak USD which is back below its early April low.
• Indications of progress with U.S.- China trade talks last week were constructive but garnered a muted market reaction given renewed tariff threats from Trump, strategic tensions with China, and high effective overall tariff rates still in place.
• Bessent indicated in Congressional testimony last week that for the 18 major trading partners currently in negotiations, the deadline for reciprocal tariffs will be pushed out, assuming the U.S. feels negotiations are happening in good faith.
• Economic release highlights last week included a benign May inflation reading alongside improved confidence and sentiment in the NFIB and UofM indices respectively.
• Inflation, growth, and labor market data didn’t change market expectations for next week’s FOMC meeting where ‘wait and see’ is the guidance. Markets are not pricing in any rate cuts until the September meeting (67%), which is effectively a coin toss given how far out it is.
• In a reminder that private equity is no silver bullet to outperformance, the State Street private equity index through year end 2024 is underperforming the S&P 500 over 1-, 3-, 5-, and 10-year periods.

Bullish Asset Allocation Narratives

• Barring any inflation/interest rate surge, growth, employment, and the business cycle look to be simply cooling rather than falling into the prevailing recession narratives.
• A stimulative U.S. budget deal and business friendly deregulation are continuing to take shape in D.C. which should bolster growth dynamics in the U.S. as long as bond markets sign off.
• Trump has demonstrated a finite pain threshold with tariff policy induced angst as administration officials, financial markets, and public opinion press for resolutions to trade disputes and policy uncertainty. While not over, peak tariff panic is likely in the rear view.

Bearish Asset Allocation Narratives

•  The Fed may ultimately need to maintain restrictive monetary policy for longer than otherwise necessary due to resilient growth, tariff inflation pressures, and healthy labor markets.
• Upward pressure on U.S. interest rates due to fundamental and technical factors present unique challenges for politicians, investors, and economic growth with wide ranging implications.
• Policy uncertainty leading to negative business and consumer sentiment poses risks to employment (deferred hiring), business capital expenditures, and personal consumption.