Monthly Market Insights - June 2025
Greetings Team,
New Highs, New Horizons
While some talking heads can’t stop talking about fading U.S. exceptionalism, the market seems to disagree. If June taught us anything, it’s that we don’t need a perfect backdrop to break new records. Despite renewed geopolitical shocks, simmering inflation concerns, and growing tariff anxieties, the S&P 500 and Nasdaq both hit new all-time highs. If you’ve been following our ongoing theme about small caps, there’s also mounting evidence that this long-overlooked corner of the market may finally be ready for a comeback.
Markets in Review: New Highs, Same Worries
For the second straight month, equities pushed higher, with all three major indices notching strong gains. Notably, both the S&P 500 (INX) and Nasdaq (IXIC) broke through to new all-time highs on Friday, with the Dow Jones (DJI) hot on their heels:
📈 S&P 500: 6,204.95 (+4.53% MoM)
📈 NASDAQ: 20,369.73 (+5.86 MoM)
📈 DOW: 44,094.77 (+4.23% MoM)
Overall, markets continued to climb the ‘wall of worries,’ a phrase we’ve used before—and one Goldman Sachs echoed in late June, when it cited how traders are staying invested even amid geopolitical noise, rate anxiety, and policy uncertainty. Oil briefly spiked after a U.S. strike on Iranian targets escalated tensions with Israel, but markets quickly shook it off. As often happens with global tension, the market dipped on rumors and recovered by the time the news broke. Gold even briefly flirted with all-time highs, with some speculating it could once again become the go-to ‘risk-free’ asset.
Economic Snapshot: Softening Labor
Despite record equity prices, however, Main Street continues to send mixed signals:
📉 Consumer spending fell 0.1% in May, while personal income slipped 0.4%.
📈 Consumer sentiment rebounded, rising 16.3% MoM to 60.7—suggesting cautious optimism may be forming, even as wallets tighten.
🧾 Jobless claims fell to 236,000 last week, but continuing claims hit their highest level since late 2021, suggesting more people are taking longer to find new work. Hiring remains soft, and tariff uncertainty means companies are hesitating to expand payrolls.
🏠 Pending home sales are near 20-year lows. Housing starts dropped nearly 10% in May to their lowest level since 2020. Even as mortgage rates flirt with 7%, home builders are also pulling back amid ICE job site enforcement, high material costs, and consumer hesitation. Meanwhile, the “golden handcuffs” of ultra-low mortgage rates are keeping would-be sellers locked in, suppressing both supply and demand.
The Big Story: No Summer Sequel
The Federal Reserve held rates steady for the sixth month in a row. On paper, inflation looks mostly tame—headline PCE came in at 2.3%, while core PCE ticked up to 2.7%, slightly hotter than expected. That jump, paired with new tariffs introduced in April, prompted Fed Chair Jerome Powell to once again urge rate caution. Why the hesitation? The last time we saw global supply disruptions and a surge in inflation expectations; it led to the 2022 spike in inflation. Powell doesn’t want a summer sequel. In his own way, he’s signaling: “I’ve seen this movie before, and I didn’t like the ending.” Tariffs have yet to fully filter into prices, but many businesses are rushing to stockpile inventory before Trump’s “Liberation Day” goes into effect in July. However, with import costs rising and corporate margins under pressure, more companies may pass these costs on to consumers.
Looking Ahead: Small Cap Summer?
Markets are momentum-driven in the short run. But over time, they tend to revert to their means. For many years, small-cap stocks have been underperforming. That may soon change. Interestingly, small and mid-cap stocks outperformed from 2000 to 2009, during another “lost decade” for the S&P 500. Now we’re in the opposite situation. The big indices are flying high right now, and the valuation gap between large caps and small caps is near historic extremes. Meanwhile, the “Big Beautiful Bill” passed by the House contains a 10-year moratorium on state-level AI regulation—a potentially huge boost for startups and smaller tech firms trying to innovate without navigating patchwork laws. That’s the kind of regulatory clarity disruptors need to flourish. Finally, let’s not forget the global stage. Fitch just upgraded its 2025 global GDP forecast to 2.2%, citing easing US-China trade tensions. For small-cap exporters and globally exposed names, that’s good news.
The Bottom Line: Stay Invested, Stay Selective
As June showed us, you don’t need perfect conditions for markets to thrive. What you need is some historical perspective. While tariffs, inflation, and geopolitical noise dominated headlines, long-term investing is about discipline, diversification, and owning assets with real, lasting potential, not just the most popular names on Squawk Box. If you want to get more defensive or wait for a “better entry,” remember: no one rings a bell at the bottom—or the top. Smart money stays nimble while staying invested.
As always, onward and upward.
Steven and Daniel
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STEVEN W. SCHMITT, MBA, CFP®, CPM®, CRPS®, ADPA®
Managing Director, Private Wealth Advisor
CA Insurance # 0G61253
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